UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 9, 1997
(Date of earliest event reported)
EFTC CORPORATION
(Exact name of registrant as specified in its charter)
Commission file number: 0-23332
Colorado 84-0854616
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Horizon Terrace
9351 Grant Street, Sixth Floor
Denver, Colorado 80229
(Address of principal executive offices)
(303) 451-8200
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1997, pursuant to an Agreement and Plan of
Reorganization (the "Merger Agreement"), dated as of July 9, 1997, among EFTC
Corporation, a Colorado corporation (the "Company"), CTI Acquisition Corp., a
Florida corporation and wholly owned subsidiary of the Company ("CTI
Acquisition"), and Circuit Test, Inc., a Florida corporation ("Circuit Test"),
CTI Acquisition was merged with and into Circuit Test with Circuit Test being
the surviving corporation (the "Merger"). Pursuant to the Merger Agreement, the
Company, upon the effectiveness of the Merger, issued 1,858,975 shares of its
common stock to the former shareholders of Circuit Test. The issuance of the
common stock pursuant to the Merger Agreement was approved by the requisite
votes of the Company's stockholders at a special meeting held on September 30,
1997.
In addition, also on September 30, 1997, the Company consummated a
certain Limited Liability Company Unit Purchase Agreement dated as of July 9,
1997 (the "Purchase Agreement"), among the Company, CT LLC Acquisition Corp., a
Florida corporation and wholly owned subsidiary
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of the Company ("CT Acquisition"), Airhub Services Group, L.C., a Kentucky
limited liability company ("Airhub"), and Circuit Test International, L.C., a
Florida limited liability company ("CTLLC," and, together with CTI and Airhub,
the "CTI Companies"). Pursuant to the Purchase Agreement, in exchange for all of
the membership interests of Airhub and CTLLC, the Company and CT Acquisition
paid the respective members of Airhub and CTLLC an aggregate of $19,500,000 in
cash.
In connection with the acquisition of the CTI Companies: (a) pursuant to a
Registration Rights Agreement, dated as of September 30, 1997 (the "Registration
Rights Agreement"), the Company agreed, subject to certain terms and conditions,
to register under the Securities Act of 1933 the resale of the shares of the
Company's common stock issued pursuant to the Merger Agreement to the prior
owners of CTI, (b) pursuant to an Indemnification Agreement, dated as of
September 30, 1997 (the "Indemnification Agreement"), certain shareholders of
CTI, the members of Airhub and the members of CTLLC agreed to indemnify the
Company against certain damages that could result from breaches of
representations and warranties and covenants set forth in the Merger Agreement
and the Purchase Agreement, (c) pursuant to an agreement, dated as of September
30, 1997 (the "Earnout Agreement"), the Company agreed to make certain payments
totaling $6 million to the members of Airhub and CTLLC upon the first to occur
of (i) the completion, prior to December 31, 1999, by the Company of a private
placement of common stock, or securities convertible into or exchangeable for
common stock, yielding net proceeds to the Company of $40 million or more, (ii)
the registration and underwritten sale of shares of the Company's common stock
or securities convertible into or exchangeable for the Company's common stock
for the account of the Company or (iii) the achievement by the CTI Companies of
certain earnings thresholds in 1997, 1998 and 1999, and (d) pursuant to separate
Employment Agreements, each dated as of September 30, 1997 (the "Employment
Agreements"), the Company agreed for a term of three years to employ Allen S.
Braswell Jr., Richard Strott, Andrew Hatch and Dennis Ayo, each of whom was an
employee of the CTI Companies prior to their acquisition by the Company. In
addition, as part of the acquisition of the CTI Companies, the Company paid the
CTI Companies immediately prior to the closing of the acquisition $9.2 million
in cash: $5.7 million to pay certain debts of the CTI Companies and $3.5 million
for certain bonus payments made by the CTI Companies prior to the consummation
of the acquisition.
The acquisitions pursuant to the Merger Agreement and Purchase Agreement
will be accounted for using the purchase method of accounting. Mr. Allen S.
Braswell, Sr. and Allen S. Braswell, Jr., who were the principal shareholders
and members of the CTI Companies, have been appointed to the Company's Board of
Directors.
Prior to the acquisition by the Company, the CTI Companies were an
independent electronic component repair and warranty service organization
focused on the computer and communications industries. One of the CTI Companies'
principal strategies is to compete through the effective use of "hub-based"
repair services, which the CTI Companies pioneered. As used in the
transportation industry, the term "hub-based" is used to denote the place where
the primary package sorting center of a package transportation and delivery
service provider is located. The CTI Companies are the only provider with its
operations inside the hub infrastructure of both of the largest
transportation/logistics companies in the United States (in terms of usage of
handling of time sensitive, express air service),
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as compared to those companies that provide ground-based, less time sensitive,
freight transportation. The location of the CTI Companies at the transportation
providers' airport hubs enables the CTI Companies to effectively provide
"end-of-runway" repair and warranty services, which allow faster turnaround of
replacement units, minimizing the inventory assets needed by the CTI Companies'
customers to support the end-users of their products. The Company intends to
continue providing such repair and warranty services through the CTI Companies.
As of December 31, 1996, the CTI Companies employed 850 persons, of whom 502
were engaged in repair services and operations, 76 in material handling and
procurement, 4 in marketing and sales and 25 in finance and administration, and
engaged the full-time services of 243 temporary laborers through employment
agencies in manufacturing and operations.
Also in connection with the acquisition of the CTI Companies, the Company
entered into a Credit Agreement, dated as of September 30, 1997 (the "Credit
Agreement"), with Bank One, Colorado, N.A. ("Bank One") comprised of a $25
million revolving line of credit, maturing on September 30, 2000 and a $20
million term loan maturing on September 30, 2002 (collectively, the "Bank One
Loan"). The Bank One Loan bears interest at a rate based on either the LIBOR or
Bank One prime rate plus applicable margins ranging from 3.25% to 0.50% for the
term facility and 2.75% to 0.00% for the revolving facility. Borrowings on the
revolving facility are subject to limitation based on the value of the available
collateral. The Bank One Loan is collateralized by substantially all of the
Company's assets, including real estate, whether now owned or later acquired.
The terms of the security interests granted by the Company pursuant to the
Credit Agreement are governed by: (a) a Pledge and Security Agreement by the
Company to Bank One (the "Pledge"); (b) a Security Agreement and Assignment
between the Company and Bank One (the "Security Agreement"); (c) a Deed of Trust
and Security Agreement among the Company as Grantor, Bank One, as Agent and
Beneficiary, and Northwest Title Company as Trustee (the "Deed of Trust"); and
(d) a Deed of Trust and Security Agreement and Financing Statement from the
Company to the Public Trustee of Weld County for Bank One (the "Deed and
Financing Statement").
The foregoing discussion of the Merger Agreement, the Purchase
Agreement, the Registration Rights Agreement, the Indemnification Agreement, the
Earnout Agreement, the Employment Agreements, the Credit Agreement, the Pledge,
the Security Agreement, the Deed of Trust and the Deed and Financing Statement
are hereby qualified in their entirety by reference to the terms thereof, which
constitute exhibits hereto and are incorporated herein by this reference.
ITEM 5. OTHER EVENTS
On September 9, 1997, the Company issued a subordinated note (the
"Note") in the aggregate principal amount of $15 million, the form of which is
attached as an exhibit to the Note Agreement, dated as of September 5, 1997 (the
"Note Agreement"), among the Company and Mr. Richard L. Monfort, a director of
the Company. The Note has a maturity date of December 31, 2002 and bears a rate
of LIBOR plus 2.00%. The proceeds of the Subordinated Note were used to repay
existing indebtedness of the Company and to pay a portion of the purchase price
of certain assets acquired from AlliedSignal Inc. The outstanding principal
amount of the Note is payable in four annual installments of $50,000 and one
final payment of $14.8 million at maturity, but may be prepaid in whole or in
part at the option of the Company at
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any time, or, pursuant to the Note Agreement, if certain conditions are
met, at the request of
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100% of the holders of the Notes. All payments and prepayments in respect of the
Notes are fully subordinated to all payments in respect of the Company's
obligations arising under or in connection with the Credit Agreement. The Note
Agreement required the Company to issue warrants for 500,000 shares of the
Company's Common Stock at an exercise price of $8.00. Pursuant to the Note
Agreement, such warrants were issued on October 6, 1997. The terms of such
warrants are governed by a Warrant to Purchase Common Stock of EFTC Corporation,
dated as of October 6, 1997 (the "Warrant Agreement") and such warrants were
exercised on October 9, 1997.
The foregoing discussion of the Note Agreement, the Note and the Warrant
Agreement are hereby qualified in their entirety by reference to the terms
thereof, which constitute exhibits hereto and are incorporated herein by this
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired:
The following financial statements of the CTI Companies (together with
the related independent auditors' report) will be filed on or prior to the 60th
day after the date that this initial report on Form 8-K was required to be
filed.
i. Combined Statements of Income and Retained Earnings for the nine months
ended September 30, 1997 and the three years ended December 31, 1996, 1995, and
1994;
ii. Combined Balance Sheets as of September 30, 1997 and December 31, 1996
and 1995;
iii. Combined Statement of Cash Flows for the nine months ended September
30, 1997 and the three years ended December 31, 1996, 1995, and 1994.
(b) Pro forma financial information
The following unaudited pro forma condensed financial statements of the
Company and related notes to unaudited pro forma condensed financial statements
are incorporated by reference from the section captioned "Unaudited Pro Forma
Condensed Financial Information" of the Company's definitive proxy statement
filed September 22, 1997 relating to the special meeting of the Company's
shareholders held on September 30, 1997:
i. Unaudited Pro Forma Condensed Statement of Operations for the Six Months
Ended June 30, 1997;
ii. Unaudited Pro Forma Condensed Statement of Operations for the Year
Ended December 31,1996;
iii. Unaudited Pro Forma Condensed Balance Sheet as of June 30, 1997.
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(c) Exhibits
The following exhibits are filed herewith or incorporated by reference:
2.1 Agreement and Plan of Reorganization, dated as of July 9, 1997, among
EFTC Corporation, CTI Acquisition, Inc., and Circuit Test, Inc. July 9, 1997.
(Pursuant to Item 601(b)(2) of Regulation S-K, the Company hereby agrees to
furnish supplementally to the Commission upon request a copy of any schedule or
exhibit omitted from such Agreement and Plan of Reorganization as filed
herewith.)
2.2 Limited Liability Company Unit Purchase Agreement, dated as of July 9,
1997 (the "Purchase Agreement") among EFTC Corporation, CT LLC Acquisition
Corp., a Florida corporation and wholly owned subsidiary of the Company, Airhub
Services Group, L.C., a Kentucky limited liability company, and Circuit Test
International, L.C., a Florida limited liability company. (Pursuant to Item
601(b)(2) of Regulation S-K, the Company hereby agrees to furnish supplementally
to the Commission upon request a copy of any schedule or exhibit omitted from
such Limited Liability Company Unit Purchase Agreement as filed herewith.)
2.3 Indemnification Agreement, dated September 30, 1997, among certain
shareholders of Circuit Test, Inc., certain members of Airhub Services Group,
L.C., certain members of Circuit Test International, L.C. and EFTC Corporation.
2.4 Registration Rights Agreement, dated as of September 30, 1997, is among
EFTC Corporation and certain former shareholders of Circuit Test, Inc.
2.5 Earnout Agreement, dated as of September 30, 1997, among EFTC
Corporation and the former members of Airhub Services Group, L.C. and Circuit
Test International, L.C.
2.6 Form of the separate Employment Agreements, each dated as of September
30, 1997, entered into by EFTC Corporation and Circuit Test, Inc. with Allen S.
Braswell Jr., Richard Strott, Andrew Hatch and Dennis Ayo.
99.1 Credit Agreement, dated September 30, 1997 between EFTC Corporation
and Bank One, Colorado, N.A.
99.2 Pledge and Security Agreement, dated as of September 30, 1997, by EFTC
Corporation to Bank One, Colorado, N.A.
99.3 Security Agreement and Assignment dated as of September 30, 1997
between EFTC Corporation and Bank One, Colorado, N.A.
99.4 Deed of Trust and Security Agreement dated as of September 30, 1997,
among EFTC Corporation as Grantor, Bank One, Colorado, N.A., as Agent and
Beneficiary, and Northwest Title Company as Trustee.
99.5 Deed of Trust and Security Agreement and Financing Statement from EFTC
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Corporation to The Public Trustee of Weld County for Bank One, Colorado, N.A.,
dated as of September 30, 1997.
99.6 Note Agreement, dated as of September 5, 1997, including the form of
Floating Rate Subordinated Note attached as Exhibit A thereto, between EFTC
Corporation and Richard L. Monfort.
99.7 Warrant to Purchase 500,000 shares of the common stock, par value $.01
per share, of EFTC Corporation, dated as of October 6, 1997, issued by EFTC
Corporation to Richard L. Monfort.
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 hereunto duly authorized.
Date: October 15, 1997
EFTC Corporation
By /s/
Stuart Fuhlendorf
Chief Financial Officer
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APPENDIX A CONFORMED COPY
- -----------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
among
EFTC CORPORATION
CTI ACQUISITION CORP.
and
CIRCUIT TEST, INC.
dated as of July 9, 1997
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
RECITALS .........................................................................................................1
AGREEMENT.........................................................................................................1
ARTICLE I THE MERGER......................................................................................2
1.1 The Merger......................................................................................2
1.2 The Closing.....................................................................................2
1.3 Effective Time..................................................................................2
1.4 Certain Tax Positions...........................................................................2
ARTICLE II SURVIVING CORPORATION...........................................................................2
2.1 Articles of Incorporation.......................................................................2
2.2 Bylaws..........................................................................................3
2.3 Directors.......................................................................................3
2.4 Officers........................................................................................3
ARTICLE III EFFECT OF MERGER ON CAPITAL STOCK...............................................................3
3.1 Effect on Capital Stock.........................................................................3
3.2 Exchange of Certificates........................................................................4
3.3 No Further Ownership Rights in Circuit Test Common Stock........................................5
3.4 Lost, Stolen or Destroyed Certificates..........................................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CIRCUIT TEST..................................................5
4.1 Organization, Standing and Power................................................................5
4.2 Capitalization; Shareholders....................................................................6
4.3 Subsidiaries....................................................................................7
4.4 Due Authorization...............................................................................7
4.5 Financial Statements............................................................................8
4.6 Absence of Certain Changes......................................................................8
4.7 Liabilities.....................................................................................8
4.8 Accounts Receivable.............................................................................9
4.9 Litigation......................................................................................9
4.10 Restrictions on Business Activities.............................................................9
4.11 Governmental Authorization......................................................................9
4.12 Contracts and Commitments.......................................................................9
4.13 Title to Property..............................................................................10
4.14 Intellectual Property..........................................................................10
4.15 Environmental Matters..........................................................................12
4.16 Taxes..........................................................................................13
4.17 S Corporation and Other Matters................................................................14
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4.18 Employee Benefit Plans.........................................................................14
4.19 Employee Matters...............................................................................16
4.20 Interested Party Transactions..................................................................16
4.21 Insurance......................................................................................16
4.22 Compliance With Laws...........................................................................17
4.23 Major Customers................................................................................17
4.24 Suppliers......................................................................................17
4.25 Inventory......................................................................................17
4.26 Product Warranty and Product Liability.........................................................18
4.27 Minute Books...................................................................................18
4.28 Brokers' and Finders' Fees.....................................................................18
4.29 Proxy Statement................................................................................18
4.30 Regulation D Offering..........................................................................18
4.31 Disclosure.....................................................................................19
4.32 Hart-Scott-Rodino..............................................................................19
4.33 Reliance.......................................................................................19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB.....................................................................................19
5.1 Organization, Standing and Power...............................................................19
5.2 Capitalization.................................................................................20
5.3 Due Authorization..............................................................................20
5.4 SEC Documents; Financial Statements............................................................21
5.5 Absence of Certain Changes.....................................................................21
5.6 Compliance with Laws...........................................................................22
5.7 Board Approval.................................................................................22
5.8 Litigation.....................................................................................22
5.9 Title to Property..............................................................................22
5.10 Intellectual Property..........................................................................22
5.11 Taxes..........................................................................................23
5.12 Employee Benefit Plans; ERISA..................................................................23
5.13 Compliance With Laws...........................................................................24
5.14 Major Customers................................................................................24
5.15 Suppliers......................................................................................24
5.16 Brokers' and Finders' Fees.....................................................................24
5.17 Disclosure.....................................................................................24
5.18 Hart-Scott-Rodino..............................................................................24
5.19 Reliance.......................................................................................24
ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME................................................................25
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6.1 Conduct of Business of Circuit Test............................................................25
6.2 No Solicitation; Acquisition Proposals.........................................................28
6.3 Conduct of Business of Parent..................................................................28
6.4 Notice of Breach...............................................................................29
ARTICLE VII ADDITIONAL COVENANTS................................................................................29
7.1 Proxy Statement................................................................................29
7.2 Meetings of Shareholders.......................................................................29
7.3 Access to Information..........................................................................30
7.4 Confidentiality................................................................................30
7.5 Publicity......................................................................................30
7.6 Filings; Cooperation...........................................................................30
7.7 Employment Matters.............................................................................31
7.8 Stock Options..................................................................................31
7.9 Director Nominees..............................................................................31
7.10 Further Assurances.............................................................................31
7.11 Certain Tax Matters............................................................................31
7.12 Audited Financial Statements...................................................................32
7.13 Additional Agreements..........................................................................32
7.14 Deferred Compensation..........................................................................32
ARTICLE VIII CONDITIONS PRECEDENT...............................................................................32
8.1 Conditions to Obligations of Each Party to Effect the Merger...................................32
8.2 Additional Conditions to Obligations of Circuit Test to Effect the Merger......................33
8.3 Additional Conditions to the Obligations of Parent and Merger Sub to
Effect the Merger..............................................................................33
ARTICLE IX RESTRICTIONS ON TRANSFER.......................................................................35
9.1 Legends........................................................................................35
9.2 Notice of Proposed Dispositions................................................................36
ARTICLE X TERMINATION, AMENDMENT AND WAIVER..............................................................36
10.1 Termination....................................................................................36
10.2 Effect of Termination..........................................................................37
10.3 Amendment......................................................................................37
10.4 Extension; Waiver..............................................................................37
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ARTICLE XI GENERAL PROVISIONS.............................................................................37
11.1 Survival of Representations and Warranties.....................................................37
11.2 Indemnification by Parent......................................................................38
11.3 Notices........................................................................................38
11.4 Interpretation.................................................................................39
11.5 Counterparts...................................................................................40
11.6 Entire Agreement; Nonassignability; Parties in Interest........................................40
11.7 Severability...................................................................................40
11.8 Remedies Cumulative; No Waiver.................................................................40
11.9 Governing Law..................................................................................40
11.10 Rules of Construction..........................................................................40
11.11 Expenses. ....................................................................................41
11.12 Attorneys Fees.................................................................................41
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EXHIBITS
Exhibit 1.3 (A) Articles of Merger
Exhibit 1.3 (B) Plan of Merger
Exhibit 7.7 Form of Employment Agreement
Exhibit 7.13 Form of Voting Letter Agreement
Exhibit 8.2(c) Opinion of Counsel to Parent
Exhibit 8.2(d) Registration Rights Agreement
Exhibit 8.3(c) Opinion of Counsel to Circuit Test
Exhibit 8.3(h) Indemnification Agreement
SCHEDULES
Schedule 3.1 Circuit Test Common Stock and Pro Forma Conversions to Parent
Common Stock
Schedule 7.8 Options Issuable by Parent to Management of Circuit Test
Target Disclosure Schedule
Parent Disclosure Schedule
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INDEX OF DEFINED TERMS
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1989 Act ................................................................................................2
Agreement ................................................................................................1
Airhub ................................................................................................1
Annual Financial Statements.......................................................................................8
CERCLA ...............................................................................................12
Certificates ................................................................................................4
Circuit Test ................................................................................................1
Circuit Test Authorizations.......................................................................................9
Circuit Test Common Stock.........................................................................................6
Circuit Test Disclosure Schedule..................................................................................5
Circuit Test Employee Plans......................................................................................15
Class A Common ................................................................................................6
Class B Common ................................................................................................6
Closing ................................................................................................2
Closing Date ................................................................................................2
COBRA ...............................................................................................16
Code ................................................................................................1
Confidential Information.........................................................................................11
controlled group ...............................................................................................23
CT Shareholders ................................................................................................1
Deferred Compensation............................................................................................32
Designees ...............................................................................................31
Effective Time ................................................................................................2
Employment Agreements............................................................................................31
environment ...............................................................................................12
Environmental Law ...............................................................................................12
ERISA ...............................................................................................14
ERISA Affiliate ...............................................................................................14
Governmental Entity...............................................................................................7
Hazardous Substance..............................................................................................12
Holder ...............................................................................................35
HSR Act ...............................................................................................19
include ...............................................................................................39
includes ...............................................................................................39
including ...............................................................................................39
Indemnification Agreement........................................................................................34
Indemnification Threshold........................................................................................38
Intellectual Property............................................................................................10
Interim Circuit Test Financial Statements.........................................................................8
Inventory ...............................................................................................17
knowledge ...............................................................................................39
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Lien ................................................................................................6
LLC ................................................................................................1
LLC Agreement ................................................................................................1
Losses ...............................................................................................38
made available ...............................................................................................39
material ...............................................................................................39
Material Adverse Effect..........................................................................................39
Merger ................................................................................................2
Merger Sub ................................................................................................1
Merger Sub Common Stock...........................................................................................3
NASD ...............................................................................................21
no action ...............................................................................................36
Parent ................................................................................................1
Parent Balance Sheet Date........................................................................................21
Parent Common Stock...............................................................................................3
Parent SEC Documents.............................................................................................21
Parent Shareholders Meeting......................................................................................18
Parent Stock Option Plans........................................................................................20
plan of reorganization............................................................................................1
Proprietary Information..........................................................................................30
Proxy Statement ...............................................................................................18
Registration Rights Agreement....................................................................................33
release ...............................................................................................12
Representatives ...............................................................................................30
Restricted Securities............................................................................................35
SEC ...............................................................................................21
SECURITIES ACT ...............................................................................................35
Shareholder Indemnity Claim......................................................................................38
Surviving Corporation.............................................................................................2
Tax ...............................................................................................14
Tax authority ...............................................................................................14
Tax Return ...............................................................................................14
Taxable ...............................................................................................14
Taxes ...............................................................................................14
Third Party Intellectual Property Rights.........................................................................11
Transaction ................................................................................................1
ultimate parent entity...........................................................................................19
unrealized built in gain.........................................................................................14
Voting Agreement ...............................................................................................34
without limitation...............................................................................................39
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as
of July 9, 1997, is among EFTC Corporation, a Colorado corporation ("Parent"),
CTI ACQUISITION CORP., a Florida corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and CIRCUIT TEST, INC., a Florida corporation ("Circuit
Test").
RECITALS
A. The Boards of Directors of Parent and Circuit Test have determined
that a business combination between Parent and Circuit Test is in the best
interests of their respective companies and shareholders, and accordingly have
approved this Agreement and the merger provided for herein whereupon Merger Sub
shall merge with and into Circuit Test upon the terms, and subject to the
conditions, set forth herein. In addition, each of the shareholders of Circuit
Test (the "CT Shareholders") has approved this Agreement and the merger provided
for herein.
B. In addition to the transactions contemplated by this Agreement,
Parent intends to acquire certain other entities which are closely affiliated
with Circuit Test. As a result, simultaneous with the execution of this
Agreement, Parent is entering into that certain Limited Liability Company Unit
Purchase Agreement (the "Purchase Agreement") with Circuit Test International,
L.C., a Florida limited liability company ("LLC"), and Airhub Services Group,
L.C., a Kentucky limited liability company ("Airhub"). This Agreement, the
Purchase Agreement, and the exhibits and schedules contained therein represent
the entire transaction by which Parent is acquiring control of the business
conducted by Circuit Test, LLC and Airhub (the "Transaction").
C. The merger is intended to qualify, for federal income tax purposes,
as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is
intended to be a "plan of reorganization" within the meaning of the regulations
promulgated under Section 368 of the Code.
D. Parent, Merger Sub and Circuit Test desire to make certain representations,
warranties and agreements in connection with the merger.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into Circuit Test in accordance herewith and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). Circuit Test shall
be the surviving corporation in the Merger, and therefore is sometimes
hereinafter referred to as "Surviving Corporation." The Merger shall have the
effects specified in Section 607.1106 of the Florida 1989 Business Corporation
Act (the "1989 Act").
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Holme Roberts & Owen LLP, 1700 Lincoln Street, Suite 4100, Denver, Colorado
80203, at 10:00 a.m., local time, within three business days following the day
on which the conditions set forth in Article VIII shall be fulfilled or waived
in accordance herewith or (b) at such other time, date or place as Parent and
Circuit Test agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
1.3 Effective Time. If all the conditions to the Merger set forth in
Article VIII shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article X, the parties
hereto shall cause Articles of Merger and a Plan of Merger meeting the
requirements of Section 607.1101 and 607.1105 of the 1989 Act to be properly
executed and duly filed in accordance with the 1989 Act on the Closing Date.
Forms of the Articles of Merger and Plan of Merger are set forth hereto as
Exhibits 1.3 (A) and (B). The Merger shall become effective at the time when the
Articles of Merger and Plan of Merger are so filed with the Department of State
of the State of Florida or at such later time that the parties hereto agree and
is designated in such Articles of Merger (the "Effective Time").
1.4 Certain Tax Positions. The parties hereto intend the Merger to
qualify, and will take the position for tax purposes that the Merger qualifies,
as a non-taxable reorganization under Sections 368(a)(1)(A) and (a)(2)(E) of the
Code. Neither party hereto nor any affiliate thereof will take any action that
would cause the Merger not to qualify as a reorganization under those sections
or regulations promulgated thereunder.
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ARTICLE II
SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of Merger
Sub in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of Surviving Corporation until duly amended in accordance with
applicable law.
2.2 Bylaws. At the Effective Time, Surviving Corporation shall take
such actions as may be necessary to amend and restate the Bylaws of Surviving
Corporation to be the same as the Bylaws of Merger Sub, until duly amended in
accordance with applicable law.
2.3 Directors. The directors of the Surviving Corporation shall be
Jack Calderon, Stuart W. Fuhlendorf, and Allen S. Braswell, Jr.
2.4 Officers. The officers the of Surviving Corporation shall be Allen S.
Braswell, Jr., President, Stuart W. Fuhlendorf, Treasurer, and Jack Calderon,
Vice President and Secretary, or as the parties hereto may otherwise agree prior
to the Effective Time.
ARTICLE III
EFFECT OF MERGER ON CAPITAL STOCK
3.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Circuit Test or the holders of
any of the following securities all of the following shall occur:
(a) Conversion of Circuit Test Common Stock.
(i) Each issued and outstanding share of Circuit Test Common Stock (as
defined in Section 4.2) shall no longer be outstanding but instead converted
into the right to receive 152.788 shares of Common Stock, $.01 par value, of
Parent (the "Parent Common Stock").
(ii) Schedule 3.1 sets forth all shares of Circuit Test Common Stock
outstanding as of the date of this Agreement, along with a calculation of the
shares of Parent Common Stock issuable as of the Effective Time.
(b) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued in the Merger. In lieu of such issuance, all shares of
Parent Common Stock issued to the Circuit Test shareholders pursuant to this
Agreement shall be rounded to the closest whole share of Parent Common Stock.
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(c) Capital Stock of Merger Sub. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of Parent, Merger Sub or Circuit Test, each issued and outstanding
share of Common Stock, $.01 par value, of Merger Sub ("Merger Sub Common Stock")
shall be converted into one (1) share of Circuit Test Common Stock.
3.2 Exchange of Certificates.
(a) Exchange. As soon as practicable after the Closing and
against surrender to Parent by any holder of record of a certificate or
certificates that prior to the Effective Time represented shares of Circuit Test
Common Stock (the "Certificates"), Parent shall cause to be delivered to the
holder of record of such Certificates the Merger Consideration to be received by
such holder as specified in Section 3.1. Until such Certificates are so
surrendered, Parent shall not cause to be delivered to the holder of record of
such Certificates the shares referred to in the previous sentence. Each
outstanding Certificate that prior to the Effective Time represented shares of
Circuit Test Common Stock will be deemed from and after the Effective Time, for
all corporate purposes, other than the payment of dividends, to evidence the
right to receive the Merger Consideration and the right to receive unpaid
dividends and distributions, if any, that such holder has the right to receive
in respect of such Parent Common Stock, after giving effect to any required
withholding tax, in each case without interest thereon. The shares represented
by the Certificates surrendered to Parent shall forthwith be canceled. The risk
of loss and title to the Certificates shall pass only upon receipt by Parent of
the Certificates.
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder of any
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to applicable law, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable (but for the provisions
of this Section 3.2(b)) with respect to such shares of Parent Common Stock and
not paid, less the amount of any withholding taxes that may be required thereon.
(c) Transfers. At or after the Effective Time, there shall be
no transfers on the stock transfer books of Circuit Test of the shares of
Circuit Test Common Stock that were outstanding immediately prior to the
Effective Time. If, at or after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing the shares of Parent Common Stock deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Article III. Certificates surrendered for exchange by any person
shall not be exchanged until Parent has received confirmation of the continued
accuracy and effectiveness of the Investor Questionnaire and the Investor
Letter, Indemnification Agreement and Registration Rights Agreement (each as
defined in Section 8.3) executed and delivered by such person.
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(d) No Liability. Notwithstanding anything to the contrary in
this Section 3.2, neither the Surviving Corporation nor any party hereto shall
be liable to any person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
3.3 No Further Ownership Rights in Circuit Test Common Stock. All
shares of Parent Common Stock issued upon surrender for exchange of shares of
Circuit Test Common Stock in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Circuit Test Common Stock, and there shall be no further registration of
transfers on the records of Surviving Corporation of shares of Circuit Test
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
III.
3.4 Lost, Stolen or Destroyed Certificates. If any Certificate is lost,
stolen or destroyed, the Parent's exchange agent shall issue in exchange for
such lost, stolen or destroyed Certificate, upon the making of an affidavit of
that fact by the holder thereof, such shares of Parent Common Stock (and cash in
lieu of fractional shares) as may be required pursuant to Section 3.1, except
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent, Surviving Corporation or the exchange
agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CIRCUIT TEST
Except as disclosed in a document of even date herewith and delivered
by Circuit Test to Parent prior to the execution and delivery of this Agreement
and referring to the section number and subsection of the representations and
warranties in this Agreement, subject to its subsequent revision from time to
time prior to the Effective Time (with the prior written consent of Parent),
(the "Circuit Test Disclosure Schedule"), Circuit Test represents and warrants
to Parent and Merger Sub as follows:
4.1 Organization, Standing and Power. Circuit Test is a corporation
duly organized and validly existing under the laws of the State of Florida, has
the full corporate power to own its properties and to carry on its business as
now being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect (as
defined in Section 11.3) on Circuit Test. Circuit Test has delivered to Parent a
true and correct copy of its Articles of Incorporation and Bylaws, each as
amended to date. Circuit Test is not in violation of any of the provisions of
its Articles of Incorporation or Bylaws or equivalent organizational
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documents. The Circuit Test Disclosure Schedule lists a complete and correct
list of the officers and directors of Circuit Test.
4.2 Capitalization; Shareholders.
(a) The authorized capital stock of Circuit Test consists of
50,000 shares of Circuit Test Class A Common Stock par value $.01 per share (the
"Class A Common"), of which there are issued and outstanding five (5) shares of
Class A Common and 50,000 shares of Circuit Test Class B Common Stock par value
$.01 per share (the "Class B Common"), of which there are issued and outstanding
12,162 shares of Class B Common. The Class A Common and the Class B Common are
collectively referred to herein as the "Circuit Test Common Stock." There are no
other outstanding shares of capital stock or other securities of Circuit Test
and no outstanding subscriptions, options, warrants, puts, calls, purchase or
sale rights, exchangeable or convertible securities or other commitments or
agreements of any nature relating to the capital stock or other securities of
Circuit Test, or otherwise obligating Circuit Test to issue, transfer, sell,
purchase, redeem or otherwise acquire such stock or securities. All outstanding
shares of Circuit Test Common Stock are duly authorized, validly issued, fully
paid and non-assessable, are free and clear of any mortgage, pledge, lien,
encumbrance, charge or other security interest (a "Lien"), except Liens created
by or imposed upon the holders thereof, and are not subject to preemptive rights
or rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Circuit Test or any agreement to which Circuit Test is a party or by
which it is bound. There are not any options, warrants, calls, conversion
rights, commitments, agreements, contracts, understandings, restrictions,
arrangements or rights of any character to which Circuit Test is a party or by
which Circuit Test may be bound obligating Circuit Test to issue, deliver, or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of Circuit Test or obligating Circuit Test to enter into such an option,
warrant, call, conversion right, commitment, agreement, contract, understanding,
restriction, arrangement or right. There are no contracts, commitments or
agreements relating to voting, purchase or sale of Circuit Test's capital stock
(i) between or among Circuit Test and any of its shareholders and (ii) to the
Circuit Test's knowledge, between or among any of Circuit Test's shareholders,
except for the shareholders named in the Circuit Test Disclosure Schedule.
Circuit Test does not have any outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of shares of
Circuit Test Common Stock on any matter.
(b) Schedule 3.1 sets forth a true and complete list of the
names of all the record holders of Circuit Test Common Stock, together with the
number of shares of Circuit Test Common Stock held by each such holder. Except
as set forth in Schedule 3.1, each holder so listed that is an individual is a
competent adult and is the record and the beneficial owner of all shares or
other equity securities so listed in his or her name, with the sole right to
vote, dispose of, and receive dividends or distributions with respect to such
shares. Each holder so listed on Schedule 3.1 that is an entity is the record
and beneficial owner, or if a trust, its beneficiaries are the beneficial owners
of, all shares or other equity securities so listed in its name, has the sole
right to vote, dispose of, and receive dividends or distributions with respect
to such shares, has
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the full power and authority, and has or will be fully empowered and authorized
as of the Effective Time, to consummate the matters contemplated to be
consummated by such holder herein.
4.3 Subsidiaries. Circuit Test does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
4.4 Due Authorization.
(a) Circuit Test has the full corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Circuit Test, subject only to the approval of
the Merger by Circuit Test's shareholders as contemplated by Section 7.2. This
Agreement has been duly executed and delivered by Circuit Test and constitutes
the valid and binding obligation of Circuit Test enforceable against Circuit
Test in accordance with its terms. The execution and delivery of this Agreement
by Circuit Test do not, and the consummation of the transactions contemplated
hereby will not: (i) conflict with or violate any provision of the Articles of
Incorporation or Bylaws of Circuit Test, (ii) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance, rule or
regulation applicable to Circuit Test or the properties or assets of Circuit
Test, or (iii) result in any breach or violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of, or result in the creation
of any Lien on any of the properties or assets of Circuit Test pursuant to or
require the consent or approval of any party to any mortgage, indenture, lease,
contract or other agreement or instrument, bond, note, concession or franchise
applicable to Circuit Test or any of its properties or assets, except, in the
case of this clause (iii) only, where such conflict, violation, default,
termination, cancellation or acceleration would not have and could not
reasonably be expected to have a Material Adverse Effect on Circuit Test or
prevent the consummation of the transactions contemplated hereby. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity") is required by or with
respect to Circuit Test in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for the filing of the Plan of Merger and the Articles of Merger as provided in
Section 1.3 and such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Circuit Test or prevent the consummation of transactions contemplated
hereby.
(b) All holders of Circuit Test Common Stock have approved, by
written consent or otherwise, this Agreement and the Merger in accordance with
applicable law, and no other consent or approval of any holder of Circuit Test
Common Stock or other equity securities of Circuit Test is required for Circuit
Test to execute and deliver this Agreement and consummate the transaction
contemplated hereby. By virtue of such approval, no holder of
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Circuit Test Common Stock or other equity securities of Circuit Test has any
right to dissent and obtain payment for such holder's shares under applicable
law.
4.5 Financial Statements. Circuit Test has heretofore delivered to
Parent true and complete copies of (i) the unaudited balance sheet, and the
related statements of operations and stockholders' equity and of cash flows for
each of the years ended December 31, 1995 and 1994, and (ii) unaudited balance
sheet, and the related statements of operations and stockholders' equity and of
cash flows at December 31, 1996 (collectively, the "Annual Financial
Statements"). Circuit Test also has heretofore delivered to Parent true copies
of the unaudited balance sheet of Circuit Test at May 31, 1997 and the related
unaudited statements of income for the five (5) months then ended (the "Interim
Circuit Test Financial Statements"). The Annual Financial Statements and the
Interim Circuit Test Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other (except as
indicated in the notes thereto and, in the case of the Interim Circuit Test
Financial Statements, that no notes are included) and fairly present the
consolidated financial condition and operating results of Circuit Test at the
dates and during the periods indicated therein, subject, in the case of the
Interim Circuit Test Financial Statements, to normal, recurring year-end audit
adjustments. Upon delivery of the audited financial statements to be delivered
to Parent pursuant to Section 7.12, such audited financial statements will be
deemed to be the Annual Financial Statements as to which representations and
warranties are made herein, and such representations and warranties will be
deemed to have been made by Circuit Test with respect to such financial
statements as of the date of such delivery.
4.6 Absence of Certain Changes. Except as specifically permitted by
this Agreement or as set forth in Schedule 4.6 of the Circuit Test Disclosure
Schedule, since December 31, 1996, Circuit Test has conducted its business in
the ordinary course consistent with past practice and there has not occurred:
(i) any change, event or condition (whether or not covered by insurance) that
has resulted in, or might reasonably be expected to result in, a Material
Adverse Effect on Circuit Test; (ii) any action by or with respect to Circuit
Test that would have constituted a breach of any of the covenants contained in
Section 6.1(b); or (iii) any of the following matters:
(a) any material damage, destruction or loss (whether or not covered by
insurance) to the properties and assets of Circuit Test;
(b) any Lien on any asset other than those otherwise permitted by this
Agreement;
(c) any labor dispute, litigation or governmental investigation affecting
the business or financial condition of Circuit Test;
4.7 Liabilities. Except as set forth in the Annual Financial
Statements, the Interim Circuit Test Financial Statements, the Circuit Test
Disclosure Schedule and except for liabilities or obligations arising in the
ordinary course and consistent with past practice and those incurred
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in connection herewith, Circuit Test does not have any liability or obligation
of any nature, whether due or to become due, fixed or contingent.
4.8 Accounts Receivable. All of the accounts receivable shown on the
balance sheet included in the Interim Circuit Test Financial Statements as of
May 31, 1997 have been collected or are good and collectible in the aggregate
recorded amounts thereof (less the allowance for doubtful accounts also
appearing in such May 31, 1997 balance sheet and net of returns and payment
discounts allowable by Circuit Test's policies) and can reasonably be
anticipated to be paid in full in the ordinary course of business consistent
with past practice without outside collection efforts, subject to no
counterclaims or setoffs.
4.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Circuit Test,
threatened against Circuit Test or any of its assets and properties or any of
its officers or directors (in their capacities as such) that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect on
Circuit Test. There is no judgment, decree or order against Circuit Test, or, to
the knowledge of Circuit Test, any of its directors or officers (in their
capacities as such), that could prevent consummation of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Circuit Test.
4.10 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Circuit Test which
has or reasonably could be expected to have the effect of prohibiting or
materially impairing any current or proposed business practice of Circuit Test,
any acquisition of property by Circuit Test or the conduct of business by
Circuit Test as currently conducted or as proposed to be conducted by Circuit
Test.
4.11 Governmental Authorization. Circuit Test has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization that is necessary for Circuit Test to own or
lease, operate and use its respective assets and properties and to carry on
business as currently conducted or as proposed to be conducted (collectively
"Circuit Test Authorizations"), Circuit Test has performed and fulfilled its
obligations under the Circuit Test Authorizations, and all the Circuit Test
Authorizations are in full force and effect, except where the failure to obtain
or have any of such Circuit Test Authorizations could not reasonably be expected
to have a Material Adverse Effect on Circuit Test.
4.12 Contracts and Commitments. Circuit Test is not a party to any oral
or written (a)(i) obligation for borrowed money, (ii) obligation evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligation to pay
the deferred purchase price of property or services (other than trade accounts
arising in the ordinary course of business), (iv) obligation under capital
leases, (v) debt of others secured by a Lien on its property, (vi) guaranty of
liabilities or obligations of others, (vii) agreement under which Circuit Test
is obligated to make or expects to receive payments in excess of $50,000 or
(viii) agreement granting any person a Lien on any of its properties or assets
(except purchase money security interests created in the
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ordinary course of business consistent with past practice); (b)(i) employment
agreement or collective bargaining agreement or (ii) agreements that limit the
right of Circuit Test, or any of its employees to compete in any line of
business; or (c) agreement which, after giving effect to the transactions
contemplated hereby, purports to restrict or bind Parent or any of its
subsidiaries, other than Surviving Corporation, in any respect. True and
complete copies of all agreements described in the Circuit Test Disclosure
Schedule have been delivered to Parent. Circuit Test has fulfilled, or taken all
actions necessary to enable it to fulfill when due, its obligations under each
of such agreements. All parties thereto have complied in all material respects
with the provisions thereof and no party is in breach or violation of, or in
default (with or without notice or lapse of time, or both) under such
agreements. With respect to such agreements, Circuit Test has not received any
notice of termination, cancellation or acceleration or any notice of breach,
violation or default thereof.
4.13 Title to Property. Circuit Test has good and marketable title to
all of its respective properties and assets, or in the case of leased properties
and assets, valid leasehold interests in such properties, free and clear of any
Lien. The plants, property and equipment of Circuit Test that are used in the
operations of its business are in good operating condition and repair. All
plants, property and equipment owned by Circuit Test conform (to Circuit Test's
knowledge) with all applicable ordinances, regulations and zoning and other laws
and do not encroach on the property of others, the failure to conform with which
would have a Material Adverse Effect on Circuit Test. There is no pending or, to
Circuit Test's knowledge, threatened change in any such ordinance, regulation or
zoning or other law, and there is no pending or, to Circuit Test's knowledge,
threatened condemnation of any such building, machinery or equipment. The
properties and assets of Circuit Test include all rights, properties, interests
in properties and assets necessary to permit Surviving Corporation to conduct
its business as currently conducted. The Circuit Test Disclosure Schedule
identifies each parcel of real property owned or leased by Circuit Test.
4.14 Intellectual Property.
(a) Circuit Test owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("Intellectual Property") that are used in the business of Circuit Test
as currently conducted, except to the extent that the failure to have such
rights has not and could not reasonably be expected to have a Material Adverse
Effect on Circuit Test.
(b) The Circuit Test Disclosure Schedule lists: (i) all
patents and patent applications and all registered and unregistered trademarks,
trade names and service marks, registered and unregistered copyrights, and
maskworks, which Circuit Test considers to be material to its business and
included in the Intellectual Property, including the jurisdictions in which each
such Intellectual Property right has been issued or registered or in which any
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application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Circuit Test is a party
and pursuant to which any person is authorized to use any Intellectual Property,
and (iii) all material licenses, sublicenses and other agreements as to which
Circuit Test is a party and pursuant to which Circuit Test is authorized to use
any third party patents, trademarks or copyrights, including software ("Third
Party Intellectual Property Rights"), in each case which are incorporated in,
are, or form a part of any product or service of Circuit Test.
(c) To the knowledge of Circuit Test, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
rights of Circuit Test, any trade secret material to Circuit Test, or any Third
Party Intellectual Property Right, by any third party, including any employee or
former employee of Circuit Test. Circuit Test has not entered into any agreement
to indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business, or contained in
license agreements relating to Intellectual Property licensed to Circuit Test in
the ordinary course of business.
(d) Circuit Test is not, and will not be as a result of the
execution and delivery of this Agreement or the performance of Circuit Test's
obligations under this Agreement be, in breach of any license, sublicense or
other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights, the breach of which could have a Material Adverse
Effect on Circuit Test.
(e) All patents, registered trademarks, service marks and
copyrights held by Circuit Test are valid and subsisting. Circuit Test (i) has
not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party or (ii) has
not brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual Property
against any third party. To the knowledge of Circuit Test, the manufacture,
marketing, licensing or sale of the products and services of Circuit Test does
not infringe any patent, trademark, service mark, copyright, trade secret or
other proprietary right of any third party.
(f) Circuit Test has secured valid written assignments from
all consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Circuit Test does
not already own by operation of law.
(g) Circuit Test has taken all reasonable and appropriate
steps to protect and preserve the confidentiality of all Intellectual Property
not otherwise protected by patents, or patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by Circuit Test by or to a third party has been
pursuant to the terms of a written agreement with such third party. All use,
disclosure or appropriation of Confidential Information not owned by Circuit
Test has been pursuant to the
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terms of a written agreement with the owner of such Confidential Information, or
is otherwise lawful.
4.15 Environmental Matters.
(a) Circuit Test has complied with, and is in compliance with,
all Environmental Laws (as defined in this Section 4.15(a)) applicable to its
current and prior business, properties and assets. Circuit Test has, and Circuit
Test has provided to Parent, true and complete copies of, all permits,
approvals, registrations, licenses and other authorizations required by any
Governmental Entity pursuant to any Environmental Law applicable to its
business, properties and assets, the absence of which would have a Material
Adverse Effect on Circuit Test and all such permits, approvals, registrations,
licenses and other authorization are listed on the Circuit Test Disclosure
Schedule. There is no pending or, to Circuit Test's knowledge, threatened civil
or criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law to which Circuit Test is a party or,
to Circuit Test's knowledge, threatened to be made a party. For purposes of this
Agreement, "Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, order or judgment or the common law relating to
protection of public health, safety or the environment or occupational health
and safety, or that regulates, or creates liability for, releases or threatened
releases of any Hazardous Substance. As used in this Section 4.15, the terms
"release" and "environment" have the meanings set forth in the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), and "Hazardous Substance" means any substance regulated by, or the
presence of which creates liability under, any Environmental Law (including
without limitation CERCLA) and includes without limitation industrial, toxic or
hazardous substances, pollutants and contaminants, oil or petroleum products,
solid or hazardous waste, chemicals and asbestos.
(b) There have been no releases or threatened releases of any
Hazardous Substance in violation of Environmental Law at any parcel of real
property or any facility currently or formerly owned, leased, operated or
controlled by Circuit Test. With respect to any such releases of or threatened
releases of Hazardous Substance, Circuit Test has given all required notices to
government authorities, copies of which have been provided to Parent. Circuit
Test is not aware of any releases of Hazardous Substance at parcels of real
property or facilities other than those presently or formerly owned, leased,
operated or controlled by Circuit Test that could reasonably be expected to have
an impact on the real property or facilities owned, leased, operated or
controlled by Circuit Test.
(c) The Circuit Test Disclosure Schedule lists all
environmental reports, investigations, audits or similar environmental documents
in the possession of Circuit Test with respect to the operations of, or real
property owned, leased, operated or controlled by Circuit Test (whether
conducted by or on behalf of Circuit Test or a third party and whether done at
the initiative of Circuit Test or directed by a Governmental Entity or other
third party). True and complete copies of each such document have been provided
to Parent.
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(d) Circuit Test is not subject to, and is not reasonably
expected to be subject to any material environmental liability, including
without limitation liability arising out of the utilization by Circuit Test of
any transporter or facility used for treatment, recycling, storage or disposal.
4.16 Taxes. Circuit Test, and any consolidated, combined,
unitary or aggregate group for Tax (as defined in this Section 4.16) purposes of
which Circuit Test is or has been a member have timely filed all Tax Returns (as
defined in this Section 4.16) required to be filed by it taking into account
extensions of due dates, have paid all Taxes shown thereon to be due and have
provided adequate accruals in accordance with generally accepted accounting
principles in its financial statements for any Taxes that have not been paid,
whether shown as being due on any Tax returns. Circuit Test has withheld and
paid over all Taxes required to have been withheld and paid over (including any
estimated taxes), and has complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. Circuit Test does not have any
liability under Treasury Regulation ss. 1.1502-6 or any analogous state, local
or foreign law by reason of having been a member of any consolidated, combined
or unitary group. Except as disclosed in the Circuit Test Disclosure Schedule:
(a) no material claim for Taxes has become a Lien against the property of
Circuit Test or is being asserted against Circuit Test other than Liens for
Taxes not yet due and payable, (b) no audit of any Tax Return of Circuit Test is
being conducted by a Tax authority, (c) no Tax authority is now asserting, or to
the knowledge of Circuit Test, threatening to assert against Circuit Test any
deficiency or claim for additional Taxes, and there are no requests for
information from a Tax authority currently outstanding that could affect the
Taxes of Circuit Test, (d) no extension of the statute of limitations on the
assessment of any Taxes has been granted by Circuit Test and is currently in
effect, (e) Circuit Test has not entered into any compensatory agreements with
respect to the performance of services which payment thereunder would result in
a nondeductible expense pursuant to Sections 162(m) or 280G of the Code, (f) no
action has been taken that would have the effect of deferring any liability for
Taxes for Circuit Test from any period prior to the Effective Date to any period
after the Effective Date, (g) Circuit Test has never been included in an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, (h) Circuit Test is not (nor has it ever been) a party to any Tax sharing
agreement, (i) no consent under Section 341(f) of the Code has been filed with
respect to Circuit Test, (j) Circuit Test has not disposed of any property that
has been accounted for under the installment method, (k) Circuit Test is not a
party to any interest rate swap, currency swap or similar transaction, (l)
Circuit Test is not a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code, (m) Circuit Test is not subject to any
joint venture, partnership or other arrangement or contract that is treated as a
partnership for federal income tax purposes, (n) Circuit Test has not made any
of the foregoing elections and is not required to apply any of the foregoing
rules under any comparable state or local income tax provisions, (o) the
transactions contemplated herein are not subject to the tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the
Code, or of any other provision of law and (p) Circuit Test is not required to
treat any asset as owned by another person for federal income tax purposes or as
tax exempt bond financed property or tax exempt use property within
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the meaning of section 168 of the Code. Circuit Test will not be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) ending after the Effective Time attributable to adjustments made prior
to the Merger pursuant to Section 481 or 263A of the Code or any comparable
provision of any state or foreign Tax law. The Circuit Test Disclosure Schedule
contains accurate and complete information with respect to: (w) all material tax
elections in effect with respect to Circuit Test, (x) the current tax basis of
the assets of Circuit Test, (y) the current and accumulated earnings and profits
of Circuit Test, and (z) the tax credit carry overs of Circuit Test. As used
herein, "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i)
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, business and occupations,
occupation, premium, property, environmental or windfall profit tax, custom,
duty, or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Entity (a "Tax authority")
responsible for the imposition of any such tax (domestic or foreign), (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of being a member of an affiliated, consolidated, combined or unitary
group for any Taxable period and (iii) any liability for the payment of any
amounts of the type described in clause (i) or (ii) as a result of any express
or implied obligation to indemnify any other person. As used herein, "Tax
Return" shall mean any return, statement, report or form (including, without
limitation,) estimated Tax returns and reports, withholding Tax returns and
reports and information reports and returns required to be filed with respect to
Taxes. Circuit Test is in full compliance with all terms and conditions of any
Tax exemptions or other Tax-sharing agreement or order of a foreign government
and the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of such Tax exemptions or other Tax-sharing
agreement or order.
4.17 S Corporation and Other Matters. Circuit Test is, and at all times
since 1984 has been, an S Corporation within the meaning of Section 1361 of the
code for federal income tax purposes. Each Circuit Test shareholder is an
individual U.S. citizen or resident or an estate or trust described in Section
1361 (c)(2) of the Code. The amount of Circuit Test's "unrealized built in gain"
(as such term is defined in Section 1374(d) of the Code) prior to the Closing
is, and as of the Closing will be, zero. The Circuit Test Disclosure Schedule
contains a true list of those states where Circuit Test has filed as an S
Corporation for applicable state income tax purposes.
4.18 Employee Benefit Plans.
(a) The Circuit Test Disclosure Schedule lists, with respect
to Circuit Test, and any trade or business (whether or not incorporated) which
is treated as a single employer with Circuit Test (an "ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Code: (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a
non-officer employee in excess of $50,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code
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Section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management and that do not generally apply to
all employees, and (v) any current or former employment or executive
compensation or severance agreements, written or otherwise, as to which
unsatisfied obligations of greater than $50,000 remain for the benefit of, or
relating to, any present or former employee, consultant or director
(collectively, the "Circuit Test Employee Plans").
(b) Circuit Test has furnished to Parent a copy of each of the
Circuit Test Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto) and has, with
respect to each Circuit Test Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500, including all schedules attached
thereto and actuarial reports, if any, filed for the last three Plan years. Any
Circuit Test Employee Plan intended to be qualified under Sections 401(a) or
501(c)(9) of the Code is so qualified. Circuit Test has furnished Parent with
the most recent Internal Revenue Service determination letter issued with
respect to each such Circuit Test Employee Plan (and nothing has occurred since
the issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Circuit Test Employee Plan subject to
Code Section 401(a)), and all communications with respect to any plan described
in Section 4.18(a) with the Internal Revenue Service, the Department of Labor or
the Pension Benefit Guaranty Corporation.
(c) (i) None of the Circuit Test Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there have been no violations of applicable provisions of the Code or ERISA with
respect to any Circuit Test Employee Plan that could reasonably be expected to
have, in the aggregate, a Material Adverse Effect; (iii) each Circuit Test
Employee Plan is in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have a Material Adverse Effect on Circuit Test, and Circuit Test and each
ERISA Affiliate have no knowledge of any default or violation by any other party
to any of the Circuit Test Employee Plans, which default or violation could
reasonably be expected to have a Material Adverse Effect on Circuit Test; (iv)
all material contributions required to be made by Circuit Test or any ERISA
Affiliate to any Circuit Test Employee Plan have been made on or before its due
dates and a reasonable amount has been accrued for contributions to each Circuit
Test Employee Plan for the current plan years; and (v) neither Circuit Test no
any ERISA Affiliate has ever maintained or otherwise incurred any obligation
under any plan subject to Title IV of ERISA. No suit, administrative proceeding,
action or other litigation has been brought, or to the knowledge of Circuit
Test, is threatened, against or with respect to any such Circuit Test Employee
Plan, including any audit or inquiry by the Internal Revenue Service or United
States Department of Labor.
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(d) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not: (i) entitle any
current or former employee or other service provider or any director of Circuit
Test, or any ERISA Affiliate to severance benefits or any other payment
(including unemployment compensation, golden parachute, bonus or otherwise),
(ii) increase any benefits otherwise payable or (iii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, service provider or director.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Circuit Test, or any ERISA Affiliate
relating to, or change in participation or coverage under, any Circuit Test
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in the Annual Financial Statements.
4.19 Employee Matters. The Circuit Test Disclosure Schedule lists all
employees of Circuit Test and the remuneration and benefits to which such
employees are entitled. The Circuit Test Disclosure Schedule also lists all
employment contracts and collective bargaining agreements, and all pension,
bonus, profit sharing, or other agreements or arrangements not otherwise
described in Section 4.18 providing for employee remuneration or benefits to
which Circuit Test is a party or by which it is bound; all of these contracts
and arrangements are in full force and effect, and neither Circuit Test nor any
other party is in default under them. There have been no claims of defaults and,
to Circuit Test's knowledge there are no facts or conditions which if continued,
or on notice, will result in a default under these contracts or arrangements.
There is no pending or, to Circuit Test's knowledge, threatened labor dispute,
strike, or work stoppage that would have a Material Adverse Effect on Circuit
Test. Circuit Test is in compliance in all material respects with all current
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
labor practice. There are no pending claims against Circuit Test under any
workers compensation plan or policy or for long term disability. Circuit Test
does not have any obligations under The Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") with respect to any former employees or
qualifying beneficiaries thereunder.
4.20 Interested Party Transactions. Circuit Test is not indebted to any
shareholder, director, officer, employee or agent of Circuit Test (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to Circuit Test, and there have been
no other transactions of the type required to be disclosed pursuant to Items 402
and 404 of Regulation S-K under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
4.21 Insurance. Circuit Test has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Circuit Test. The Circuit Test Disclosure
Schedule sets forth a true and complete listing of all such policies, including
in each case applicable coverage limits, deductibles and policy
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expiration dates. There is no material claim pending under any of such policies
or bonds as to which Circuit Test has received a denial, or, to Circuit Test's
knowledge, as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Circuit Test is otherwise in
compliance in all material respects with the terms of such policies and bonds.
Circuit Test has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies. Each policy or bond is
legal, valid, binding, enforceable and in full force and effect and will
continue to be legal, valid, binding, enforceable and in full force and effect
following the consummation of the transactions contemplated hereby.
4.22 Compliance With Laws. Circuit Test has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on Circuit Test.
4.23 Major Customers. The Circuit Test Disclosure Schedule contains a
list of the customers of Circuit Test for each of the two most recent fiscal
years, that individually accounted for more than five percent of the total
dollar amount of net sales, showing the total dollar amount of net sales to each
such customer during each such year. Circuit Test has no knowledge nor has it
received notice from any of the customers listed on the Circuit Test Disclosure
Schedule, that any of the customers listed in the Circuit Test Disclosure
Schedule will not continue to be customers of Circuit Test after the Closing at
substantially the same level of purchases.
4.24 Suppliers. As of the date hereof, no supplier of Circuit Test has
indicated to Circuit Test that it will stop, or decrease the rate of, supplying
materials, products or service to Circuit Test. Circuit Test has not knowingly
breached, so as to provide a benefit to Circuit Test that was not intended by
the parties, any agreement with, or engaged in any fraudulent conduct with
respect to, any customer or supplier of Circuit Test.
4.25 Inventory. All inventories of raw materials, work-in process and
finished goods (including all such in transit) of Circuit Test, together with
related packaging materials (collectively, "Inventory"), reflected in the
Interim Circuit Test Financial Statements consist of a quality and quantity
usable and saleable in the ordinary course of business, have commercial values
at least equal to the value shown on such balance sheet or are subject to
purchase obligations by customers or suppliers at such value and is valued in
accordance with generally accepted accounting principles at the lower of cost
(on a first in first out basis) or market. All Inventory purchased since the
date of such balance sheet consists of a quality and quantity usable and
saleable in the ordinary course of business. Except as set forth in the Circuit
Test Disclosure Schedule, all Inventory is located on premises owned or leased
by Circuit Test. All work-in process contained in Inventory constitutes items in
process of production pursuant to contracts or open orders taken in the ordinary
course of business, from regular customers of Circuit Test with no recent
history of credit problems with respect to Circuit Test; neither Circuit Test
nor any such customer is in material breach of the terms of any obligation to
the other, and, based on Circuit
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Test's knowledge or what Circuit Test reasonably should know, valid grounds
exist for any counterclaim or set-off of amounts billable to such customers upon
the completion of orders to which work-in-process relates. All work-in process
is of a quality ordinarily produced in accordance with the requirements of the
orders to which such work-in-process is identified, and will require no rework
with respect to work performed prior to Closing.
4.26 Product Warranty and Product Liability. The Circuit Test
Disclosure Schedule contains a true and complete copy of Circuit Test's standard
warranty or warranties for its manufacturing services. There has been no
variation from such warranties, except as set forth in the Circuit Test
Disclosure Schedule. Except as stated therein, there are no warranties,
commitments or obligations with respect to Circuit Test's performance of
services. The Circuit Test Disclosure Schedule contains a description of all
product liability claims and similar claims, actions, litigation and other
proceedings relating to services rendered, which are presently pending or, to
Circuit Test's knowledge, threatened, or which have been asserted or commenced
against Circuit Test within the last five years, in which a party thereto either
requests injunctive relief (whether temporary or permanent) or alleges damages
(whether or not covered by insurance). There are no defects in Circuit Test's
manufacturing services that would adversely affect performance of products
Circuit Test manufactures or create an unusual risk of injury to persons or
property. Circuit Test's manufacturing services have been designed or performed
so as to meet and comply with all governmental standards and specifications
currently in effect, and have received all governmental approvals necessary to
allow its performance.
4.27 Minute Books. The minute books of Circuit Test made available to
Parent contain true and complete summaries of all meetings of directors and
shareholders or actions by written consent since the time of incorporation of
Circuit Test, and reflect all transactions referred to in such minutes
accurately in all material respects.
4.28 Brokers' and Finders' Fees. Except for commissions or fees payable
to Broadview Associates, LLC, Circuit Test has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
4.29 Proxy Statement. The information supplied by Circuit Test for
inclusion in the proxy statement to be sent to the shareholders of Parent in
connection with the meeting of Parent's shareholders (the "Parent Shareholders
Meeting") to consider the Merger (such proxy statement as amended or
supplemented is referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed, at the time of the Parent Shareholders
Meeting and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they are made, not false or misleading; or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Parent
Shareholders Meeting which has become false or misleading.
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4.30 Regulation D Offering. To Circuit Test's knowledge, the
information provided to Parent by the holders of shares of Circuit Test Common
Stock, which information is set forth in each such holder's Voting Agreement (as
defined in Section 8.3(g)) delivered to Parent, is true and correct in all
material respects.
4.31 Disclosure. None of the representations or warranties made by
Circuit Test herein or in the Circuit Test Disclosure Schedule, or in any
certificate furnished by Circuit Test pursuant to this Agreement, when all such
documents are read together in their entirety, contain or will contain at the
Effective Time any untrue statement of a material fact, or omit or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading. Circuit Test has delivered or made available true
and complete copies of each document that has been requested by Parent or its
counsel in connection with their legal and accounting review of Circuit Test.
4.32 Hart-Scott-Rodino. None of Circuit Test, its shareholders or any
of their respective affiliates is an "ultimate parent entity" within the meaning
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and
regulations promulgated thereunder (the "HSR Act"), that has $100,000,000 of
total assets or sales (as determined under the HSR Act), as of the date of any
such ultimate parent entity's last regularly prepared balance sheet or as of the
date hereof.
4.33 Reliance. The foregoing representations and warranties are being
made by Circuit Test with the knowledge and expectation that Parent and Merger
Sub are placing reliance thereon.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in a document of even date herewith and delivered
by Parent to Circuit Test prior to the execution and delivery of this Agreement
and referring to the sections and subsections of the representations and
warranties in this Agreement (the "Parent Disclosure Schedule"), subject to its
subsequent revision from time to time to the Effective Time (with the prior
written consent of Circuit Test) Parent and Merger Sub represent and warrant to
Circuit Test as follows:
5.1 Organization, Standing and Power. Each of Parent and its
subsidiaries, including Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has the full corporate power to own its properties and to carry on
its business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and
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in good standing would have a Material Adverse Effect on Parent. Merger Sub has
not engaged in any business (other than certain organizational matters) since
the date of its incorporation.
5.2 Capitalization. As of March 31, 1997, the authorized capital stock
of Parent consisted of 45,000,000 shares of Parent Common Stock and 5,000,000
shares of Preferred Stock, $.01 par value, of which there were issued and
outstanding 5,928,060 shares of Parent Common Stock and no shares of Preferred
Stock. There are no other outstanding shares of capital stock or other
securities of Parent other than shares of Parent Common Stock issued after March
31, 1997 upon the exercise of options issued under Parent's 1993 Incentive Stock
Option Plan and its Stock Option Plan for Non-Employee Directors (collectively,
the "Parent Stock Option Plans") and other outstanding stock options granted by
Parent to its employees. The authorized capital stock of Merger Sub consists of
1,000 shares of Merger Sub Common Stock, all of which are issued and outstanding
and are held by Parent. All outstanding shares of Parent and Merger Sub have
been duly authorized, validly issued, fully paid and are non-assessable and free
and clear of any Lien, except Liens created by or imposed upon the holders
thereof. As of March 31, 1997, Parent has reserved (a) 1,155,000 shares of
Parent Common Stock for issuance to employees, directors and independent
contractors pursuant to the Parent Stock Option Plans, (b) 243,800 shares of
Parent Common Stock for issuance pursuant to other outstanding stock options
granted to its employees. Other than this Agreement, as disclosed in the
immediately preceding sentence or as to additional shares to be authorized under
employee benefit plans of Parent, there are no other options, warrants, puts,
calls, rights, exchangeable or convertible securities or other commitments or
agreements of any nature to which Parent or Merger Sub is a party or by which
either of them is bound obligating Parent or Merger Sub to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, or repurchased,
any shares of the capital stock of Parent or Merger Sub or obligating Parent or
Merger Sub to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. The shares of Parent Common Stock to be issued pursuant
to the Merger will, when issued, be duly authorized, validly issued, fully paid,
and non-assessable.
5.3 Due Authorization. Parent and Merger Sub have the full corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, subject only to the approval of the Merger by Parent's shareholders as
contemplated by Section 7.2. This Agreement has been duly executed and delivered
by Parent and Merger Sub and constitutes the valid and binding obligations of
Parent and Merger Sub. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby will not: (a) conflict
with or violate any provision of the Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws of Parent, as amended, the Articles
of Incorporation or Bylaws of Merger Sub, or equivalent charter documents of any
of Parent's subsidiaries, as amended, (b) violate or conflict with any permit,
order, license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to Parent or any of its subsidiaries or the properties or assets of
Parent or any of its subsidiaries, or (c) result in any breach or violation of,
or constitute a default (with or without notice or lapse of time, or both)
under, or
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give rise to any right of termination, cancellation or acceleration of, or
result in the creation of any Lien on any of the properties or assets of Parent
or any of its subsidiaries pursuant to any mortgage, indenture, lease, contract
or other agreement or instrument, bond, note, concession or franchise applicable
to Parent or any of its subsidiaries or their properties or assets, except, in
the case of this clause (c) only, where such conflict, violation, default,
termination, cancellation or acceleration would not have and could not
reasonably be expected to have a Material Adverse Effect on Parent. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby, except for (i) the filing of the Articles of
Merger and Plan of Merger as provided in Section 1.3, (ii) the filing with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. ("NASD") of the Proxy Statement relating to the Parent
Shareholders Meeting, (iii) the filing of a Form 8-K with the SEC and NASD
within 15 days after the Closing Date, (iv) any filings as may be required under
applicable state securities laws and the securities laws of any foreign country,
and (v) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Parent or would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement.
5.4 SEC Documents; Financial Statements. Parent has furnished Circuit
Test with true and complete copies of its (a) Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as filed with the SEC, (b) Quarterly
Reports on Form 10-Q for the quarter ended March 31, 1997, as filed with the
SEC, (c) proxy statements related to all meetings of its shareholders (whether
annual or special) since December 31, 1995, and (d) all other reports and
registration statements filed by Parent with the SEC since December 31, 1995,
except registration statements on Form S-8 relating to employee benefit plans
(collectively, the "Parent SEC Documents"). As of their respective filing dates,
the Parent SEC Documents prepared in all material respects in accordance with
the requirements of the Exchange Act or the Securities Act, as applicable, and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Documents. The annual and interim financial statements included in the Parent
SEC Documents were prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as indicated in the notes thereto) and fairly
present the consolidated financial condition and operating results of Parent and
its consolidated subsidiaries at the dates and during the periods indicated
therein, subject, in the case of interim financial statements, to normal,
recurring year-end audit adjustments.
5.5 Absence of Certain Changes. Except as disclosed in the Parent SEC
Documents filed with the SEC prior to the date hereof, since March 31, 1997 (the
"Parent Balance Sheet Date"), each of Parent and its subsidiaries has conducted
its business in the ordinary course consistent with past practice and there has
not occurred: (a) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to result in, a
Material Adverse Effect on Parent or (b) any declaration, setting aside, or
payment of
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a dividend or other distribution with respect to the shares of Parent, or any
direct or indirect redemption, retirement, purchase or other acquisition by
Parent of any of its capital stock. Except as disclosed in such Parent SEC
Documents, Parent is not aware of any facts which are reasonably likely to have
a Material Adverse Effect on Parent.
5.6 Compliance with Laws. Each of Parent and its subsidiaries has
complied with, is not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Parent.
5.7 Board Approval. The Boards of Directors of Parent and Merger Sub
have (a) approved this Agreement and the Merger, (b) determined that the Merger
is in the best interests of their respective shareholders and is on terms that
are fair to such shareholders and (c) recommended that the shareholders of
Parent and Merger Sub approve this Agreement and the Merger.
5.8 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Parent, threatened
against Parent, any of its subsidiaries, or any of their respective assets and
properties or any of Parent's officers or directors (in their capacities as
such) that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on Parent. There is no judgment, decree or order
against Parent, or, to the knowledge of Parent, any of its directors or officers
(in their capacities as such), that could prevent consummation of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Parent.
5.9 Title to Property. Parent and each of its subsidiaries has good and
marketable title to all of its respective properties and assets, or in the case
of leased properties and assets, valid leasehold interests in such properties,
free and clear of any Lien. The plants, property and equipment of Parent that
are used in the operations of its business are in good operating condition and
repair. All plants, property and equipment owned by Parent conform (to Parent's
knowledge) with all applicable ordinances, regulations and zoning and other laws
and do not encroach on the property of others, the failure to conform with which
would have a Material Adverse Effect on Parent.
5.10 Intellectual Property.
(a) Parent and its subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use, all Intellectual Property
used in the business of Parent and its subsidiaries as currently conducted,
except to the extent that the failure to have such rights has not and could not
reasonably be expected to have a Material Adverse Effect on Parent.
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(b) To the knowledge of Parent, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Parent or its subsidiaries, any trade secret material to Parent, or any Third
Party Intellectual Property Right, by any third party, including any employee or
former employee of Parent or its subsidiaries. Neither Parent nor any subsidiary
of Parent has entered into any agreement to indemnify any other person against
any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders arising in the ordinary
course of business, or contained in license agreements relating to Intellectual
Property licensed to Parent or its subsidiaries in the ordinary course of
business.
(c) All patents, registered trademarks, service marks and
copyrights held by Parent and its subsidiaries are valid and subsisting. Neither
Parent nor any subsidiary of Parent (i) has been sued in any suit, action or
proceeding which involves a claim of infringement of any patents, trademarks,
service marks, copyrights or violation of any trade secret or other proprietary
right of any third party or (ii) has brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party. To the knowledge of
Parent, the manufacture, marketing, licensing or sale of the products and
services of Parent does not infringe any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party.
(d) Parent has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all Confidential Information. All
use, disclosure or appropriation of Confidential Information owned by Parent or
any of its subsidiaries by or to a third party has been pursuant to the terms of
a written agreement with such third party. All use, disclosure or appropriation
of Confidential Information not owned by Parent or its subsidiaries has been
pursuant to the terms of a written agreement with the owner of such Confidential
Information, or is otherwise lawful.
5.11 Taxes. Except matters as would not have a Material Adverse Effect
on Parent: (i) Parent and its subsidiaries have (a) filed (or there have been
filed on their behalf) with appropriate governmental authorities all Tax Returns
required to be filed by them and such Tax Returns were true, correct and
complete, and (b) duly paid in full or made provision in accordance with GAAP
for the payment of all Taxes for all periods ending though the date of this
Agreement; and (ii) Parent and its subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and had, within the time and manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws.
5.12 Employee Benefit Plans; ERISA. Except matters as would not have a
Material Adverse Effect on Parent: the material employee benefit plans,
arrangements, practices, contracts and agreements (including, without
limitation, employment agreement, change of control agreement and severance
agreements, incentive compensation, bonus, stock option, stock appreciation
rights and stock purchase plans, and including, but not limited to, plans
described in
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section 3(3) of ERISA, maintained by Parent, any of its subsidiaries or any
trade or business, whether or not incorporated, that together with Parent would
be deemed a "controlled group" within the meaning section 4001(a)(14) or ERISA,
or with respect to which Parent or any of its subsidiaries has or may have a
liability were in substantial compliance with applicable laws, including ERISA
and the Code.
5.13 Compliance With Laws. Parent and its subsidiaries have complied
with, are not in violation of, and have not received any notices of violation
with respect to, any federal, state, local or foreign statute, law or regulation
with respect to the conduct of their respective businesses, or the ownership or
operation of their respective businesses, except for such violations or failures
to comply as could not be reasonably expected to have a Material Adverse Effect
on Parent.
5.14 Major Customers. Parent has no knowledge or information of any
facts indicating, nor any other reason to believe, that any of the principal
customers of Parent and its subsidiaries will not continue to be customers of
Parent or such subsidiaries after the Closing at substantially the same level of
purchases.
5.15 Suppliers. As of the date hereof, no supplier of Parent has
indicated to Parent that it will stop, or decrease the rate of, supplying
materials, products or service to Parent. Parent has not knowingly breached, so
as to provide a benefit to Parent that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of Parent.
5.16 Brokers' and Finders' Fees. Parent has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
5.17 Disclosure. None of the representations or warranties made by
Parent herein or in the Parent Disclosure Schedule, or in any certificate
furnished by Parent pursuant to this Agreement, when all such documents are read
together in their entirety, contain or will contain at the Effective Time any
untrue statement of a material fact, or omit or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. Parent has delivered or made available true and complete copies of
each document that has been requested by Circuit Test or its counsel in
connection with their legal and accounting review of Parent.
5.18 Hart-Scott-Rodino. Neither Parent nor any of its subsidiaries is
an "ultimate parent entity" within the meaning of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and the rules and regulations promulgated
thereunder (the "HSR Act"), that has $100,000,000 of total assets or sales (as
determined under the HSR Act), as of the date of any such ultimate parent
entity's last regularly prepared balance sheet or as of the date hereof.
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5.19 Reliance. The foregoing representations and warranties are being
made by Parent and Merger Sub with the knowledge and expectation that Circuit
Test is placing reliance thereon.
ARTICLE VI
CONDUCT PRIOR TO EFFECTIVE TIME
6.1 Conduct of Business of Circuit Test. Prior to the Effective Time,
except as expressly contemplated by this Agreement or as agreed in writing by
Parent:
(a) Affirmative Covenants. Circuit Test will:
(i) carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use its best efforts
to preserve intact its present business organizations, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time;
(ii) maintain insurance coverages and its books, accounts and records in
the usual manner consistent with past practice;
(iii) comply in all material respects with all laws and regulations of any
Governmental Entity applicable to it;
(iv) maintain and keep its plants, property and equipment in good repair,
working order and condition, ordinary wear and tear excepted;
(v) perform in all material respects its obligations under all contracts
and commitments to which it is a party or by which it is bound;
(vi) notify Parent of any event or occurrence not in the ordinary course of
its business, and of any event which could have a Material Adverse Effect on
Circuit Test; or
(vii) pay, consistent with past practice, all accounts payable that arise
in the ordinary course of its business.
(b) Negative Covenants. Circuit Test will not:
(i) cause or permit any amendments to its Articles of Incorporation or
Bylaws or equivalent charter documents;
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(ii) accelerate, amend or change the period of exercisability or vesting of
options or other rights granted under its employee stock plans or director stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans;
(iii) transfer to any person or entity any rights to its Intellectual
Property;
(iv) enter into or amend any agreements pursuant to which any other party
is granted exclusive marketing or other exclusive rights of any type or scope
with respect to any of its products or technology;
(v) enter into any operating lease providing for payments in excess of
an aggregate of $50,000;
(vi) adopt or amend any employee benefit or stock purchase or option plan,
or hire any new director level or officer level employee (other than in the
ordinary course of business), pay any special bonus or special remuneration to
any employee or director, or increase the salaries or wage rates of its
employees, except as set forth in Section 6.1(b) of the Circuit Test Disclosure
Schedule;
(vii) commence a lawsuit other than (A) for the routine collection of
bills, (B) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect of
its business, provided that it consults with Parent prior to the filing of such
a suit, or (C) for a breach of this Agreement;
(viii) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets, other than in the ordinary course of business consistent with past
practice;
(ix) other than in the ordinary course of business, make or change any
material election in respect of Taxes, adopt or change any accounting method in
respect of Taxes, file any material Tax Return or any amendment to a material
Tax Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(x) revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business;
(xi) take, or agree in writing or otherwise to take, any other action that
would make any of its representations or warranties contained in this Agreement
untrue;
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(xii) delay in the payment of any trade or other payables other than in the
ordinary course of business consistent with past practice;
(xiii) sell, lease or otherwise transfer or dispose of any property or
asset of Circuit Test, other than in the ordinary course of business consistent
with past practice;
(xiv) change its accounting methods, practices or policies (including any
change in depreciation or amortization policies or rates) by Circuit Test or
revalue any of its assets, except as described in the notes to the Annual
Financial Statements;
(xv) declare, set aside, or pay any dividend or other distribution to
Circuit Test's shareholders, or any direct or indirect redemption, retirement,
purchase or other acquisition by Circuit Test of any of its capital stock or
other securities or options, warrants or other rights to acquire capital stock,
except as set forth on Schedule 6.1(b);
(xvi) enter into commitment or transaction (including any capital
expenditure, capital financing or sale of assets) for any amount that requires
or could require payments in excess of $50,000 with respect to any individual
contract or a series of related contracts;
(xvii) cancel any debt or waive or release of any right or claim by Circuit
Test, other than in the ordinary course of business;
(xviii) make any payment, or discharge or satisfy any claim, liability or
obligation by Circuit Test, other than as reflected or reserved against in the
Annual Financial Statements or the Interim Circuit Test Financial Statements or
in the ordinary course of business consistent with past practice;
(xix) issue or sell any capital stock or other securities, exchangeable or
convertible securities, options, warrants, puts, calls or other rights to
acquire capital stock or other securities of Circuit Test;
(xx) incur any indebtedness for borrowed money, or guarantee or otherwise
assume any such indebtedness, except as set forth in Schedule 6.1(b);
(xxi) make any loan or advance (other than advances to employees in the
ordinary course of business for travel and entertainment in accordance with past
practice) to any person;
(xxii ) increase in any salary, wage, benefit or other remuneration payable
or to become payable to any current or former officer, director, employee,
independent contractor or agent of Circuit Test or pay or agree to pay any bonus
or severance payment or arrangement made to, for or with any officer, director,
employee or agent of Circuit Test or provide for any supplemental retirement
plan or other program or special remuneration for any officer, director,
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employee or agent of Circuit Test, except for normal salary or wage increases
relating to periodic performance reviews and annual bonuses consistent with past
practice of Circuit Test;
(xxiii) grant credit to any customer on terms or in amounts more favorable
than those which have been extended to such customer in the past, any other
change in the terms of any credit heretofore extended or any other change in the
policies or practices of Circuit Test with respect to the granting of credit; or
(xiv) agree, whether in writing or otherwise, to do any of the foregoing.
6.2 No Solicitation; Acquisition Proposals. Subject to the fiduciary
duties of Circuit Test's Board of Directors under applicable law, as advised by
counsel, Circuit Test shall not, directly or indirectly, through any officer,
director, employee, representative, agent, financial advisor or otherwise,
solicit, initiate or encourage inquiries or submission of proposals or offers
from any person relating to any sale of all or any portion of the assets,
business, properties of (other than immaterial or insubstantial assets or
inventory in the ordinary course of business), or any equity interest in,
Circuit Test or any business combination with Circuit Test whether by merger,
purchase of assets, tender offer or otherwise or participate in any negotiation
regarding, or furnishing to any other person any information with respect to, or
otherwise cooperate in any way with, or assist in, facilitate or encourage, any
effort or attempt by any other person to do or seek to do any of the foregoing.
Circuit Test shall use its best efforts to cause all confidential materials
previously furnished to any third parties in connection with any of the
foregoing to be promptly returned to Circuit Test and shall cease any
negotiations conducted in connection therewith or otherwise conducted with any
such parties.
6.3 Conduct of Business of Parent. Prior to the Effective Time, except
as expressly contemplated by this Agreement or as agreed in writing by Circuit
Test, Parent will, and will cause each of its subsidiaries to:
(a) carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use its best efforts
to preserve intact its present business organizations, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time;
(b) maintain insurance coverages and its books, accounts and records in the
usual manner consistent with past practice;
(c) comply in all material respects with all laws and regulations of any
Governmental Entity applicable to it;
(d) maintain and keep its plants, property and equipment in good repair,
working order and condition, ordinary wear and tear excepted;
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(e) perform in all material respects its obligations under all contracts
and commitments to which it is a party or by which it is bound;
(f) notify Circuit Test of any event or occurrence not in the ordinary
course of its business, and of any event which could have a Material Adverse
Effect on Parent; or
(g) pay, consistent with past practice, all accounts payable that arise in
the ordinary course of its business except to the extent that the amount owing
is being duly contested by Parent and such contest does not have a Material
Adverse Effect on Parent and adequate reserves therefor are reflected on the
Annual Financial Statements or the Interim Financial Statements for Parent.
6.4 Notice of Breach. Each party hereto shall promptly give written
notice to the others upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event that could cause or constitute
a breach of any of its representations, warranties or covenants hereunder.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Proxy Statement. As promptly as practicable after the execution of
this Agreement, Parent shall prepare and file with the SEC preliminary proxy
materials relating to the approval of the Merger and the transactions
contemplated hereby by the shareholders of Parent.
7.2 Meetings of Shareholders.
(a) Parent Shareholders Meeting. As promptly as practicable
after the date hereof, Parent shall take all action necessary in accordance with
applicable law and its Articles of Incorporation and Bylaws to convene the
Parent Shareholders Meeting. Subject to Section 7.1, Parent shall use its
reasonable efforts to solicit from shareholders proxies in favor of the Merger
and shall take all other action necessary or advisable to secure the vote or
consent of shareholders required to effect the Merger, and subject to the
fiduciary duties of Parent's Board of Directors under applicable law, as advised
by counsel, the Board of Directors of Parent shall recommend a vote in favor of
the Merger.
(b) Circuit Test Shareholders Meeting. Circuit Test shall take
all action necessary in accordance with applicable law and its Articles of
Incorporation and Bylaws within ten (10) days after the date hereof either (i)
to obtain the written consent of the shareholders of Circuit Test to this
Agreement and the transactions contemplated hereby or (ii) to convene a special
meeting of its shareholders and solicit from shareholders proxies in favor of
the Merger. In any event, Circuit Test shall take all action necessary or
advisable to secure the vote or consent of shareholders required to effect the
Merger, and subject to the fiduciary duties of Circuit Test's
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Board of Directors under applicable law, as advised by counsel, the Board of
Directors of Circuit Test shall recommend a consent or vote in favor of the
Merger.
7.3 Access to Information. Each party shall afford the other and its
accountants, counsel and other representatives (collectively, "Representatives")
full access during normal business hours (and at such other times as the parties
hereto agree) during the period prior to the Effective Time to: (a) all of such
party's properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel of such party as
the other party may reasonably request. Each party agrees to provide to the
other and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of Parent
and Circuit Test shall confer on a regular and frequent basis with one or more
representatives of the other party to report operational matters of materiality
and the general status of ongoing operations. No information or knowledge
obtained in any investigation pursuant to this Section 7.3 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties hereto to consummate the Merger.
7.4 Confidentiality. Each party hereto and its Representatives will
treat as confidential and hold in confidence all information concerning the
businesses and affairs of the other that is not already generally available to
the public and is not otherwise known to the party to whom it was disclosed on a
non-confidential basis ("Proprietary Information") and refrain from using any
Proprietary Information except in furtherance of this Agreement or as required
by law.
7.5 Publicity. Circuit Test shall not, and shall use its reasonable
efforts to cause its shareholders not to, issue, or cause or permit to be
issued, any press release or otherwise make any public statement regarding the
terms of this Agreement or the transactions contemplated hereby without Parent's
prior written consent. Parent and Merger Sub shall consult with Circuit Test
before issuing any press release or otherwise making any public statement
regarding the terms of this Agreement or the transactions contemplated hereby,
except as required by law or its other legal obligations.
7.6 Filings; Cooperation. Parent and Circuit Test shall make, and cause
their affiliates to make, all necessary filings with respect to the Merger and
the other transactions contemplated hereby including those required under the
Securities Act and the Exchange Act and the rules and regulations thereunder,
and under applicable Blue Sky or similar securities laws, and shall use all
reasonable efforts to obtain required approvals and clearances with respect
thereto to (a) comply as promptly as practicable with all governmental
requirements applicable to the transaction and (b) obtain promptly all necessary
permits, orders and other consents of Governmental Entities and consents of
third parties necessary for the consummation of the Merger.
7.7 Employment Matters. At the Effective Time, Parent will enter into
employment agreements with each of Messrs. Allen S. Braswell, Jr., Richard
Strott, Andrew Hatch and
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Dennis Ayo (the "Employment Agreements"), which Employment Agreements shall be
substantially in the form attached hereto as Exhibit 7.7.
7.8 Stock Options. At the Effective Time, Parent will issue stock
options to certain employees of Circuit Test. Such stock options will be issued
and exercisable under Parent's Equity Incentive Plan. Schedule 7.8 hereto sets
forth the names of the grantees, the number of options to be granted and the
manner in which such options will vest. The exercise price of the options shall
be the last closing sale price of the Parent Common Stock on the date of grant.
7.9 Director Nominees. At or prior the Effective Time, Parent shall take
such action as may be necessary such that two persons designated by Circuit Test
will be elected to Parent's Board of Directors (the "Designees"), effective at
the Effective Time. Circuit Test has selected as the Designees Messrs. Allen S.
Braswell, Sr. and Allen S. Braswell, Jr. Unless waived by the Designees, Parent
also shall take such action as may be necessary to nominate the Designees for
election to the Board of Directors at Parent's Annual Meeting of Shareholders
held next following the Effective Time.
7.10 Further Assurances.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings (including, but not limited to,
filings with all applicable Governmental Entities) and to lift any injunction or
other legal bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible).
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Parent and the Surviving Corporation
shall take all such necessary action.
(c) Circuit Test and its shareholders shall confirm and
represent to Parent, by signed certificates, such factual matters as Parent may
reasonably request in order for Parent to confirm that the Merger will qualify
as a nontaxable reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
7.11 Certain Tax Matters. Parent shall continue at least one
significant historical business line of Circuit Test, or shall use at least a
significant portion of Circuit Test's historical business assets in a business,
in each case within the meaning of Treasury Regulation Section 1.368-1(d).
7.12 Audited Financial Statements. On or before July 16, 1997, Circuit Test
shall deliver or cause to be delivered to Parent the consolidated audited
balance sheet, and the related
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statements of operations, stockholders' and members' equity and of cash flows of
Circuit Test, LLC and Airhub for the year ended December 31, 1996.
7.13 Additional Agreements. On or before July 16, 1997: (a) Parent shall
deliver or cause to be delivered to Circuit Test executed Voting Letter
Agreements (the form of which is attached as Exhibit 7.13 hereto) from each of
the directors of Parent who is also a shareholder of Parent; (b) Circuit Test
shall deliver or cause to be delivered to Parent a Voting Agreement executed by
all of the CT Shareholders (other than the Allen S. Braswell, Sr. Grantor
Retained Income Trust and Allen S. Braswell, Jr. who shall execute such Voting
Agreement as of the date hereof).
7.14 Deferred Compensation. The parties hereto agree that after the
Effective Time Circuit Test shall be authorized to pay up to an aggregate of
$500,000 to its employees as "Deferred Compensation", less the amount of any
Deferred Compensation paid by Airhub and CTLLC pursuant to Section 7.8 of the
Purchase Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party hereto to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of the parties
hereto:
(a) This Agreement and the Merger shall have been approved and
adopted by the requisite vote of the holders of Parent Common Stock and by the
requisite vote of the holders of Circuit Test Common Stock.
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Merger, nor any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing, shall be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(c) Parent, Circuit Test and Merger Sub and their respective
subsidiaries, if any, shall have timely obtained from each Governmental Entity
all approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
federal securities and state Blue Sky laws.
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(d) Simultaneous with the occurrence of the Closing hereunder, the Closing
shall have occurred under the Purchase Agreement.
8.2 Additional Conditions to Obligations of Circuit Test to Effect the
Merger. The obligations of Circuit Test to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Circuit Test:
(a) Parent and Merger Sub shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them on or prior to the
Effective Time and the representations and warranties of Parent and Merger Sub
in this Agreement shall be true and correct in all material respects (or in all
respects in the case of any representation or warranty that is qualified by its
terms by a reference to Material Adverse Effect or otherwise the concept of
materiality) when made and on and as of the Effective Time as though such
representations and warranties were made on and as of such date.
(b) Circuit Test shall have received a certificate executed on
behalf of Parent by its Chief Financial Officer certifying that the conditions
specified in Section 8.2(a) have been fulfilled.
(c) Circuit Test shall have received a legal opinion of Holme
Roberts & Owen LLP, counsel to Parent, substantially in the form attached hereto
as Exhibit 8.2(c).
(d) Parent shall have executed and delivered to the holders of
Circuit Test Common Stock an agreement with respect to demand and piggyback
registration rights of such holders (the "Registration Rights Agreement"), which
Registration Rights Agreement shall be substantially in the form of Exhibit
8.2(d) attached hereto.
(e) Parent shall have agreed to grant, as of the Effective
Time, to the members of Circuit Test's management identified on Schedule 8.2(e),
the employee stock options specified in such schedule.
(f) There shall not have occurred any Material Adverse Effect on Parent.
(g) Parent shall have executed and delivered to the other
parties thereto, all Employment Agreements to be entered into at the Effective
Time, which Employment Agreements shall be substantially in the form attached
hereto as Exhibit 7.7.
8.3 Additional Conditions to the Obligations of Parent and Merger Sub
to Effect the Merger. The obligations of Parent and Merger Sub to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Parent:
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(a) Circuit Test shall have performed and complied in all
material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it on or prior to the
Effective Time and the representations and warranties of Circuit Test in this
Agreement shall be true and correct in all material respects (or in all respects
in the case of any representation or warranty that is qualified by its terms by
a reference to Material Adverse Effect or otherwise by the concept of
materiality) when made and on and as of the Effective Time as though such
representations and warranties were made on and as of such time.
(b) Parent shall have received a certificate, dated as of the
Effective Time, executed on behalf of Circuit Test by its President and its
Chief Financial Officer certifying that the conditions specified in Section
8.3(a) have been fulfilled.
(c) Parent shall have received a legal opinion from Burch,
Porter & Johnson, PLLC, legal counsel to Circuit Test, substantially in form
attached hereto as Exhibit 8.3(c).
(d) Parent shall have been furnished with evidence
satisfactory to it of the consent or approval of those persons whose consent or
approval shall be required in connection with the Merger under any material
contract of Circuit Test otherwise.
(e) There shall not have occurred any Material Adverse Effect
on Circuit Test.
(f) Parent shall have received letters of resignation,
effective as of the Effective Time, executed and tendered by each of the then
incumbent directors of Circuit Test.
(g) The Voting Agreement, dated the date hereof (the "Voting
Agreement"), among the CT Shareholders and Parent shall be in full force and
effect as of the Effective Time and the parties to the Voting Agreement other
than Parent shall have performed and complied in all material respects with all
covenants, obligations and conditions of the Voting Agreement required to be
performed or complied with by them. The CT Shareholders shall have executed and
delivered to Parent: (i) a certificate confirming the continued accuracy of the
representations and warranties given by them under the Voting Agreement; and
(ii) the Registration Rights Agreement.
(h) The parties to the Voting Agreement, other than Parent,
and Bruce A. Braswell, Amy A. Braswell, and Anita B. Murman shall have entered
into an agreement regarding the indemnification of Parent and Merger Sub with
respect to the representations, warranties and covenants of this Agreement (the
"Indemnification Agreement"), which Indemnification Agreement shall be
substantially in the form of Exhibit 8.3(h) attached hereto;
(i) Each employee who is to be party thereto shall have
executed and delivered to Parent, all Employment Agreements to be entered into
at the Effective Time, which Employment Agreements shall be substantially in the
form attached hereto as Exhibit 7.7.
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(j) Parent shall have received from each of the holders of
Circuit Test Common Stock who are receiving Parent Common Stock in the Merger a
letter substantially in the form of Exhibit 8.3(j) attached hereto, and Parent
shall have confirmed, to its reasonable satisfaction, that the Merger will
qualify as a nontaxable reorganization under Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
(k) There shall be no material variation between the audited
financial statements for the year ended December 31, 1996 delivered to Parent
pursuant to Section 7.12 and the unaudited financial statements for such period
previously delivered to Parent.
(l) For matters from its inception until the Closing, all
corporate actions of Circuit Test, other than those that require no Board
approval, shall have been approved or otherwise ratified by the Circuit Test
Board of Directors as the valid and duly authorized actions of Circuit Test.
(m) Parent shall have received such clearance certificate or
shall have received or filed such other documents that may be required by any
state taxing authority in order to relieve Parent of any obligation to withhold
any portion of the consideration payable.
(n) Circuit Test shall deliver to Parent at Closing a
"Certificate of Nonforeign Status" under section 1445 of the Code in a form
reasonably satisfactory to Parent.
ARTICLE IX
RESTRICTIONS ON TRANSFER
9.1 Legends. Each certificate representing shares of Parent Common
Stock issued in connection with the Merger (the "Restricted Securities") shall
bear a legend to the following effect:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
RESTRICTIONS ON THE TRANSFERABILITY CONTAINED IN AN AGREEMENT RELATING
TO THE SECURITIES AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND
NO TRANSFER WILL BE RECOGNIZED UNLESS MADE IN COMPLIANCE WITH SUCH
LAWS."
Any holder of Restricted Securities (a "Holder") who disposes of Restricted
Securities in accordance with Section 9.2 shall be entitled to have Parent cause
new unlegended certificates to be issued promptly to the Holder in exchange for
outstanding legended certificates representing
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the disposed shares if: (a) the opinion to counsel referred to in Section 9.2 is
to the further effect that such legend is not required in order to establish
compliance with any provisions of the Securities Act; (b) the transfer is in
connection with a transaction intended to comply with Rule 144 and Rule 145 as
promulgated by the SEC under the Securities Act, as such Rules may be amended
from time to time, or any similar successor rule that may be promulgated by the
SEC, or (c) an appropriate registration statement with respect to such
Restricted Securities has been filed by Parent with the SEC and has been
declared effective by the SEC.
9.2 Notice of Proposed Dispositions. Each Holder of Restricted
Securities by acceptance thereof shall agree to comply in all respects with the
provisions of this Section 9.2. Prior to any proposed disposition of any
Restricted Securities (unless there is in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement) the holder thereof shall
give written notice to Parent of such Holder's intention to effect such
disposition. Each such notice shall describe the manner and circumstances of the
proposed disposition and shall be accompanied by either (a) a written opinion of
legal counsel addressed to Parent and reasonably satisfactory in form and
substance to Parent, to the effect that the proposed disposition of Restricted
Securities may be effected without registration of such Restricted Securities or
(b) a "no action" letter from the SEC to the effect that such disposition
without registration of such Restricted Securities will not result in
recommendation by the staff of the SEC that enforcement action be taken with
respect thereto, whereupon the Holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the Holder to Parent. The provisions of this Section 9.2
shall not apply to Restricted Securities that are then freely tradeable pursuant
to Rule 144(k) under the Securities Act, as amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of Circuit Test and Parent, this Agreement may be
terminated:
(a) by mutual consent of Parent and Circuit Test;
(b) by either Parent or Circuit Test, if, without fault of the
terminating party, the Closing shall not have occurred on or before the later of
(i) 30 days after the date the Proxy Statement is mailed, but in no event later
than November 30, 1997, or (ii) such later date as may be agreed upon in writing
by the parties hereto;
(c) by Parent, if any of the conditions specified in Section
8.3 have not been satisfied or waived at such time as such condition is no
longer capable of satisfaction;
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(d) by Circuit Test, if any of the conditions specified in
Section 8.2 have not been satisfied or waived at such time as such condition is
no longer capable of satisfaction;
(e) by either Parent or Circuit Test if the other shall have
breached its respective representations, warranties or other obligations under
Articles IV through VII in any material respect and such breach continues for a
period of 10 days after receipt of notice of the breach from the non-breaching
party hereto.
10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent, Merger
Sub or Circuit Test or their respective officers, directors, shareholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of this Section 10.2 and
Section 7.4 (Confidentiality) and Article XI (General Provisions) shall remain
in full force and effect and survive any termination of this Agreement.
10.3 Amendment. The respective Boards of Directors of the parties
hereto may cause this Agreement to be amended at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto; provided
that an amendment made subsequent to adoption of the Agreement by the
shareholders of Circuit Test or Merger Sub shall not (a) alter or change the
amount or kind of consideration to be received on conversion of the Circuit Test
Common Stock, (b) alter or change any term of the Articles of Incorporation of
Surviving Corporation to be effected by the Merger, or (c) alter or change any
of the terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of Circuit Test Common Stock or Parent.
10.4 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Survival of Representations and Warranties. The representations
and warranties of Circuit Test in Article IV shall survive the Merger and
continue in full force and effect for two years after the Effective Time, except
for those contained in Section 4.16 and 4.17 shall survive the Merger and
continue in full force and effect after the Effective Time for the applicable
statute
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of limitations period. The Shareholders of Circuit Test have agreed to indemnify
Parent pursuant to the Indemnification Agreement, subject to the limitations
contained therein. The representations and warranties of Parent and Merger Sub
shall survive the Merger and continue in full force and effect for two years
after the Effective Time and Parent shall indemnify the Shareholders of Circuit
Test pursuant to Section 11.2, in each case subject to the limitations contained
therein.
11.2 Indemnification by Parent.
(a) Indemnity Obligation of Parent. Parent hereby agrees to
indemnify and hold harmless each of the CT Shareholders harmless from, and to
reimburse each of the CT Shareholders for, any Shareholder Indemnity Claims
arising under the terms and conditions of this Agreement. For purpose of this
Agreement, the term "Shareholder Indemnity Claim" shall mean any loss, damage,
deficiency, claim, liability, suit, action, fee, cost or expense of any nature
whatsoever ("Losses") incurred by the CT Shareholders resulting from any breach
of representation or warranty of Parent or Merger Sub that is contained in this
Agreement.
(b) Limitation on Indemnification. Notwithstanding the
foregoing, any claim for indemnification or breach of representation and
warranty against Parent hereunder shall be payable by Parent only in the event,
and to the extent, that the accumulated amount of claims in respect of such
indemnifying party's obligations to indemnify hereunder shall exceed the amount
of $100,000 in the aggregate (the "Indemnification Threshold"). In addition, the
aggregate liability of Parent for amounts in excess of the Indemnification
Threshold shall not exceed an aggregate of $2.5 million unless such Losses are
caused by or arise out of any breach of which Parent had actual knowledge at the
time of the related representation was made or deemed made, in which case an
aggregate ceiling of $14.5 million shall apply.
11.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
at the following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Parent or Merger Sub, to:
EFTC Corporation
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892-4306
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<PAGE>
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler
Facsimile No.: (303) 866-0200
(b) if to Circuit Test, to:
Circuit Test, Inc.
4601 Cromwell Avenue
Memphis, Tennessee 38118
Attention: Allen S. Braswell, Jr.
Facsimile No.: (901) 795-5305
with a copy to:
Burch, Porter & Johnson, PLLC
50 North Front Street
Suite 800
Memphis, Tennessee 38103
Attention: Warner B. Rodda
Facsimile No.: (901) 524-5026
11.4 Interpretation. When a reference is made in this Agreement to
Exhibits, Articles or Sections, such reference shall be to an Exhibit, Article
or Section to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party hereto to whom such information is to be made available.
The table of contents, index of defined terms and Article and Section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. In this Agreement,
any reference to any event, change, condition or effect being "material" with
respect to any entity or group of entities means any material event, change,
condition or effect related to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of entities. In this
Agreement, any reference to a "Material Adverse Effect" with respect to any
entity or group of entities means any event, change or effect that is materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, business, operations or results of operations of such entity and
its subsidiaries, taken as a whole. In this Agreement, any reference to a
party's "knowledge" means such party's actual knowledge of a particular fact or
matter after due and diligent inquiry of officers, directors and other employees
of such party reasonably
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<PAGE>
believed to have knowledge of such matters. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter
forms.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart.
11.6 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Circuit Test Disclosure Schedule and the Parent Disclosure Schedule (a)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof; (b) are not intended to confer upon any other person any rights
or remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
11.7 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties hereto further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.8 Remedies Cumulative; No Waiver. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right.
11.9 Governing Law. The Merger shall be governed by the laws of the
state of Florida. All other aspects of this Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado (without regard
to the principles of conflicts of law thereof).
11.10 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
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11.11 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisers, accountants and legal counsel) shall be paid by the party incurring
such expense.
11.12 Attorneys Fees. In the event of any proceeding to enforce this
Agreement, the prevailing party shall be entitled to receive from the losing
party all reasonable costs and expenses, including the reasonable fees of
attorneys, accountants and other experts, incurred by the prevailing party in
investigating and prosecuting (or defending) such action at trial or upon any
appeal.
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SIGNATURE PAGE--AGREEMENT AND PLAN OF REORGANIZATION
IN WITNESS WHEREOF, Circuit Test, Parent and Merger Sub have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
EFTC CORPORATION,
a Colorado corporation
By: /s/ Stuart Fuhlendorf
CTI ACQUISITION CORP.,
a Florida corporation
By: /s/ Stuart Fuhlendorf
CIRCUIT TEST, INC.
a Florida corporation
By: /s/ Allen S. Braswell, Jr.
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- --------------------------------------------------------------------------------
LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT
among
EFTC CORPORATION,
CTLLC ACQUISITION CORP.,
CIRCUIT TEST INTERNATIONAL, L.C.,
AIRHUB SERVICES GROUP, L.C.,
and the
MEMBERS OF AIRHUB SERVICES GROUP, L.C. AND CIRCUIT TEST
INTERNATIONAL, L.C.
July 9, 1997
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
RECITALS .........................................................................................................1
AGREEMENT.........................................................................................................2
ARTICLE I PURCHASE AND SALE OF UNITS OF AIRHUB............................................................2
1.1 Transfer of Units...............................................................................2
1.2 Purchase Price..................................................................................2
1.3 The Airhub Transfer.............................................................................2
1.4 The Closing.....................................................................................2
1.5 The LLC Consideration...........................................................................2
ARTICLE II PURCHASE AND SALE OF UNITS OF CTLLC.............................................................3
2.1 Transfer of Units...............................................................................3
2.2 Purchase Price..................................................................................3
2.3 The CTLLC Transfer..............................................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AIRHUB........................................................3
3.1 Organization, Standing and Power................................................................3
3.2 Capitalization; Unitholders.....................................................................4
3.3 Subsidiaries....................................................................................4
3.4 Due Authorization; No Conflict..................................................................4
3.5 Information Supplied............................................................................6
3.6 Absence of Certain Changes......................................................................6
3.7 Liabilities.....................................................................................6
3.8 Accounts Receivable.............................................................................6
3.9 Litigation......................................................................................7
3.10 Restrictions on Business Activities.............................................................7
3.11 Governmental Authorization......................................................................7
3.12 Contracts and Commitments.......................................................................7
3.13 Title to Property...............................................................................8
3.14 Intellectual Property...........................................................................8
3.15 Environmental Matters...........................................................................9
3.16 Taxes..........................................................................................10
3.17 Tax Classification as a Partnership............................................................12
3.18 Employee Benefit Plans.........................................................................12
3.19 Employee Matters...............................................................................13
3.20 Interested Party Transactions..................................................................14
3.21 Insurance......................................................................................14
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3.22 Compliance With Laws...........................................................................14
3.23 Major Customers................................................................................14
3.24 Suppliers......................................................................................14
3.25 Inventory......................................................................................15
3.26 Product Warranty and Product Liability.........................................................15
3.27 Minute Books...................................................................................15
3.28 Brokers' and Finders' Fees.....................................................................15
3.29 Disclosure.....................................................................................16
3.30 Reliance.......................................................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CTLLC........................................................16
4.1 Organization, Standing and Power...............................................................16
4.2 Capitalization; Unitholders....................................................................16
4.3 Subsidiaries...................................................................................17
4.4 Due Authorization..............................................................................17
4.5 Information Supplied...........................................................................18
4.6 Absence of Certain Changes.....................................................................19
4.7 Liabilities....................................................................................19
4.8 Accounts Receivable............................................................................19
4.9 Litigation.....................................................................................19
4.10 Restrictions on Business Activities............................................................19
4.11 Governmental Authorization.....................................................................20
4.12 Contracts and Commitments......................................................................20
4.13 Title to Property..............................................................................20
4.14 CTLLC Intellectual Property....................................................................21
4.15 Environmental Matters..........................................................................22
4.16 Taxes..........................................................................................23
4.17 Tax Classification as a Partnership............................................................24
4.18 Employee Benefit Plans.........................................................................24
4.19 Employee Matters...............................................................................25
4.20 Interested Party Transactions..................................................................26
4.21 Insurance......................................................................................26
4.22 Compliance With Laws...........................................................................26
4.23 Major Customers................................................................................26
4.24 Suppliers......................................................................................26
4.25 Inventory......................................................................................27
4.26 Product Warranty and Product Liability.........................................................27
4.27 Minute Books...................................................................................27
4.28 Brokers' and Finders' Fees.....................................................................28
4.29 Disclosure.....................................................................................28
4.30 Reliance.......................................................................................28
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<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND
LLC ACQUISITION................................................................................28
5.1 Organization, Standing and Power...............................................................28
5.2 Due Authorization..............................................................................28
5.3 Absence of Certain Changes.....................................................................29
5.4 Compliance with Laws...........................................................................29
5.5 Board Approval.................................................................................30
5.6 Brokers' and Finders' Fees.....................................................................30
5.7 Reliance.......................................................................................30
ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME................................................................30
6.1 Conduct of Business of Circuit Test............................................................30
6.2 No Solicitation; Acquisition Proposals.........................................................33
6.3 Conduct of Business of Parent..................................................................33
6.4 Notice of Breach...............................................................................34
ARTICLE VII ADDITIONAL COVENANTS................................................................................34
7.1 Access to Information..........................................................................34
7.2 Confidentiality................................................................................35
7.3 Publicity......................................................................................35
7.4 Filings; Cooperation...........................................................................35
7.5 Earnout Agreements. ..........................................................................35
7.6 Further Assurances.............................................................................36
7.7 Indemnification Agreement......................................................................36
7.8 Deferred Compensation..........................................................................36
ARTICLE VIII CONDITIONS PRECEDENT...............................................................................36
8.1 Conditions to Obligations of Each Party to Effect the LLC Transfer.............................36
8.2 Additional Conditions to Obligations of Airhub to Effect the
Airhub Transfer................................................................................37
8.3 Additional Conditions to Obligations of CTLLC to Effect the
CTLLC Transfer.................................................................................37
8.4 Additional Conditions to the Obligations of Parent and LLC Acquisition
to Effect the LLC Transfer.....................................................................38
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..............................................................39
9.1 Termination....................................................................................39
9.2 Effect of Termination..........................................................................39
9.3 Amendment......................................................................................39
9.4 Extension; Waiver..............................................................................39
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<PAGE>
ARTICLE X GENERAL PROVISIONS.............................................................................40
10.1 Survival of Representations and Warranties.....................................................40
10.2 Notices........................................................................................40
10.3 Interpretation.................................................................................41
10.4 Counterparts...................................................................................41
10.5 Entire Agreement; Nonassignability; Parties in Interest........................................42
10.6 Severability...................................................................................42
10.7 Remedies Cumulative; No Waiver.................................................................42
10.8 Governing Law..................................................................................42
10.9 Rules of Construction..........................................................................42
10.10 Expenses. ....................................................................................42
10.11 Attorneys Fees.................................................................................43
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<PAGE>
INDEX OF DEFINED TERMS
Page
Airhub Authorizations.............................................................................................7
Agreement ................................................................................................1
Airhub ................................................................................................1
Airhub Disclosure Schedule........................................................................................3
Airhub Employee Plans............................................................................................12
Airhub Inventory ...............................................................................................15
Airhub Members ................................................................................................1
Airhub Transfer ................................................................................................2
Airhub Units ................................................................................................2
Assignment of Units...............................................................................................2
CERCLA ...............................................................................................10
Circuit Test ................................................................................................1
Closing ................................................................................................2
Closing Balance Sheet.............................................................................................2
Closing Date ................................................................................................2
COBRA ...............................................................................................14
Confidential Information..........................................................................................9
CTI Group ................................................................................................2
CTLLC ................................................................................................1
CTLLC Authorizations.............................................................................................20
CTLLC Confidential Information...................................................................................22
CTLLC Disclosure Schedule........................................................................................16
CTLLC Employee Plans.............................................................................................24
CTLLC Intellectual Property......................................................................................21
CTLLC Inventory ...............................................................................................27
CTLLC Members ................................................................................................1
CTLLC Transfer ................................................................................................3
CTLLC Units ................................................................................................3
Debt ................................................................................................2
Deferred Compensation............................................................................................36
Earnout Agreement ...............................................................................................35
environment ...............................................................................................10
Environmental Law ...............................................................................................10
ERISA ...............................................................................................12
ERISA Affiliate ...............................................................................................12
Governmental Entity...............................................................................................5
Hazardous Substance..............................................................................................10
include ...............................................................................................41
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includes ...............................................................................................41
including ...............................................................................................41
Indemnification Agreement........................................................................................36
Intellectual Property.............................................................................................8
knowledge ...............................................................................................41
Lien ................................................................................................5
LLC Acquisition ................................................................................................1
LLC Consideration ................................................................................................2
LLC Transfer ................................................................................................3
made available ...............................................................................................41
material ...............................................................................................41
Material Adverse Effect..........................................................................................41
Merger Sub ................................................................................................1
NASD ...............................................................................................29
Parent ................................................................................................1
Parent Balance Sheet Date........................................................................................29
Parent Disclosure Schedule.......................................................................................28
Parent SEC Documents.............................................................................................29
partnership ...............................................................................................12
Proprietary Information..........................................................................................35
release ...............................................................................................10
Reorganization Agreement..........................................................................................1
SEC ................................................................................................6
Tax ...............................................................................................11
Tax authority ...............................................................................................11
Tax Return ...............................................................................................11
Taxable ...............................................................................................11
Taxes ...............................................................................................11
Third Party Intellectual Property Rights..........................................................................8
Transaction ................................................................................................1
Waiving Party ...............................................................................................39
</TABLE>
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<PAGE>
LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT
THIS LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT (this
"Agreement"), dated as of July 9, 1997, is among EFTC CORPORATION, a Colorado
corporation ("Parent"), CTLLC ACQUISITION CORP., a Florida corporation and
wholly-owned subsidiary of Parent ("LLC Acquisition"), AIRHUB SERVICES GROUP,
L.C., a Kentucky limited liability company ("Airhub"), the MEMBERS of Airhub
(the "Airhub Members"), CIRCUIT TEST INTERNATIONAL, L.C., a Florida limited
liability company ("CTLLC"), and the MEMBERS of CTLLC (the "CTLLC Members").
RECITALS
A. The Board of Directors of Parent and the Airhub Members have
determined that a business combination between Parent and Airhub is in the best
interests of their respective companies, shareholders and members and
accordingly have approved this Agreement and the acquisition whereby Parent will
acquire all of the ownership interest in Airhub from the Airhub Members.
B. The Board of Directors of Parent and LLC Acquisition and the CTLLC
Members have determined that a business combination between Parent, LLC
Acquisition and CTLLC is in the best interests of their respective companies and
shareholders or members and accordingly have approved this Agreement and the
acquisition whereby Parent and LLC Acquisition will acquire all of the ownership
interest in CTLLC from the CTLLC Members.
C. The transactions contemplated by this Agreement are part of the
acquisition by Parent (the "Transaction") of the businesses presently conducted
by Airhub, CTLLC and Circuit Test, Inc., a Florida corporation ("Circuit Test").
Accordingly, in addition to, and simultaneous with the execution of, this
Agreement, Parent is entering into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") among Parent, CTI Acquisition Corp., a Florida
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and Circuit
Test. This Agreement, the Reorganization Agreement, and the exhibits and
schedules contained therein represent the entire agreement among such parties
with respect to the Transaction.
D. Parent, LLC Acquisition, Airhub, CTLLC, the Airhub Members and the
CTLLC Members desire to make certain representations, warranties and agreements
in connection with the transactions described herein.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF UNITS OF AIRHUB
1.1 Transfer of Units. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in the Reorganization Agreement),
each of the Airhub Members will assign, sell, convey, transfer, and deliver to
Parent (the "Airhub Transfer") all of their ownership interests of Airhub (the
"Airhub Units"), such that, at the Effective Time, Parent will become the sole
holder of Airhub Units.
1.2 Purchase Price. In exchange for the Airhub Units, Parent will pay
each of the Airhub Members twenty-five percent (25%) of the LLC Consideration
(as defined below in Section 1.5). Such payment shall be in the form of
immediately available funds, as of the Closing, as defined in Section 1.4 below,
or in such form as the parties shall mutually agree.
1.3 The Airhub Transfer. At the Closing, each of the Airhub Members
will deliver to Parent an "Assignment of Units", together with any certificates
or other instruments that represent their respective Airhub Units. A form of the
Assignment of Units is attached hereto as Exhibit 1.3.
1.4 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place: (a) at the offices of Holme Roberts & Owen LLP, 1700 Lincoln
Street, Suite 4100, Denver, Colorado 80203, at 10:00 a.m., local time, within
three business days following the day on which the conditions set forth in
Article VIII shall be fulfilled or waived in accordance herewith or (b) at such
other time, date or place as all of the parties to this Agreement agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
1.5 The LLC Consideration. For purposes of this Agreement, the
aggregate payments made for the LLC interests acquired hereby shall include the
LLC Consideration, as defined in this Section 1.5, and the payments contemplated
by a certain Earnout Agreement, described in Section 7.5 herein. For purposes of
this Agreement, the "LLC Consideration" shall be Nineteen Million Five Hundred
Thousand Dollars ($19,500,000) adjusted as follows: (a) the LLC Consideration
shall be decreased by the amount, if any, the Debt of the CTI Group, as set
forth on the CTI Group Closing Balance Sheet, exceeds $5.7 million; or (b) the
LLC Consideration shall be increased by the amount, if any, the Debt of the CTI
Group, as set forth on the CTI Group Closing Balance Sheet, is less than $5.7
million. For purposes of this Section 1.5, "Debt" shall mean interest bearing
indebtedness, excluding any obligations incurred pursuant to Section
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<PAGE>
6.1(b)(v) and 7.8 of this Agreement and Sections 6.1(b)(vi) and 7.14 of the
Reorganization Agreement, and net of cash, "CTI Group" shall mean Airhub, CTLLC
and Circuit Test, and "Closing Balance Sheet" shall be that balance sheet
delivered by the CTI Group to Parent two days prior to Closing dated as of a
date two days prior to Closing. As soon as practicable following the Closing,
Parent shall notify the Airhub Members and the CTLLC Members of any discrepancy
between the Closing Balance Sheet and the actual amount of Debt of the CTI Group
as of the Closing Date. The amount payable by, or refundable to, Parent in
respect of any such discrepancy shall be promptly paid by the appropriate party
and such payment or refund (when so paid, or, if applicable, upon recovery
thereof pursuant to the Indemnification Agreement, as defined in Section 7.7
hereto) shall not be deemed to be subject to the threshold or aggregate
limitations on indemnification specified in Section 2.1 of the Indemnification
Agreement. Parent's post-Closing determination of Debt shall be based on the
definition herein of Debt and computed in accordance with GAAP. Such
determination shall be conclusive absent manifest error.
ARTICLE II
PURCHASE AND SALE OF UNITS OF CTLLC
2.1 Transfer of Units. Subject to the terms and conditions of this
Agreement, at the Effective Time: (i) the Allen S. Braswell, Jr. Revocable
Living Trust, will assign, sell, convey, transfer, and deliver to Parent all of
its ownership interests of CTLLC (the "CTLLC Units"), and (ii) Circuit Test
International Family Limited Partnership will assign, sell, convey, transfer,
and deliver to LLC Acquisition all of its CTLLC Units (together, the "CTLLC
Transfer"), such that, at the Effective Time, Parent and LLC Acquisition will
become the sole holders of CTLLC Units. For purposes of this Agreement, the
Airhub Transfer and the CTLLC Transfer together shall collectively be referred
to as the "LLC Transfer".
2.2 Purchase Price. In exchange for the CTLLC Units, Parent will pay the
Allen S. Braswell, Jr. Revocable Living Trust and LLC Acquisition will pay
Circuit Test International Family Limited Partnership twenty-five percent (25%)
of the LLC Consideration. Such payment shall be in the form of immediately
available funds, as of the Closing, or in such form as the parties shall
mutually agree.
2.3 The CTLLC Transfer. At the Closing, Allen S. Braswell, Jr. will deliver
to Parent and Circuit Test International Family Limited Partnership will deliver
to LLC Acquisition an Assignment of Units, defined above, together with any
certificates or other instruments that represent their respective CTLLC Units.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIRHUB
Except as disclosed in a document of even date herewith and delivered
by Airhub and the Airhub Members to Parent prior to the execution and delivery
of this Agreement and referring to
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the section number and subsection of the representations and warranties in this
Agreement, subject to its subsequent revision from time to time prior to the
Effective Time (but only with the prior written consent of Parent), (the "Airhub
Disclosure Schedule"), Airhub and each of the Airhub Members, jointly and
severally, represent and warrant to Parent as follows:
3.1 Organization, Standing and Power. Airhub is a limited liability
company duly organized and validly existing under the laws of the Commonwealth
of Kentucky, has the full power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect (as defined in Section 10.3) on Airhub or its operations. Airhub
has delivered to Parent a true and correct copy of its Articles of Organization
and Operating Agreement, each as amended to date. Neither Airhub nor any Airhub
Members is in violation of any of the provisions of its Articles of Organization
or Operating Agreement or other equivalent organizational documents. The Airhub
Disclosure Schedule lists a complete and correct list of the Airhub Members,
interest holders of Airhub, and the managers of Airhub.
3.2 Capitalization; Unitholders.
(a) There are currently two Airhub Units owned by the Airhub
Members. There are no other outstanding Airhub Units or other securities of
Airhub and no outstanding subscriptions, options, rights of first refusal, puts,
calls, purchase or sale rights, exchangeable or convertible securities or other
commitments or agreements of any nature relating to the Airhub Units or other
securities of Airhub, or otherwise obligating Airhub to issue, transfer, sell,
purchase, redeem or otherwise acquire any such Airhub Units or securities. There
are not any options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, arrangements or rights of
any character to which Airhub or any of the Airhub Members is a party or by
which Airhub may be bound obligating Airhub or any of the Airhub Members to
issue, deliver, or sell, or cause to be issued, delivered or sold, additional
Airhub Units or obligating Airhub or any of the Airhub Members to enter into
such an option, right of first refusal, call, conversion right, commitment,
agreement, contract, understanding, restriction, arrangement or right. There are
no contracts, commitments or agreements relating to voting, purchase or sale of
Airhub Units (i) between or among Airhub and any of the Airhub Members or (ii)
by or among any of the Airhub Members.
(b) Schedule 3.2 sets forth a true and complete list of the
names of all owners of Airhub Units, together with the number of Airhub Units
held by each such holder. Except as set forth in Schedule 3.2, each holder so
listed is the record and the beneficial owner of all Airhub Units so listed in
its name, has the full power and authority, and has or will be fully empowered
and authorized as of the Effective Time, to consummate the matters contemplated
to be consummated by such holder herein.
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3.3 Subsidiaries. Airhub does not directly or indirectly own any equity
or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
3.4 Due Authorization; No Conflict.
(a) Airhub has the full power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of Airhub and the Airhub Members.
This Agreement has been duly executed and delivered by Airhub and constitutes
the valid and binding obligation of Airhub enforceable against Airhub in
accordance with its terms. The execution and delivery of this Agreement by
Airhub do not, and the consummation of the transactions contemplated hereby will
not: (i) conflict with or violate any provision of the Articles of Organization
or Operating Agreement of Airhub, (ii) violate or conflict with any permit,
order, license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to Airhub or the properties or assets of Airhub or the Airhub Units,
or (iii) result in any breach or violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of, or result in the creation of any
mortgage, pledge, lien, encumbrance, charge or other security interest (a
"Lien") on any of the properties or assets of Airhub or the Airhub Units
pursuant to, or require the consent or approval of any party to any mortgage,
indenture, lease, contract or other agreement or instrument, bond, note,
concession or franchise applicable to Airhub or any of its properties or assets,
except, in the case of this clause (iii) only, where such conflict, violation,
default, termination, cancellation or acceleration would not have and could not
reasonably be expected to have a Material Adverse Effect on Airhub or materially
affect the consummation of the transactions contemplated hereby. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity") is required by or with
respect to Airhub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, other
than any consents, approvals, orders and registrations that, if not obtained or
made, would not have a Material Adverse Effect on Airhub or materially affect
the consummation of transactions contemplated hereby.
(b) Each Airhub Member represents and warrants that such
Airhub Member is competent, and has the full power and authority, to execute,
deliver and enter into this Agreement and to perform such Airhub Member's
obligations, including the delivery of the Airhub Units, hereunder and has taken
all actions necessary to secure all approvals required in connection therewith.
This Agreement has been duly executed and delivered by each Airhub Member and
constitutes the valid and binding obligation of such Airhub Member enforceable
against such Airhub Member in accordance with its terms. The execution and
delivery of this Agreement by the Airhub Members does not, and the performance
will not: (i) violate or conflict with any permit, order, license, decree,
judgment, statute, law, ordinance, rule or regulation applicable to any Airhub
Member or the properties or assets of such Airhub Member or (ii) result
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in any breach or violation of, or constitute a default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of, or result in the creation of any Lien on any of
the properties or assets of such Airhub Member pursuant to, or require the
consent or approval of any party to, any mortgage, indenture, lease, contract or
other agreement or instrument, bond, note, concession or franchise applicable to
such Airhub Member or any of its properties or assets, except, in the case of
this clause (b) only, where such conflict, violation, default, termination,
cancellation or acceleration would not have and could not reasonably be expected
to materially affect the consummation of the transactions contemplated hereby.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to any
Airhub Member in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, other than any
consents, approvals, orders and registrations that, if not obtained or made,
would not have a Material Adverse Effect on Airhub or materially affect the
consummation of transactions contemplated hereby.
3.5 Information Supplied. None of the information supplied or to be
supplied by Airhub, the Airhub Members, or their auditors, attorneys, financial
advisors, other consultants or advisors for inclusion in any document relating
to the Transaction to be filed by Parent with the Securities and Exchange
Commission (the "SEC"), will, at the time of the particular filing and any
amendment or supplement thereto, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading or necessary to correct any statement in any earlier filing
with the SEC or any amendment or supplement thereto or any earlier communication
to shareholders of Company with respect to the Transaction.
3.6 Absence of Certain Changes. Except as specifically permitted by
this Agreement or as set forth in Schedule 3.6 of the Airhub Disclosure
Schedule, since December 31, 1996, Airhub has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect on Airhub; (ii) any action by or with respect to Airhub that would have
constituted a breach of any of the covenants contained in Section 6.1(b); or
(iii) any of the following matters:
(a) any material damage, destruction or loss (whether or not covered by
insurance) to the properties and assets of Airhub;
(b) any Lien on any asset other than those otherwise permitted by this
Agreement;
(c) any labor dispute, litigation or governmental investigation affecting
the business or financial condition of Airhub;
3.7 Liabilities. Except as set forth in the Annual Financial Statements,
the Interim Circuit Test Financial Statements (both as defined in the
Reorganization Agreement), the Airhub
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Disclosure Schedule and except for liabilities or obligations arising in the
ordinary course and consistent with past practice and those incurred in
connection herewith, Airhub does not have any liability or obligation of any
nature, whether due or to become due, fixed or contingent.
3.8 Accounts Receivable. All of the accounts receivable of Airhub shown
on the balance sheet included in the Interim Circuit Test Financial Statements
as of May 31, 1997 have been collected or are good and collectible in the
aggregate recorded amounts thereof (less the allowance for doubtful accounts
also appearing in such May 31, 1997 balance sheet and net of returns and payment
discounts allowable by Airhub's policies) and can reasonably be anticipated to
be paid in full in the ordinary course of business consistent with past practice
without outside collection efforts, subject to no counterclaims or setoffs.
3.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Airhub, threatened
against Airhub or any of its assets and properties or any of its officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Airhub. There
is no judgment, decree or order against Airhub, or, to the knowledge of Airhub,
any of its directors or officers (in their capacities as such), that could
prevent consummation of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Airhub.
3.10 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Airhub which has
or reasonably could be expected to have the effect of prohibiting or materially
impairing any current or proposed business practice of Airhub, any acquisition
of property by Airhub or the conduct of business by Airhub as currently
conducted or as proposed to be conducted by Airhub.
3.11 Governmental Authorization. Airhub has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization that is necessary for Airhub to own or lease, operate and
use its respective assets and properties and to carry on business as currently
conducted or as proposed to be conducted (collectively "Airhub Authorizations"),
Airhub has performed and fulfilled its obligations under the Airhub
Authorizations, and all the Airhub Authorizations are in full force and effect,
except where the failure to obtain or have any of such Airhub Authorizations
could not reasonably be expected to have a Material Adverse Effect on Airhub.
3.12 Contracts and Commitments. Airhub is not a party to any oral or
written (a)(i) obligation for borrowed money, (ii) obligation evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligation to pay
the deferred purchase price of property or services (other than trade accounts
arising in the ordinary course of business), (iv) obligation under capital
leases, (v) debt of others secured by a Lien on its property, (vi) guaranty of
liabilities or obligations of others, (vii) agreement under which Airhub is
obligated to make or expects to receive payments in excess of $50,000 or (viii)
agreement granting any person a Lien
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on any of its properties or assets (except purchase money security interests
created in the ordinary course of business consistent with past practice);
(b)(i) employment agreement or collective bargaining agreement or (ii)
agreements that limit the right of Airhub, or any of its employees to compete in
any line of business; or (c) agreement which, after giving effect to the
transactions contemplated hereby, purports to restrict or bind Parent or any of
its subsidiaries, other than Surviving Corporation, in any respect. True and
complete copies of all agreements described in the Airhub Disclosure Schedule or
any other section thereto have been delivered to Parent. Airhub has fulfilled,
or taken all actions necessary to enable it to fulfill when due, its obligations
under each of such agreements. All parties thereto have complied in all material
respects with the provisions thereof and no party is in breach or violation of,
or in default (with or without notice or lapse of time, or both) under such
agreements. With respect to such agreements, Airhub has not received any notice
of termination, cancellation or acceleration or any notice of breach, violation
or default thereof.
3.13 Title to Property. Airhub has good and marketable title to all of
its respective properties and assets, or in the case of leased properties and
assets, valid leasehold interests in such properties, free and clear of any
Lien. The plants, property and equipment of Airhub that are used in the
operations of its business are in good operating condition and repair. All
plants, property and equipment owned by Airhub conform (to Airhub's knowledge)
with all applicable ordinances, regulations and zoning and other laws and do not
encroach on the property of others, the failure to conform with which would have
a Material Adverse Effect on Airhub. There is no pending or, to Airhub's
knowledge, threatened change in any such ordinance, regulation or zoning or
other law, and there is no pending or, to Airhub's knowledge, threatened
condemnation of any such building, machinery or equipment. The properties and
assets of Airhub include all rights, properties, interests in properties and
assets necessary to permit Surviving Corporation to conduct its business as
currently conducted. The Airhub Disclosure Schedule identifies each parcel of
real property owned or leased by Airhub.
3.14 Intellectual Property.
(a) Airhub owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
("Intellectual Property") that are used in the business of Airhub as currently
conducted, except to the extent that the failure to have such rights has not and
could not reasonably be expected to have a Material Adverse Effect on Airhub.
(b) The Airhub Disclosure Schedule lists: (i) all patents and
patent applications and all registered and unregistered trademarks, trade names
and service marks, registered and unregistered copyrights, and maskworks, which
Airhub considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
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issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which Airhub is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which Airhub is a
party and pursuant to which Airhub is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual Property
Rights"), in each case which are incorporated in, are, or form a part of any
product or service of Airhub.
(c) To the knowledge of Airhub, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Airhub, any trade secret material to Airhub, or any Third Party Intellectual
Property Right, by any third party, including any employee or former employee of
Airhub. Airhub has not entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders arising in the ordinary
course of business, or contained in license agreements relating to Intellectual
Property licensed to Airhub in the ordinary course of business.
(d) Airhub is not, and will not be as a result of the
execution and delivery of this Agreement or the performance of Airhub's
obligations under this Agreement be, in breach of any license, sublicense or
other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights, the breach of which could have a Material Adverse
Effect on Airhub.
(e) All patents, registered trademarks, service marks and
copyrights held by Airhub are valid and subsisting. Airhub (i) has not been sued
in any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party or (ii) has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. To the knowledge of Airhub, the manufacture, marketing, licensing or sale
of the products and services of Airhub does not infringe any patent, trademark,
service mark, copyright, trade secret or other proprietary right of any third
party.
(f) Airhub has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Airhub does not
already own by operation of law.
(g) Airhub has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, or patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by Airhub by or to a third party has been
pursuant to the terms of a written agreement with such third party. All use,
disclosure or appropriation of Confidential Information not owned by Airhub has
been pursuant to the terms of a written agreement with the owner of such
Confidential Information, or is otherwise lawful.
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3.15 Environmental Matters.
(a) Airhub has complied with, and is in compliance with, all
Environmental Laws (as defined in this Section 3.15(a)) applicable to its
current and prior business, properties and assets. Airhub has, and Airhub has
provided to Parent, true and complete copies of, all permits, approvals,
registrations, licenses and other authorizations required by any Governmental
Entity pursuant to any Environmental Law applicable to its business, properties
and assets, the absence of which would have a Material Adverse Effect on Airhub
and all such permits, approvals, registrations, licenses and other authorization
are listed on the Airhub Disclosure Schedule. There is no pending or, to
Airhub's knowledge, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any Environmental
Law to which Airhub is a party or, to Airhub's knowledge, threatened to be made
a party. For purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, ordinance, rule, regulation, order or judgment or
the common law relating to protection of public health, safety or the
environment or occupational health and safety, or that regulates, or creates
liability for, releases or threatened releases of any Hazardous Substance. As
used in Sections 3.15 and 4.15, the terms "release" and "environment" have the
meanings set forth in the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), and "Hazardous Substance"
means any substance regulated by, or the presence of which creates liability
under, any Environmental Law (including without limitation CERCLA) and includes
without limitation industrial, toxic or hazardous substances, pollutants and
contaminants, oil or petroleum products, solid or hazardous waste, chemicals and
asbestos.
(b) There have been no releases or threatened releases of any
Hazardous Substance in violation of Environmental Law at any parcel of real
property or any facility currently or formerly owned, leased, operated or
controlled by Airhub. With respect to any such releases of or threatened
releases of Hazardous Substance, Airhub has given all required notices to
government authorities, copies of which have been provided to Parent. Airhub is
not aware of any releases of Hazardous Substance at parcels of real property or
facilities other than those presently or formerly owned, leased, operated or
controlled by Airhub that could reasonably be expected to have an impact on the
real property or facilities owned, leased, operated or controlled by Airhub.
(c) The Airhub Disclosure Schedule lists all environmental
reports, investigations, audits or similar environmental documents in the
possession of Airhub with respect to the operations of, or real property owned,
leased, operated or controlled by Airhub (whether conducted by or on behalf of
Airhub or a third party and whether done at the initiative of Airhub or directed
by a Governmental Entity or other third party). True and complete copies of each
such document have been provided to Parent.
(d) Airhub is not subject to, and is not reasonably expected to be subject
to any material environmental liability, including without limitation liability
arising out of the
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utilization by Airhub of any transporter or facility used for treatment,
recycling, storage or disposal.
3.16 Taxes. Airhub, and any combined, unitary or aggregate group for
Tax (as defined in this Section 3.16) purposes of which Airhub is or has been a
member have timely filed all Tax Returns (as defined in this Section 3.16)
required to be filed by it taking into account extensions of due dates and the
information included in those returns is true, correct and complete, have paid
all Taxes shown thereon to be due and have provided adequate accruals in
accordance with generally accepted accounting principles in its financial
statements for any Taxes that have not been paid, whether shown as being due on
any Tax returns. Airhub has withheld and paid over all Taxes required to have
been withheld and paid over (including any estimated taxes), and has complied
with all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other third
party. Airhub does not have any liability for Taxes of any other entity or
person under any federal, state, local or foreign law by reason of having been a
member of any consolidated, combined or unitary group. Except as disclosed in
the Airhub Disclosure Schedule: (a) no material claim for Taxes has become a
Lien against the property of Airhub or is being asserted against Airhub other
than Liens for Taxes not yet due and payable, (b) no audit of any Tax Return of
Airhub is being conducted by a Tax authority, (c) no Tax authority is now
asserting, or to the knowledge of Airhub, threatening to assert against Airhub
any deficiency or claim for additional Taxes, and there are no requests for
information from a Tax authority currently outstanding that could affect the
Taxes of Airhub, (d) no extension of the statute of limitations on the
assessment of any Taxes has been granted by Airhub and is currently in effect,
(e) no action has been taken that would have the effect of deferring any
liability for Taxes for Airhub from any period prior to the Effective Date to
any period after the Effective Date, (f) Airhub is not (nor has it ever been) a
party to any Tax sharing agreement, (g) Airhub has not disposed of any property
that has been accounted for under the installment method, (h) Airhub is not a
party to any interest rate swap, currency swap or similar transaction, (i)
Airhub is not a member of any joint venture, partnership or other arrangement
that is treated as a partnership for federal income tax purposes, (j) Airhub has
not made any of the foregoing elections and is not required to apply any of the
foregoing rules under any comparable state or local income tax provisions, (k)
the transactions contemplated herein are not subject to the tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the
Code, or of any other provision, and (l) Airhub is not required to treat any
asset as owned by another person for federal income tax purposes or as tax
exempt bond financed property or tax exempt use property within the meaning of
Section 168 of the Code. Airhub will not be required to include any material
adjustment in Taxable income for any Tax period (or portion thereof) ending
after the Effective Time attributable to adjustments made prior to the Effective
Time pursuant to Section 481 or 263A of the Code or any comparable provision of
any state or foreign Tax law. The Airhub Disclosure Schedule contains accurate
and complete information with respect to: (w) all material tax elections in
effect with respect to Airhub, and (x) the current tax basis of the assets of
Airhub. As used in this Agreement, "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits,
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license, withholding, payroll, employment, excise, severance, stamp, business
and occupations, occupation, premium, property, environmental or windfall profit
tax, custom, duty, or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Entity (a "Tax
authority") responsible for the imposition of any such tax (domestic or
foreign), (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period and (iii) any
liability for the payment of any amounts of the type described in clause (i) or
(ii) as a result of any express or implied obligation to indemnify any other
person. As used in this Agreement, "Tax Return" shall mean any return,
statement, report or form (including, without limitation,) estimated Tax returns
and reports, withholding Tax returns and reports and information reports and
returns required to be filed with respect to Taxes. Airhub is in full compliance
with all terms and conditions of any Tax exemptions or other Tax-sharing
agreement or order of a foreign government and the consummation of the Merger
shall not have any adverse effect on the continued validity and effectiveness of
such Tax exemptions or other Tax-sharing agreement or order.
3.17 Tax Classification as a Partnership. At all times since its
formation, Airhub has been properly classified as a "partnership" for federal
and state income tax purposes.
3.18 Employee Benefit Plans.
(a) The Airhub Disclosure Schedule lists, with respect to
Airhub, and any trade or business (whether or not incorporated) which is treated
as a single employer with Airhub (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code: (i) all material employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in
excess of $50,000, loans to officers and Airhub Members and any supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
and that do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of greater than $50,000 remain
for the benefit of, or relating to, any present or former employee, consultant
or director (collectively, the "Airhub Employee Plans").
(b) Airhub has furnished to Parent a copy of each of the
Airhub Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Airhub Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500, including all schedules attached thereto and actuarial
reports,
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if any, filed for the last three Plan years. Any Airhub Employee Plan intended
to be qualified under Sections 401(a) or 501(c)(9) of the Code is so qualified.
Airhub has furnished Parent with the most recent Internal Revenue Service
determination letter issued with respect to each such Airhub Employee Plan (and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Airhub Employee Plan subject to Code Section 401(a)), and all communications
with respect to any plan described in Section 3.18(a) with the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation.
(c) (i) None of the Airhub Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there have been no
violations of applicable provisions of the Code or ERISA with respect to any
Airhub Employee Plan that could reasonably be expected to have, in the
aggregate, a Material Adverse Effect; (iii) each Airhub Employee Plan is in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have a Material
Adverse Effect on Airhub, and Airhub and each ERISA Affiliate have no knowledge
of any default or violation by any other party to any of the Airhub Employee
Plans, which default or violation could reasonably be expected to have a
Material Adverse Effect on Airhub; (iv) all material contributions required to
be made by Airhub or any ERISA Affiliate to any Airhub Employee Plan have been
made on or before its due dates and a reasonable amount has been accrued for
contributions to each Airhub Employee Plan for the current plan years; and (v)
neither Airhub no any ERISA Affiliate has ever maintained or otherwise incurred
any obligation under any plan subject to Title IV of ERISA. No suit,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of Airhub, is threatened, against or with respect to any such
Airhub Employee Plan, including any audit or inquiry by the Internal Revenue
Service or United States Department of Labor.
(d) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not: (i) entitle any
current or former employee or other service provider or any Airhub Member, or
any ERISA Affiliate to severance benefits or any other payment (including
unemployment compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, service
provider or Airhub Director.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Airhub, or any ERISA Affiliate relating
to, or change in participation or coverage under, any Airhub Employee Plan which
would materially increase the expense of maintaining such Plan above the level
of expense incurred with respect to that Plan for the most recent fiscal year
included in the Annual Financial Statements.
3.19 Employee Matters. The Airhub Disclosure Schedule lists all employees
of Airhub and the remuneration and benefits to which such employees are
entitled. The Airhub Disclosure Schedule also lists all employment contracts and
collective bargaining agreements, and all
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pension, bonus, profit sharing, or other agreements or arrangements not
otherwise described in Section 3.18 providing for employee remuneration or
benefits to which Airhub is a party or by which it is bound; all of these
contracts and arrangements are in full force and effect, and neither Airhub nor
any other party is in default under them. There have been no claims of defaults
and, to Airhub's knowledge there are no facts or conditions which if continued,
or on notice, will result in a default under these contracts or arrangements.
There is no pending or, to Airhub's knowledge, threatened labor dispute, strike,
or work stoppage that would have a Material Adverse Effect on Airhub. Airhub is
in compliance in all material respects with all current applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice. There are
no pending claims against Airhub under any workers compensation plan or policy
or for long term disability. Airhub does not have any obligations under The
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") with respect to
any former employees or qualifying beneficiaries thereunder.
3.20 Interested Party Transactions. Airhub is not indebted to any
Airhub Member, interest holder, manager, officer, employee or agent of Airhub
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to Airhub, and there have
been no other transactions of the type required to be disclosed pursuant to
Items 402 and 404 of Regulation S-K under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended.
3.21 Insurance. Airhub has policies of insurance and bonds of the type
and in amounts customarily carried by persons conducting businesses or owning
assets similar to those of Airhub. The Airhub Disclosure Schedule sets forth a
true and complete listing of all such policies, including in each case
applicable coverage limits, deductibles and policy expiration dates. There is no
material claim pending under any of such policies or bonds as to which Airhub
has received a denial, or, to Airhub's knowledge, as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and Airhub is otherwise in compliance in all material respects with the terms of
such policies and bonds. Airhub has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies. Each
policy or bond is legal, valid, binding, enforceable and in full force and
effect and will continue to be legal, valid, binding, enforceable and in full
force and effect following the consummation of the transactions contemplated
hereby.
3.22 Compliance With Laws. Airhub has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on Airhub.
3.23 Major Customers. The Airhub Disclosure Schedule contains a list of the
customers of Airhub for each of the two most recent fiscal years, that
individually accounted for
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more than five percent of the total dollar amount of net sales, showing the
total dollar amount of net sales to each such customer during each such year.
Airhub has no knowledge nor has it received notice from any of the customers
listed on the Airhub Disclosure Schedule, that any of the customers listed in
the Airhub Disclosure Schedule will not continue to be customers of Airhub after
the Closing at substantially the same level of purchases.
3.24 Suppliers. As of the date hereof, no supplier of Airhub has
indicated to Airhub that it will stop, or decrease the rate of, supplying
materials, products or service to Airhub. Airhub has not knowingly breached, so
as to provide a benefit to Airhub that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of Airhub.
3.25 Inventory. All inventories of raw materials, work-in process and
finished goods (including all such in transit) of Airhub, together with related
packaging materials (collectively, "Airhub Inventory"), reflected in the Interim
Circuit Test Financial Statements (as defined in the Reorganization Agreement)
consist of a quality and quantity usable and saleable in the ordinary course of
business, have commercial values at least equal to the value shown on such
balance sheet or are subject to purchase obligations by customers or suppliers
at such value and is valued in accordance with generally accepted accounting
principles at the lower of cost (on a first in first out basis) or market. All
Airhub Inventory purchased since the date of such balance sheet consists of a
quality and quantity usable and saleable in the ordinary course of business.
Except as set forth in the Airhub Disclosure Schedule, all Airhub Inventory is
located on premises owned or leased by Airhub. All work-in process contained in
Airhub Inventory constitutes items in process of production pursuant to
contracts or open orders taken in the ordinary course of business, from regular
customers of Airhub with no recent history of credit problems with respect to
Airhub; neither Airhub nor any such customer is in material breach of the terms
of any obligation to the other, and, based on Airhub's knowledge or what Airhub
reasonably should know, valid grounds exist for any counterclaim or set-off of
amounts billable to such customers upon the completion of orders to which
work-in-process relates. All work-in process is of a quality ordinarily produced
in accordance with the requirements of the orders to which such work-in-process
is identified, and will require no rework with respect to work performed prior
to Closing.
3.26 Product Warranty and Product Liability. The Airhub Disclosure
Schedule contains a true and complete copy of Airhub's standard warranty or
warranties for its manufacturing services. There has been no variation from such
warranties, except as set forth in the Airhub Disclosure Schedule. Except as
stated therein, there are no warranties, commitments or obligations with respect
to Airhub's performance of services. The Airhub Disclosure Schedule contains a
description of all product liability claims and similar claims, actions,
litigation and other proceedings relating to services rendered, which are
presently pending or, to Airhub's knowledge, threatened, or which have been
asserted or commenced against Airhub within the last five years, in which a
party thereto either requests injunctive relief (whether temporary or permanent)
or alleges damages (whether or not covered by insurance). There are no defects
in Airhub's manufacturing services that would adversely affect performance of
products Airhub
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manufactures or create an unusual risk of injury to persons or property.
Airhub's manufacturing services have been designed or performed so as to meet
and comply with all governmental standards and specifications currently in
effect, and have received all governmental approvals necessary to allow its
performance.
3.27 Minute Books. The minute books of Airhub made available to Parent
contain true and complete summaries of all meetings of members or actions by
written consent since the time of formation of Airhub, and reflect all
transactions referred to in such minutes accurately in all material respects.
3.28 Brokers' and Finders' Fees. Except for commissions or fees payable
to Broadview Associates, LLC, Airhub has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.29 Disclosure. None of the representations or warranties made by
Airhub herein or in the Airhub Disclosure Schedule, or in any certificate
furnished by Airhub pursuant to this Agreement, when all such documents are read
together in their entirety, contain or will contain at the Effective Time any
untrue statement of a material fact, or omit or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. Airhub has delivered or made available true and complete copies of
each document that has been requested by Parent or its counsel in connection
with their legal and accounting review of Airhub.
3.30 Reliance. The foregoing representations and warranties are being
made by Airhub with the knowledge and expectation that Parent is placing
reliance thereon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CTLLC
Except as disclosed in a document of even date herewith and delivered
by CTLLC and the CTLLC Members to Parent prior to the execution and delivery of
this Agreement and referring to the section number and subsection of the
representations and warranties in this Agreement, subject to its subsequent
revision from time to time prior to the Effective Time (but only with the prior
written consent of Parent), (the "CTLLC Disclosure Schedule"), CTLLC and each of
the CTLLC Members, jointly and severally, represent and warrant to Parent and
LLC Acquisition as follows:
4.1 Organization, Standing and Power. CTLLC is a limited liability
company duly organized and validly existing under the laws of the State of
Florida, has the full power to own its properties and to carry on its business
as now being conducted and as proposed to be conducted and is duly qualified to
do business and is in good standing in each jurisdiction in
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which the failure to be so qualified and in good standing would have a Material
Adverse Effect (as defined in Section 10.3) on CTLLC or its operations. CTLLC
has delivered to Parent a true and correct copy of its Articles of Organization
and Regulations, each as amended to date. Neither CTLLC nor any of its Members
is in violation of any of the provisions of its Articles of Organization or
Regulations or other equivalent organizational documents. The CTLLC Disclosure
Schedule lists a complete and correct list of the CTLLC Members and the managers
of CTLLC.
4.2 Capitalization; Unitholders.
(a) There are currently two CTLLC Units owned by the CTLLC
Members. There are no other outstanding CTLLC Units or other securities of CTLLC
and no outstanding subscriptions, options, rights of first refusal, puts, calls,
purchase or sale rights, exchangeable or convertible securities or other
commitments or agreements of any nature relating to the CTLLC Units or other
securities of CTLLC, or otherwise obligating CTLLC to issue, transfer, sell,
purchase, redeem or otherwise acquire any such CTLLC Units or securities. There
are not any options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, arrangements or rights of
any character to which CTLLC or any of the CTLLC Members is a party or by which
CTLLC may be bound obligating CTLLC or any of the CTLLC Members to issue,
deliver, or sell, or cause to be issued, delivered or sold, additional CTLLC
Units or obligating CTLLC or any of the CTLLC Members to enter into such an
option, right of first refusal, call, conversion right, commitment, agreement,
contract, understanding, restriction, arrangement or right. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
CTLLC Units (i) between or among CTLLC and any of the CTLLC Members or (ii) by
or among any of the CTLLC Members.
(b) Schedule 4.2 sets forth a true and complete list of the
names of all owners of CTLLC Units, together with the number of CTLLC Units held
by each such holder. Except as set forth in Schedule 4.2, each holder so listed
is the record and the beneficial owner of all CTLLC Units so listed in its name,
has the full power and authority, and has or will be fully empowered and
authorized as of the Effective Time, to consummate the matters contemplated to
be consummated by such holder herein.
4.3 Subsidiaries. CTLLC does not directly or indirectly own any equity
or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
4.4 Due Authorization; No Conflict.
(a) CTLLC has the full power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of CTLLC and the CTLLC Members.
This Agreement has been duly executed and delivered by CTLLC
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and constitutes the valid and binding obligation of CTLLC enforceable against
CTLLC in accordance with its terms. The execution and delivery of this Agreement
by CTLLC do not, and the consummation of the transactions contemplated hereby
will not: (i) conflict with or violate any provision of the Articles of
Organization or Regulations of CTLLC, (ii) violate or conflict with any permit,
order, license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to CTLLC or the properties or assets of CTLLC or the CTLLC Units, or
(iii) result in any breach or violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of, or result in the creation of any
Lien on any of the properties or assets of CTLLC or the CTLLC Units pursuant to,
or require the consent or approval of any party to any mortgage, indenture,
lease, contract or other agreement or instrument, bond, note, concession or
franchise applicable to CTLLC or any of its properties or assets, except, in the
case of this clause (iii) only, where such conflict, violation, default,
termination, cancellation or acceleration would not have and could not
reasonably be expected to have a Material Adverse Effect on CTLLC or materially
affect the consummation of the transactions contemplated hereby. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to CTLLC in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, other than any consents, approvals,
orders and registrations that, if not obtained or made, would not have a
Material Adverse Effect on CTLLC or materially affect the consummation of
transactions contemplated hereby.
(b) Each CTLLC Member represents and warrants that such CTLLC
Member is competent, and has the full power and authority, to execute, deliver
and enter into this Agreement and to perform such Airhub Member's obligations,
including the delivery of the CTLLC Units, hereunder and has taken all actions
necessary to secure all approvals required in connection therewith. This
Agreement has been duly executed and delivered by each CTLLC Member and
constitutes the valid and binding obligation of such CTLLC Member enforceable
against each CTLLC Member in accordance with its terms. The execution and
delivery of this Agreement by the CTLLC Members does not, and the performance
will not: (i) violate or conflict with any permit, order, license, decree,
judgment, statute, law, ordinance, rule or regulation applicable to any CTLLC
Member or the properties or assets of such CTLLC Member or (ii) result in any
breach or violation of, or constitute a default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of, or result in the creation of any Lien on any of the properties
or assets of such CTLLC Member pursuant to, or require the consent of any party
to, any mortgage, indenture, lease, contract or other agreement or instrument,
bond, note, concession or franchise applicable to such CTLLC Member or any of
its properties or assets, except, in the case of this clause (ii) only, where
such conflict, violation, default, termination, cancellation or acceleration
would not have and could not reasonably be expected to materially affect the
consummation of the transactions contemplated hereby. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to the CTLLC Member in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, other than any consents, approvals,
orders and registrations
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that, if not obtained or made, would not have a Material Adverse Effect on CTLLC
or materially affect the consummation of transactions contemplated hereby.
4.5 Information Supplied. None of the information supplied or to be
supplied by CTLLC, the CTLLC Members, or their auditors, attorneys, financial
advisors, other consultants or advisors for inclusion in any document relating
to the Transaction to be filed by Parent with the SEC will, at the time of the
particular filing and any amendment or supplement thereto, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading or necessary to correct any
statement in any earlier filing with the SEC or any amendment or supplement
thereto or any earlier communication to shareholders of Company with respect to
the Transaction.
4.6 Absence of Certain Changes. Except as specifically permitted by
this Agreement or as set forth in Schedule 4.6 of the CTLLC Disclosure Schedule,
since December 31, 1996, CTLLC has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect on CTLLC;
(ii) any action by or with respect to CTLLC that would have constituted a breach
of any of the covenants contained in Section 6.1(b); or (iii) any of the
following matters:
(a) any material damage, destruction or loss (whether or not covered by
insurance) to the properties and assets of CTLLC;
(b) any Lien on any asset other than those otherwise permitted by this
Agreement;
(c) any labor dispute, litigation or governmental investigation affecting
the business or financial condition of CTLLC;
4.7 Liabilities. Except as set forth in the Annual Financial
Statements, the Interim Circuit Test Financial Statements, the CTLLC Disclosure
Schedule and except for liabilities or obligations arising in the ordinary
course and consistent with past practice and those incurred in connection
herewith, CTLLC does not have any liability or obligation of any nature, whether
due or to become due, fixed or contingent.
4.8 Accounts Receivable. All of the accounts receivable of CTLLC shown
on the balance sheet included in the Interim CTLLC Financial Statements as of
May 31, 1997 have been collected or are good and collectible in the aggregate
recorded amounts thereof (less the allowance for doubtful accounts also
appearing in such May 31, 1997 balance sheet and net of returns and payment
discounts allowable by CTLLC's policies) and can reasonably be anticipated to be
paid in full in the ordinary course of business consistent with past practice
without outside collection efforts, subject to no counterclaims or setoffs.
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4.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of CTLLC, threatened
against CTLLC or any of its assets and properties or any of its officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on CTLLC. There
is no judgment, decree or order against CTLLC, or, to the knowledge of CTLLC,
any of its directors or officers (in their capacities as such), that could
prevent consummation of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on CTLLC.
4.10 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon CTLLC which has or
reasonably could be expected to have the effect of prohibiting or materially
impairing any current or proposed business practice of CTLLC, any acquisition of
property by CTLLC or the conduct of business by CTLLC as currently conducted or
as proposed to be conducted by CTLLC.
4.11 Governmental Authorization. CTLLC has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization that is necessary for CTLLC to own or lease, operate and use
its respective assets and properties and to carry on business as currently
conducted or as proposed to be conducted (collectively "CTLLC Authorizations"),
CTLLC has performed and fulfilled its obligations under the CTLLC
Authorizations, and all the CTLLC Authorizations are in full force and effect,
except where the failure to obtain or have any of such CTLLC Authorizations
could not reasonably be expected to have a Material Adverse Effect on CTLLC.
4.12 Contracts and Commitments. CTLLC is not a party to any oral or
written (a)(i) obligation for borrowed money, (ii) obligation evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligation to pay
the deferred purchase price of property or services (other than trade accounts
arising in the ordinary course of business), (iv) obligation under capital
leases, (v) debt of others secured by a Lien on its property, (vi) guaranty of
liabilities or obligations of others, (vii) agreement under which CTLLC is
obligated to make or expects to receive payments in excess of $50,000 or (viii)
agreement granting any person a Lien on any of its properties or assets (except
purchase money security interests created in the ordinary course of business
consistent with past practice); (b)(i) employment agreement or collective
bargaining agreement or (ii) agreements that limit the right of CTLLC, or any of
its employees to compete in any line of business; or (c) agreement which, after
giving effect to the transactions contemplated hereby, purports to restrict or
bind Parent or any of its subsidiaries, other than Surviving Corporation, in any
respect. True and complete copies of all agreements described in the CTLLC
Disclosure Schedule or any other section thereto have been delivered to Parent.
CTLLC has fulfilled, or taken all actions necessary to enable it to fulfill when
due, its obligations under each of such agreements. All parties thereto have
complied in all material respects with the provisions thereof and no party is in
breach or violation of, or in default (with or without notice or lapse of time,
or both) under such agreements. With respect to such
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agreements, CTLLC has not received any notice of termination, cancellation or
acceleration or any notice of breach, violation or default thereof.
4.13 Title to Property. CTLLC has good and marketable title to all of
its respective properties and assets, or in the case of leased properties and
assets, valid leasehold interests in such properties, free and clear of any
Lien. The plants, property and equipment of CTLLC that are used in the
operations of its business are in good operating condition and repair. All
plants, property and equipment owned by CTLLC conform (to CTLLC's knowledge)
with all applicable ordinances, regulations and zoning and other laws and do not
encroach on the property of others, the failure to conform with which would have
a Material Adverse Effect on CTLLC. There is no pending or, to CTLLC's
knowledge, threatened change in any such ordinance, regulation or zoning or
other law, and there is no pending or, to CTLLC's knowledge, threatened
condemnation of any such building, machinery or equipment. The properties and
assets of CTLLC include all rights, properties, interests in properties and
assets necessary to permit Surviving Corporation to conduct its business as
currently conducted. The CTLLC Disclosure Schedule identifies each parcel of
real property owned or leased by CTLLC.
4.14 CTLLC Intellectual Property.
(a) CTLLC owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material ("CTLLC
Intellectual Property") that are used in the business of CTLLC as currently
conducted, except to the extent that the failure to have such rights has not and
could not reasonably be expected to have a Material Adverse Effect on CTLLC.
(b) The CTLLC Disclosure Schedule lists: (i) all patents and
patent applications and all registered and unregistered trademarks, trade names
and service marks, registered and unregistered copyrights, and maskworks, which
CTLLC considers to be material to its business and included in the CTLLC
Intellectual Property, including the jurisdictions in which each such CTLLC
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which CTLLC is a party and
pursuant to which any person is authorized to use any CTLLC Intellectual
Property, and (iii) all material licenses, sublicenses and other agreements as
to which CTLLC is a party and pursuant to which CTLLC is authorized to use any
third party patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights"), in each case which are incorporated in, are, or
form a part of any product or service of CTLLC.
(c) To the knowledge of CTLLC, there is no unauthorized use,
disclosure, infringement or misappropriation of any CTLLC Intellectual Property
rights of CTLLC, any trade secret material to CTLLC, or any Third Party
Intellectual Property Right, by any third
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party, including any employee or former employee of CTLLC. CTLLC has not entered
into any agreement to indemnify any other person against any charge of
infringement of any CTLLC Intellectual Property, other than indemnification
provisions contained in purchase orders arising in the ordinary course of
business, or contained in license agreements relating to CTLLC Intellectual
Property licensed to CTLLC in the ordinary course of business.
(d) CTLLC is not, and will not be as a result of the execution
and delivery of this Agreement or the performance of CTLLC's obligations under
this Agreement be, in breach of any license, sublicense or other agreement
relating to the CTLLC Intellectual Property or Third Party Intellectual Property
Rights, the breach of which could have a Material Adverse Effect on CTLLC.
(e) All patents, registered trademarks, service marks and
copyrights held by CTLLC are valid and subsisting. CTLLC (i) has not been sued
in any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party or (ii) has not brought any
action, suit or proceeding for infringement of CTLLC Intellectual Property or
breach of any license or agreement involving CTLLC Intellectual Property against
any third party. To the knowledge of CTLLC, the manufacture, marketing,
licensing or sale of the products and services of CTLLC does not infringe any
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party.
(f) CTLLC has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
CTLLC Intellectual Property of the rights to such contributions that CTLLC does
not already own by operation of law.
(g) CTLLC has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all CTLLC Intellectual Property not
otherwise protected by patents, or patent applications or copyright ("CTLLC
Confidential Information"). All use, disclosure or appropriation of CTLLC
Confidential Information owned by CTLLC by or to a third party has been pursuant
to the terms of a written agreement with such third party. All use, disclosure
or appropriation of CTLLC Confidential Information not owned by CTLLC has been
pursuant to the terms of a written agreement with the owner of such CTLLC
Confidential Information, or is otherwise lawful.
4.15 Environmental Matters.
(a) CTLLC has complied with, and is in compliance with, all
Environmental Laws (as defined in Section 3.15(a)) applicable to its current and
prior business, properties and assets. CTLLC has, and CTLLC has provided to
Parent, true and complete copies of, all permits, approvals, registrations,
licenses and other authorizations required by any Governmental Entity pursuant
to any Environmental Law applicable to its business, properties and assets, the
absence of which would have a Material Adverse Effect on CTLLC and all such
permits, approvals, registrations, licenses and other authorization are listed
on the CTLLC Disclosure Schedule.
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There is no pending or, to CTLLC's knowledge, threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law to which CTLLC is a party or, to CTLLC's
knowledge, threatened to be made a party.
(b) There have been no releases or threatened releases of any
Hazardous Substance in violation of Environmental Law at any parcel of real
property or any facility currently or formerly owned, leased, operated or
controlled by CTLLC. With respect to any such releases of or threatened releases
of Hazardous Substance, CTLLC has given all required notices to government
authorities, copies of which have been provided to Parent. CTLLC is not aware of
any releases of Hazardous Substance at parcels of real property or facilities
other than those presently or formerly owned, leased, operated or controlled by
CTLLC that could reasonably be expected to have an impact on the real property
or facilities owned, leased, operated or controlled by CTLLC.
(c) The CTLLC Disclosure Schedule lists all environmental
reports, investigations, audits or similar environmental documents in the
possession of CTLLC with respect to the operations of, or real property owned,
leased, operated or controlled by CTLLC (whether conducted by or on behalf of
CTLLC or a third party and whether done at the initiative of CTLLC or directed
by a Governmental Entity or other third party). True and complete copies of each
such document have been provided to Parent.
(d) CTLLC is not subject to, and is not reasonably expected to
be subject to any material environmental liability, including without limitation
liability arising out of the utilization by CTLLC of any transporter or facility
used for treatment, recycling, storage or disposal.
4.16 Taxes. CTLLC, and any combined, unitary or aggregate group for Tax
(as defined in Section 3.16) purposes of which CTLLC is or has been a member
have timely filed all Tax Returns (as defined in this Section 4.16) required to
be filed by it taking into account extensions of due dates and the information
included in those returns is true, correct and complete, have paid all Taxes
shown thereon to be due and have provided adequate accruals in accordance with
generally accepted accounting principles in its financial statements for any
Taxes that have not been paid, whether shown as being due on any Tax returns.
CTLLC has withheld and paid over all Taxes required to have been withheld and
paid over (including any estimated taxes), and has complied with all information
reporting and backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party. CTLLC does not
have any liability for Taxes of any other entity or person under any federal,
state, local or foreign law by reason of having been a member of any
consolidated, combined or unitary group. Except as disclosed in the CTLLC
Disclosure Schedule: (a) no material claim for Taxes has become a Lien against
the property of CTLLC or is being asserted against CTLLC other than Liens for
Taxes not yet due and payable, (b) no audit of any Tax Return of CTLLC is being
conducted by a Tax authority, (c) no Tax authority is now asserting, or to the
knowledge of
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CTLLC, threatening to assert against CTLLC any deficiency or claim for
additional Taxes, and there are no requests for information from a Tax authority
currently outstanding that could affect the Taxes of CTLLC, (d) no extension of
the statute of limitations on the assessment of any Taxes has been granted by
CTLLC and is currently in effect, (e) no action has been taken that would have
the effect of deferring any liability for Taxes for CTLLC from any period prior
to the Effective Date to any period after the Effective Date, (f) CTLLC is not
(nor has it ever been) a party to any Tax sharing agreement, (g) CTLLC has not
disposed of any property that has been accounted for under the installment
method, (h) CTLLC is not a party to any interest rate swap, currency swap or
similar transaction, (i) CTLLC is not a member of any joint venture, partnership
or other arrangement that is treated as a partnership for federal income tax
purposes, (j) CTLLC has not made any of the foregoing elections and is not
required to apply any of the foregoing rules under any comparable state or local
income tax provisions, (k) the transactions contemplated herein are not subject
to the tax withholding provisions of Section 3406 of the Code, or of Subchapter
A of Chapter 3 of the Code, or of any other provision of law, and (l) CTLLC is
not required to treat any asset as owned by another person for federal income
tax purposes or as tax exempt bond financed property or tax exempt use property
within the meaning of Section 168 of the Code. CTLLC will not be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) ending after the Effective Time attributable to adjustments made prior
to the Effective Time pursuant to Section 481 or 263A of the Code or any
comparable provision of any state or foreign Tax law. The CTLLC Disclosure
Schedule contains accurate and complete information with respect to: (w) all
material tax elections in effect with respect to CTLLC, and (x) the current tax
basis of the assets of CTLLC. CTLLC is in full compliance with all terms and
conditions of any Tax exemptions or other Tax-sharing agreement or order of a
foreign government and the consummation of the Merger shall not have any adverse
effect on the continued validity and effectiveness of such Tax exemptions or
other Tax-sharing agreement or order.
4.17 Tax Classification as a Partnership. At all times since its
formation, CTLLC has been properly classified as a "partnership" for federal and
state income tax purposes.
4.18 Employee Benefit Plans.
(a) The CTLLC Disclosure Schedule lists, with respect to
CTLLC, and any trade or business (whether or not incorporated) which is treated
as an ERISA Affiliate within the meaning of Section 414(b), (c), (m) or (o) of
the Code: (i) all material employee benefit plans (as defined in Section 3(3) of
ERISA, (ii) each loan to a non-officer employee in excess of $50,000, loans to
officers and CTLLC Members and any supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to senior management and that do not
generally apply to all employees, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of greater than $50,000
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remain for the benefit of, or relating to, any present or former employee,
consultant or director (collectively, the "CTLLC Employee Plans").
(b) CTLLC has furnished to Parent a copy of each of the CTLLC
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each CTLLC
Employee Plan which is subject to ERISA reporting requirements, provided copies
of the Form 5500, including all schedules attached thereto and actuarial
reports, if any, filed for the last three Plan years. Any CTLLC Employee Plan
intended to be qualified under Sections 401(a) or 501(c)(9) of the Code is so
qualified. CTLLC has furnished Parent with the most recent Internal Revenue
Service determination letter issued with respect to each such CTLLC Employee
Plan (and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any CTLLC Employee Plan subject to Code Section 401(a)), and all communications
with respect to any plan described in Section 4.18(a) with the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation.
(c) (i) None of the CTLLC Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there have
been no violations of applicable provisions of the Code or ERISA with respect to
any CTLLC Employee Plan that could reasonably be expected to have, in the
aggregate, a Material Adverse Effect; (iii) each CTLLC Employee Plan is in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have a Material
Adverse Effect on CTLLC, and CTLLC and each ERISA Affiliate have no knowledge of
any default or violation by any other party to any of the CTLLC Employee Plans,
which default or violation could reasonably be expected to have a Material
Adverse Effect on CTLLC; (iv) all material contributions required to be made by
CTLLC or any ERISA Affiliate to any CTLLC Employee Plan have been made on or
before its due dates and a reasonable amount has been accrued for contributions
to each CTLLC Employee Plan for the current plan years; and (v) neither CTLLC no
any ERISA Affiliate has ever maintained or otherwise incurred any obligation
under any plan subject to Title IV of ERISA. No suit, administrative proceeding,
action or other litigation has been brought, or to the knowledge of CTLLC, is
threatened, against or with respect to any such CTLLC Employee Plan, including
any audit or inquiry by the Internal Revenue Service or United States Department
of Labor.
(d) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not: (i) entitle any
current or former employee or other service provider or any CTLLC Member, or any
ERISA Affiliate to severance benefits or any other payment (including
unemployment compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, service
provider or CTLLC Director.
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(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by CTLLC, or any ERISA Affiliate relating
to, or change in participation or coverage under, any CTLLC Employee Plan which
would materially increase the expense of maintaining such Plan above the level
of expense incurred with respect to that Plan for the most recent fiscal year
included in the Annual Financial Statements.
4.19 Employee Matters. The CTLLC Disclosure Schedule lists all
employees of CTLLC and the remuneration and benefits to which such employees are
entitled. The CTLLC Disclosure Schedule also lists all employment contracts and
collective bargaining agreements, and all pension, bonus, profit sharing, or
other agreements or arrangements not otherwise described in Section 4.18
providing for employee remuneration or benefits to which CTLLC is a party or by
which it is bound; all of these contracts and arrangements are in full force and
effect, and neither CTLLC nor any other party is in default under them. There
have been no claims of defaults and, to CTLLC's knowledge there are no facts or
conditions which if continued, or on notice, will result in a default under
these contracts or arrangements. There is no pending or, to CTLLC's knowledge,
threatened labor dispute, strike, or work stoppage that would have a Material
Adverse Effect on CTLLC. CTLLC is in compliance in all material respects with
all current applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice. There are no pending claims against CTLLC under
any workers compensation plan or policy or for long term disability. CTLLC does
not have any obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder.
4.20 Interested Party Transactions. CTLLC is not indebted to any CTLLC
Member, CTLLC Unit Holder, manager, officer, employee or agent of CTLLC (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to CTLLC, and there have been no other
transactions of the type required to be disclosed pursuant to Items 402 and 404
of Regulation S-K under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
4.21 Insurance. CTLLC has policies of insurance and bonds of the type
and in amounts customarily carried by persons conducting businesses or owning
assets similar to those of CTLLC. The CTLLC Disclosure Schedule sets forth a
true and complete listing of all such policies, including in each case
applicable coverage limits, deductibles and policy expiration dates. There is no
material claim pending under any of such policies or bonds as to which CTLLC has
received a denial, or, to CTLLC's knowledge, as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and CTLLC is otherwise in compliance in all material respects with the terms of
such policies and bonds. CTLLC has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies. Each
policy or bond is legal, valid, binding, enforceable and in full force and
effect and will continue to be legal, valid, binding, enforceable and in full
force and effect following the consummation of the transactions contemplated
hereby.
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4.22 Compliance With Laws. CTLLC has complied with, is not in violation
of, and has not received any notices of violation with respect to, any federal,
state, local or foreign statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for such
violations or failures to comply as could not be reasonably expected to have a
Material Adverse Effect on CTLLC.
4.23 Major Customers. The CTLLC Disclosure Schedule contains a list of
the customers of CTLLC for each of the two most recent fiscal years, that
individually accounted for more than five percent of the total dollar amount of
net sales, showing the total dollar amount of net sales to each such customer
during each such year. CTLLC has no knowledge nor has it received notice from
any of the customers listed on the CTLLC Disclosure Schedule, that any of the
customers listed in the CTLLC Disclosure Schedule will not continue to be
customers of CTLLC after the Closing at substantially the same level of
purchases.
4.24 Suppliers. As of the date hereof, no supplier of CTLLC has
indicated to CTLLC that it will stop, or decrease the rate of, supplying
materials, products or service to CTLLC. CTLLC has not knowingly breached, so as
to provide a benefit to CTLLC that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of CTLLC.
4.25 Inventory. All inventories of raw materials, work-in process and
finished goods (including all such in transit) of CTLLC, together with related
packaging materials (collectively, "CTLLC Inventory"), reflected in the Interim
Circuit Test Financial Statements consist of a quality and quantity usable and
saleable in the ordinary course of business, have commercial values at least
equal to the value shown on such balance sheet or are subject to purchase
obligations by customers or suppliers at such value and is valued in accordance
with generally accepted accounting principles at the lower of cost (on a first
in first out basis) or market. All CTLLC Inventory purchased since the date of
such balance sheet consists of a quality and quantity usable and saleable in the
ordinary course of business. Except as set forth in the CTLLC Disclosure
Schedule, all CTLLC Inventory is located on premises owned or leased by CTLLC.
All work-in process contained in CTLLC Inventory constitutes items in process of
production pursuant to contracts or open orders taken in the ordinary course of
business, from regular customers of CTLLC with no recent history of credit
problems with respect to CTLLC; neither CTLLC nor any such customer is in
material breach of the terms of any obligation to the other, and, based on
CTLLC's knowledge or what CTLLC reasonably should know, valid grounds exist for
any counterclaim or set-off of amounts billable to such customers upon the
completion of orders to which work-in-process relates. All work-in process is of
a quality ordinarily produced in accordance with the requirements of the orders
to which such work-in-process is identified, and will require no rework with
respect to work performed prior to Closing.
4.26 Product Warranty and Product Liability. The CTLLC Disclosure Schedule
contains a true and complete copy of CTLLC's standard warranty or warranties for
its manufacturing services. There has been no variation from such warranties,
except as set forth in the CTLLC Disclosure Schedule. Except as stated therein,
there are no warranties, commitments
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or obligations with respect to CTLLC's performance of services. The CTLLC
Disclosure Schedule contains a description of all product liability claims and
similar claims, actions, litigation and other proceedings relating to services
rendered, which are presently pending or, to CTLLC's knowledge, threatened, or
which have been asserted or commenced against CTLLC within the last five years,
in which a party thereto either requests injunctive relief (whether temporary or
permanent) or alleges damages (whether or not covered by insurance). There are
no defects in CTLLC's manufacturing services that would adversely affect
performance of products CTLLC manufactures or create an unusual risk of injury
to persons or property. CTLLC's manufacturing services have been designed or
performed so as to meet and comply with all governmental standards and
specifications currently in effect, and have received all governmental approvals
necessary to allow its performance.
4.27 Minute Books. The minute books of CTLLC made available to Parent
contain true and complete summaries of all meetings of members or actions by
written consent since the time of formation of CTLLC, and reflect all
transactions referred to in such minutes accurately in all material respects.
4.28 Brokers' and Finders' Fees. Except for commissions or fees payable
to Broadview Associates, LLC, CTLLC has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
4.29 Disclosure. None of the representations or warranties made by
CTLLC herein or in the CTLLC Disclosure Schedule, or in any certificate
furnished by CTLLC pursuant to this Agreement, when all such documents are read
together in their entirety, contain or will contain at the Effective Time any
untrue statement of a material fact, or omit or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. CTLLC has delivered or made available true and complete copies of
each document that has been requested by Parent or its counsel in connection
with their legal and accounting review of CTLLC.
4.30 Reliance. The foregoing representations and warranties are being
made by CTLLC with the knowledge and expectation that Parent and LLC Acquisition
are placing reliance thereon.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND LLC ACQUISITION
Except as disclosed in a document of even date herewith and delivered
by Parent and LLC Acquisition to Airhub prior to the execution and delivery of
this Agreement and referring to the sections and subsections of the
representations and warranties in this Agreement (the "Parent Disclosure
Schedule"), subject to its subsequent revision from time to time to the
Effective Time
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(but only with the prior written consent of Airhub) Parent and LLC Acquisition,
jointly and severally, represent and warrant to Airhub, the Airhub Members,
CTLLC and the CTLLC Members as follows:
5.1 Organization, Standing and Power. Each of Parent and LLC
Acquisition is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has the full
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Parent.
LLC Acquisition has not engaged in any business (other than certain
organizational matters) since the date of its incorporation.
5.2 Due Authorization. Parent and LLC Acquisition have the full
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and LLC
Acquisition. This Agreement has been duly executed and delivered by Parent and
LLC Acquisition and constitutes the valid and binding obligations of Parent and
LLC Acquisition. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not: (a) conflict with
or violate any provision of the Amended and Restated Articles of Incorporation
or Amended and Restated Bylaws of Parent, as amended, the Articles of
Incorporation or Bylaws of LLC Acquisition, or equivalent charter documents of
any of Parent's subsidiaries, as amended, (b) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance, rule or
regulation applicable to Parent or any of its subsidiaries or the properties or
assets of Parent or any of its subsidiaries, or (c) result in any breach or
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to any right of termination, cancellation or
acceleration of, or result in the creation of any Lien on any of the properties
or assets of Parent or any of its subsidiaries pursuant to any mortgage,
indenture, lease, contract or other agreement or instrument, bond, note,
concession or franchise applicable to Parent or any of its subsidiaries or their
properties or assets, except, in the case of this clause (c) only, where such
conflict, violation, default, termination, cancellation or acceleration would
not have and could not reasonably be expected to have a Material Adverse Effect
on Parent. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent or any of its subsidiaries in connection with the execution
and delivery of this Agreement by Parent and LLC Acquisition or the consummation
by Parent and LLC Acquisition of the transactions contemplated hereby, except
for: (i) the filing with the SEC and the National Association of Securities
Dealers, Inc. ("NASD") of the Proxy Statement relating to the shareholders
meeting to be held regarding the Transaction, (ii) the filing of a Form 8-K with
the SEC and NASD within 15 days after the Closing Date, (iii) any filings as may
be required under applicable state securities laws and the securities laws of
any foreign country, and (iv) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made,
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would not have a Material Adverse Effect on Parent and would not prevent or
materially alter or delay any of the transactions contemplated by this
Agreement.
5.3 Absence of Certain Changes. Except as disclosed in the documents
that have been filed with the SEC prior to the date hereof (the "Parent SEC
Documents"), since March 31, 1996 (the "Parent Balance Sheet Date"), each of
Parent and its subsidiaries has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (a) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect on Parent
or (b) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Parent, or any direct or indirect
redemption, retirement, purchase or other acquisition by Parent of any of its
capital stock. Except as disclosed in such Parent SEC Documents, Parent is not
aware of any facts which are reasonably likely to have a Material Adverse Effect
on Parent.
5.4 Compliance with Laws. Each of Parent and its subsidiaries has
complied with, is not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Parent.
5.5 Board Approval. The Boards of Directors of Parent and LLC
Acquisition have (a) approved this Agreement, (b) determined that the
transactions described by this Agreement are in the best interests of their
respective shareholders and is on terms that are fair to such shareholders and
(c) recommended that the shareholders of Parent and LLC Acquisition approve this
Agreement and the transactions contemplated herein.
5.6 Brokers' and Finders' Fees. Parent has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
5.7 Reliance. The forgoing representations and warranties are being
made by Parent and LLC Acquisition with the knowledge and expectation that
Airhub, CTLLC and their respective members are placing reliance thereon.
ARTICLE VI
CONDUCT PRIOR TO EFFECTIVE TIME
6.1 Conduct of Business of Circuit Test. Prior to the Effective Time,
except as expressly contemplated by this Agreement or as agreed in writing by
Parent:
(a) Affirmative Covenants. Airhub and CTLLC will:
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(i) carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use its best efforts
to preserve intact its present business organizations, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time;
(ii) maintain insurance coverages and its books, accounts and records in
the usual manner consistent with past practice;
(iii) comply in all material respects with all laws and regulations of any
Governmental Entity applicable to it;
(iv) maintain and keep its plants, property and equipment in good repair,
working order and condition, ordinary wear and tear excepted;
(v) perform in all material respects its obligations under all contracts
and commitments to which it is a party or by which it is bound;
(vi) notify Parent of any event or occurrence not in the ordinary course of
its business, and of any event which could have a Material Adverse Effect on
Circuit Test; or
(vii) pay, consistent with past practice, all accounts payable that arise
in the ordinary course of its business.
(b) Negative Covenants. Neither Airhub nor CTLLC will (and the Members of
each entity will take such reasonable steps to prevent Airhub and CTLLC):
(i) cause or permit any amendments to its Articles of Organization or
Operating Agreement/Regulations (as applicable) or equivalent charter documents;
(ii) transfer to any person or entity any rights to its Intellectual
Property;
(iii) enter into or amend any agreements pursuant to which any other party
is granted exclusive marketing or other exclusive rights of any type or scope
with respect to any of its products or technology;
(iv) enter into any operating lease providing for payments in excess of
an aggregate of $50,000;
(v) adopt or amend any employee benefit plan, or hire any new manager level
or officer level employee (other than in the ordinary course of business), pay
any special bonus or special remuneration to any employee or manager, or
increase the salaries or
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wage rates of its employees, except as set forth in Section 6.1(b) of the
Airhub and CTLLC Disclosure Schedule;
(vi) commence a lawsuit other than (A) for the routine collection of bills,
(B) in such cases where it in good faith determines that failure to commence
suit would result in the material impairment of a valuable aspect of its
business, provided that it consults with Parent prior to the filing of such a
suit, or (C) for a breach of this Agreement;
(vii) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets, other than in the ordinary course of business consistent with past
practice;
(viii) other than in the ordinary course of business, make or change any
material election in respect of Taxes, adopt or change any accounting method in
respect of Taxes, file any material Tax Return or any amendment to a material
Tax Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(ix) revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business;
(x) take, or agree in writing or otherwise to take, any other action that
would make any of its representations or warranties contained in this Agreement
untrue;
(xi) delay in the payment of any trade or other payables other than in the
ordinary course of business consistent with past practice;
(xii) sell, lease or otherwise transfer or dispose of any property or
asset, other than in the ordinary course of business consistent with past
practice;
(xiii) declare, set aside, or pay any distribution to the Airhub or CTLLC
Members, or any direct or indirect redemption, retirement, purchase or other
acquisition by Airhub or CTLLC, as applicable, of any of its securities, except
as set forth on Schedule 6.1(b);
(xiv) enter into commitment or transaction (including any capital
expenditure, capital financing or sale of assets) for any amount that requires
or could require payments in excess of $50,000 with respect to any individual
contract or a series of related contracts;
(xv) cancel any debt or waive or release of any right or claim by either
Airhub or CTLLC, as applicable, other than in the ordinary course of business;
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(xviii) make any payment, or discharge or satisfy any claim, liability or
obligation by Airhub or CTLLC, as applicable, other than as reflected or
reserved against in the Annual Financial Statements or the Interim Circuit Test
Financial Statements or in the ordinary course of business consistent with past
practice;
(xix) issue or sell any Airhub or CTLLC Units, as applicable or other
securities, rights of first refusal or other rights to acquire securities of
Airhub or CTLLC, as applicable;
(xx) incur any indebtedness for borrowed money, or guarantee or otherwise
assume any such indebtedness, except as set forth in Schedule 6.1(b);
(xxi) make any loan or advance (other than advances to employees in the
ordinary course of business for travel and entertainment in accordance with past
practice) to any person;
(xxii ) increase in any salary, wage, benefit or other remuneration payable
or to become payable to any current or former officer, manager, employee,
independent contractor or agent, or pay or agree to pay any bonus or severance
payment or arrangement made to, for or with any officer, manager, employee or
agent, or provide for any supplemental retirement plan or other program or
special remuneration for any officer, manager, employee or agent, except for
normal salary or wage increases relating to periodic performance reviews and
annual bonuses consistent with past practice;
(xxiii) grant credit to any customer on terms or in amounts more favorable
than those which have been extended to such customer in the past, any other
change in the terms of any credit heretofore extended or any other change in the
policies or practices with respect to the granting of credit; or
(xiv) agree, whether in writing or otherwise, to do any of the foregoing.
6.2 No Solicitation; Acquisition Proposals. Subject to the fiduciary
duties of the Airhub and CTLLC Members under applicable law, as advised by
counsel, neither Airhub or CTLLC shall, directly or indirectly, through any
Member, officer, manager, employee, representative, agent, financial advisor or
otherwise, solicit, initiate or encourage inquiries or submission of proposals
or offers from any person relating to any sale of all or any portion of the
assets, business, properties of (other than immaterial or insubstantial assets
or inventory in the ordinary course of business), or any equity interest in,
Airhub or CTLLC, as applicable, or any business combination with Airhub or
CTLLC, as applicable, whether by merger, purchase of assets, tender offer or
otherwise or participate in any negotiation regarding, or furnishing to any
other person any information with respect to, or otherwise cooperate in any way
with, or assist in, facilitate or encourage, any effort or attempt by any other
person to do or seek to do any of the foregoing. Each of Airhub and CTLLC shall
use its best efforts to cause all confidential materials previously furnished to
any third parties in connection with any of the foregoing to be
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promptly returned to Airhub or CTLLC, as applicable, and shall cease any
negotiations conducted in connection therewith or otherwise conducted with any
such parties.
6.3 Conduct of Business of Parent. Prior to the Effective Time, except as
expressly contemplated by this Agreement or as agreed in writing by Airhub and
CTLLC:
(a) Affirmative Covenants. Parent will, and will cause each of its
subsidiaries to:
(i) carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use its best efforts
to preserve intact its present business organizations, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time;
(ii) maintain insurance coverages and its books, accounts and records in
the usual manner consistent with past practice;
(iii) comply in all material respects with all laws and regulations of any
Governmental Entity applicable to it;
(iv) maintain and keep its plants, property and equipment in good repair,
working order and condition, ordinary wear and tear excepted;
(v) perform in all material respects its obligations under all contracts
and commitments to which it is a party or by which it is bound;
(vi) notify Airhub and CTLLC of any event or occurrence not in the ordinary
course of its business, and of any event which could have a Material Adverse
Effect on Parent; or
(vii) pay, consistent with past practice, all accounts payable that arise
in the ordinary course of its business except to the extent that the amount
owing is being duly contested by Parent and such contest does not have a
Material Adverse Effect on Parent and adequate reserves therefor are reflected
on the Annual Financial Statements or the Interim Financial Statements for
Parent.
6.4 Notice of Breach. Each party hereto shall promptly give written
notice to the others upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event that could cause or constitute
a breach of any of its representations, warranties or covenants hereunder.
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ARTICLE VII
ADDITIONAL COVENANTS
7.1 Access to Information. Airhub and CTLLC and their respective
Members shall afford Parent and its accountants, counsel and other
representatives full access during normal business hours (and at such other
times as the parties hereto agree) during the period prior to the Effective Time
to: (a) all of Airhub's and CTLLC's properties, books, contracts, commitments
and records, and (b) all other information concerning the business, properties
and personnel of Airhub and CTLLC as Parent may reasonably request including
information relating to the Members of Airhub and CTLLC. Airhub and CTLLC agree
to provide to Parent and its accountants, counsel and other representatives
copies of internal financial statements, business plans and budgets promptly
upon request. Parent shall cooperate with Airhub and CTLLC with its due
diligence review of Parent to the extent necessary to confirm the accuracy of
Parent's and LLC Acquisition's representations and warranties. Subject to
compliance with applicable law, from the date hereof until the Effective Time,
each of Parent, Airhub, and CTLLC shall confer on a regular and frequent basis
with one or more representatives of the other party to report and discuss
material operational matters and the general status of ongoing operations. No
information or knowledge obtained in any investigation pursuant to this Section
7.1 shall affect or be deemed to modify any term hereof, any representation or
warranty contained herein or any obligations of the parties hereto, including
their obligations to consummate the transactions contemplated hereby.
7.2 Confidentiality. The parties hereto will treat as confidential and
hold in confidence all information concerning the businesses and affairs of
Airhub and CTLLC and the business and affairs of Parent and LLC Acquisition
("Proprietary Information") that is not already generally available to the
public and is not otherwise known to the party to whom it was disclosed on a
non-confidential basis and refrain from using any such Proprietary Information
except in furtherance of this Agreement or as required by law.
7.3 Publicity. None of Airhub, the Airhub Members, CTLLC and the CTLLC
Members shall issue, or cause or permit to be issued, any press release or
otherwise make any public statement regarding the terms of this Agreement or the
transactions contemplated hereby without Parent's prior written consent. Parent
and LLC Acquisition shall consult with Airhub and CTLLC before issuing any press
release or otherwise making any public statement regarding the terms of this
Agreement or the transactions contemplated hereby, provided, however, that any
failure to consult with Airhub or CTLLC shall not constitute a breach of this
Agreement to the extent such consultation would be impractical and such press
release or statement is necessary to comply with law or other legal obligations
of Parent or any of its subsidiaries or, upon the advice of counsel, is
necessary or prudent to be made in order to avoid potential liability of Parent
or any of its subsidiaries, directors, officers or employees under federal or
state securities laws.
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7.4 Filings; Cooperation. Parent, Airhub, and CTLLC shall make, and
cause their affiliates to make, all necessary filings with respect to the
transactions contemplated hereby including any those required under the
Securities Act and the Exchange Act and the rules and regulations thereunder
including, without limitation the Proxy Statement to be prepared by Parent in
connection with the Transaction, and under applicable Blue Sky or similar
securities laws, and shall use all reasonable efforts to obtain any required
approvals and clearances with respect thereto to (a) comply as promptly as
practicable with all governmental requirements applicable to the transaction and
(b) obtain promptly all necessary consents, approvals, orders and authorizations
of, and all registrations, declarations and filings with, Governmental Entities
and consents of third parties necessary for the consummation of the transactions
contemplated hereby.
7.5 Earnout Agreement. At or prior to the Effective Time, Parent, the
Airhub Members and the CTLLC Members will enter into agreements which will
provide for certain contingent earnout payments. Such earnout payments, payable
by the Parent to each Airhub and CTLLC Member on a pro rata basis, are described
in an "Earnout Agreement", the form of which is attached as Exhibit 7.5 hereto.
7.6 Further Assurances.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable (other than actions that materially alter terms or
materially reduce intended beneficiaries) under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using all reasonable efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings (including, but not limited to, filings with all applicable Governmental
Entities) and to lift any injunction or other legal bar to any of the
transactions contemplated hereby (and, in such case, to proceed with the
Transfer as expeditiously as possible).
(b) If, at any time after the Effective Time, any further
action described in Section 7.6 (a) is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of Parent and
the former Airhub and CTLLC Members shall take such action.
7.7 Indemnification Agreement. The Parent, Airhub and CTLLC Members
shall enter into an agreement regarding the indemnification of Parent and Merger
Sub with respect to the representations, warranties and covenants of this
Agreement (the "Indemnification Agreement"), which Indemnification Agreement
shall be substantially in the form of Exhibit 8.3(h) attached to the
Reorganization Agreement.
7.8 Deferred Compensation. The parties hereto agree that after the
Effective Time Airhub and CTLLC shall be authorized to pay up to an aggregate of
$500,000 to its employees as
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"Deferred Compensation", less the amount of any Deferred Compensation paid by
Circuit Test pursuant to Section 7.14 of the Reorganization Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Obligations of Each Party to Effect the LLC Transfer.
The respective obligations of each party hereto to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of the parties
hereto:
(a) The Reorganization Agreement, and the transactions
contemplated thereby shall have been approved and adopted by the requisite vote
of the holders of capital stock of both Parent and Circuit Test, and the closing
of such transactions shall have occurred contemporaneously with the Closing.
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
LLC Transfer or materially altering the terms of the Transaction, nor any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing, shall be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the LLC Transfer or the Transaction that makes the consummation of
the LLC Transfer illegal.
(c) Each party to this Agreement shall have timely obtained
from each Governmental Entity all approvals, waivers and consents, if any,
necessary for consummation of or in connection with the LLC Transfer and the
several transactions contemplated hereby, including such approvals, waivers and
consents as may be required under federal and state securities laws.
8.2 Additional Conditions to Obligations of Airhub to Effect the Airhub
Transfer. The obligations of Airhub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Airhub:
(a) Parent shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them at or prior to the Effective
Time and the representations and warranties of Parent in this Agreement shall be
true and correct in all material respects (or in all respects in the case of any
representation or warranty that is qualified by its terms by a reference to
Material Adverse
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Effect or otherwise the concept of materiality) when made and on and as of the
Effective Time as though such representations and warranties were made on and as
of such date.
(b) Airhub shall have received a certificate executed on
behalf of Parent by its Chief Financial Officer certifying that the conditions
specified in Section 8.2(a) have been fulfilled.
(c) Airhub shall have received a legal opinion of Holme
Roberts & Owen LLP, counsel to Parent, substantially in the form attached hereto
as Exhibit 8.2(c).
8.3 Additional Conditions to Obligations of CTLLC to Effect the CTLLC
Transfer. The obligations of CTLLC to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by CTLLC:
(a) Parent and LLC Acquisition shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them at or prior
to the Effective Time and the representations and warranties of Parent and LLC
Acquisition in this Agreement shall be true and correct in all material respects
(or in all respects in the case of any representation or warranty that is
qualified by its terms by a reference to Material Adverse Effect or otherwise
the concept of materiality) when made and on and as of the Effective Time as
though such representations and warranties were made on and as of such date.
(b) Airhub shall have received a certificate executed on
behalf of Parent by its Chief Financial Officer certifying that the conditions
specified in Section 8.3(a) have been fulfilled.
(c) Airhub shall have received a legal opinion of Holme
Roberts & Owen LLP, counsel to Parent, substantially in the form attached hereto
as Exhibit 8.2(c).
8.4 Additional Conditions to the Obligations of Parent and LLC
Acquisition to Effect the LLC Transfer. The obligations of Parent, with respect
to the LLC Transfer, and of both Parent and LLC Acquisition, with respect to the
CTLLC Transfer, to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Parent:
(a) Airhub and the Airhub Members shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them at or prior
to the Effective Time and the representations and warranties of Airhub and the
Airhub Members in this Agreement shall be true and correct in all material
respects (or in all respects in the case of any representation or warranty that
is qualified by its terms by a reference to Material Adverse Effect or otherwise
by the concept of
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materiality) when made and on and as of the Effective Time as though such
representations and warranties were made at and as of such time.
(b) Parent shall have received a certificate, dated as of the
Effective Time, executed on behalf of Airhub by its Managing Member certifying
that the conditions specified in Section 8.4(a) have been fulfilled.
(c) CTLLC and the CTLLC Members shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them at or prior
to the Effective Time and the representations and warranties of Airhub and the
CTLLC Members in this Agreement shall be true and correct in all material
respects (or in all respects in the case of any representation or warranty that
is qualified by its terms by a reference to Material Adverse Effect or otherwise
by the concept of materiality) when made and on and as of the Effective Time as
though such representations and warranties were made on and as of such time.
(d) Parent and LLC Acquisition shall have received a
certificate, dated as of the Effective Time, executed on behalf of CTLLC by its
Managing Member certifying that the conditions specified in Section 8.4(c) have
been fulfilled.
(e) Parent shall have received a legal opinion from Burch,
Porter & Johnson, PLLC, legal counsel to Airhub, substantially in form attached
hereto as Exhibit 8.4(e).
(f) There shall not have occurred any Material Adverse Effect
on Airhub or CTLLC (including, specifically, any change to the CTI Group Closing
Balance Sheet).
(g) Parent shall have received such clearance certificate or
shall have received or filed such other documents as may be required by any
state taxing authority in order to relieve Parent of any obligaion to withold
any portion of the consideration payable hereunder.
(h) Airhub and CTLLC shall each deliver to Parent at Closing a
"Certificate of Non-Foreign Status", under section 1445 of the Code, in a form
reasonably satisfactory to Parent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of Airhub and Parent, this Agreement may be terminated:
(a) by mutual consent of all of the parties to this Agreement;
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(b) by either Parent, Airhub or CTLLC, if, without fault of
the terminating party, the Closing shall not have occurred on or before the
later of (i) 30 days after the date the
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Proxy Statement is mailed, but in no event later than November 30, 1997, or (ii)
such later date as may be agreed upon in writing by the parties hereto;
(c) by either Parent, CTLLC or Airhub if the any other party
shall have breached its respective representations, warranties or other
obligations under Articles IV through VII in any material respect and such
breach continues for a period of 10 days after receipt of
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notice of the breach from the non-breaching party hereto.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or Airhub or their respective officers, directors, shareholders or affiliates,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties or other obligations set forth
in this Agreement; provided that, the provisions of this Section 9.2 and Section
7.2 (Confidentiality) and Article X (General Provisions) shall remain in full
force and effect and survive any termination of this Agreement.
9.3 Amendment. The respective parties hereto may cause this Agreement
to be amended at any time by execution of an instrument in writing signed on
behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time any
party (the "Waiving Party") hereto may, to the extent legally allowed, (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto (but only to the extent intended to benefit the Waiving
Party), (b) waive any inaccuracies in the representations and warranties made to
the Waiving Party contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions for the
benefit of the Waiving Party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations
and warranties of Airhub Article III and CTLLC in Article IV shall survive the
Closing and continue in full force and effect for two years after the Effective
Time, except for those contained in Sections 3.16, 3.17, 4.16 and 4.17 shall
survive the Closing and continue in full force and effect after the Effective
Time for the applicable statute of limitations period. The Airhub Members and
the CTLLC Members have agreed to indemnify Parent pursuant to the
Indemnification Agreement, subject to the limitations contained therein. The
representations and warranties of Parent and LLC Acquisition shall not survive
the Closing.
10.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally or sent via
facsimile, in either case with confirmation of receipt, or shall be deemed given
the business day after delivery of such notice (together with a proper request
for overnight delivery) to a nationally recognized overnight
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courier service that guarantees next-business-day delivery to the applicable
destination, in each such case to the parties at the following address or at
such other address for a party as shall be specified by notice hereunder:
(a) if to Parent or Merger Sub, to:
EFTC Corporation
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892-4306
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler
Facsimile No.: (303) 866-0200
(b) if to Airhub or CTLLC, to:
Circuit Test Group
4601 Cromwell Avenue
Memphis, Tennessee 38118
Attention: Allen S. Braswell, Jr.
Facsimile No.: (901) 795-5305
with a copy to:
Burch, Porter & Johnson, PLLC
50 North Front Street
Suite 800
Memphis, Tennessee 38103
Attention: Warner B. Rodda
Facsimile No.: (901) 524-5026
10.3 Interpretation. When a reference is made in this Agreement to
Exhibits, Articles or Sections, such reference shall be to an Exhibit, Article
or Section to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been reasonably
identified and delivered, or other reasonable access is provided to the party to
whom such information is to be made available. The table of contents, index of
defined terms and Article
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and Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
In this Agreement, any reference to any event, change, condition or effect being
"material" with respect to any entity or group of entities means any material
event, change, condition or effect related to the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations or results of operations
of such entity and its subsidiaries, taken as a whole. In this Agreement, any
reference to a party's "knowledge" means such party's actual knowledge of a
particular fact or matter after due and diligent inquiry of officers, directors
and other employees of such party reasonably believed to have knowledge of such
matters. Whenever the context may require, any pronoun shall be deemed include
the corresponding masculine, feminine and neuter forms.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart.
10.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Airhub Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written and
oral, among the parties hereto with respect to the subject matter hereof; (b)
are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
10.6 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties hereto further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.7 Remedies Cumulative; No Waiver. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair
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such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right.
10.8 Governing Law. All aspects of this Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado (without regard
to the principles of conflicts of law thereof).
10.9 Rules of Construction. The parties hereto acknowledge that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
10.10 Expenses. Whether or not the LLC Transfer is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisers, accountants and legal counsel) shall be paid by the
party incurring such expense.
10.11 Attorneys Fees. In the event of any proceeding to enforce this
Agreement, the prevailing party shall be entitled to receive from the losing
party all reasonable costs and expenses, including the reasonable fees of
attorneys, accountants and other experts, incurred by the prevailing party in
investigating and prosecuting (or defending) such action at trial or upon any
appeal.
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SIGNATURE PAGE--LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT
IN WITNESS WHEREOF, Airhub, CTLLC, Parent, LLC Acquisition, the Airhub
Members, and the CTI Members have caused this Agreement to be executed and
delivered by their respective officers thereunto duly authorized, all as of the
date first written above.
EFTC GROUP
EFTC CORPORATION,
a Colorado corporation
By /s/
Its
CTLLC ACQUISITION CORP.,
a Florida Corporation
By: /s/
Its
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Signature Page--LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT,
continued
AIRHUB GROUP
AIRHUB SERVICES GROUP, L.C., INC.
a Kentucky limited liability company
By: /s/
Its
AIRHUB MEMBERS:
ALLEN S. BRASWELL, JR. REVOCABLE LIVING
TRUST
By /s/
Allen S. Braswell, Jr., Trustee
CIRCUIT TEST INTERNATIONAL LIMITED
PARTNERSHIP, a Florida limited
Partnership
By ALLEN S. BRASWELL, SR. LIVING TRUST
Its General Partner
/s/
Allen S. Braswell, Sr., Trustee
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Signature Page--LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT,
continued
CTLLC GROUP
CIRCUIT TEST INTERNATIONAL, L.C.,
a Florida limited liability company
By /s/
Its
CTLLC MEMBERS:
ALLEN S. BRASWELL, JR. REVOCABLE LIVING
TRUST
By /s/
Allen S. Braswell, Jr., Trustee
CIRCUIT TEST INTERNATIONAL LIMITED
PARTNERSHIP, a Florida limited
Partnership
By ALLEN S. BRASWELL, SR. LIVING TRUST
Its General Partner
/s/
Allen S. Braswell, Sr., Trustee
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INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated September 30,
1997 is among the undersigned shareholders (each a "Shareholder") of Circuit
Test, Inc., a Florida corporation ("Circuit Test"), the undersigned members (the
"Airhub Members") of Airhub Services Group, L.C., a Kentucky limited liability
company ("Airhub"), and the members (the "CTLLC Members" and, together with the
Airhub Members and the Shareholders, the "Indemnitors") of Circuit Test
International, L.C., a Florida limited liability company ("CTLLC"), and EFTC
Corporation, a Colorado corporation ("Parent").
RECITALS
A. Pursuant to the Agreement and Plan of Reorganization, dated as of
July 9, 1997 (the "Reorganization Agreement") among Parent, CTI Acquisition
Corp., a Florida corporation and a wholly-owned subsidiary of Parent ("Merger
Sub"), and Circuit Test, the Shareholders will receive shares of Common Stock,
$.01 par value, of Parent ("Parent Common Stock") in exchange for their shares
of Class A and Class B Common Stock, $.01 par value, of Circuit Test ("Circuit
Test Common Stock"). In connection with the Reorganization Agreement, Parent has
granted the Shareholders demand and piggyback registration rights pursuant to
the Registration Rights Agreement of even date herewith (the "Registration
Rights Agreement").
B. Pursuant to that certain Limited Liability Company Unit Purchase
Agreement, dated as of July 9, 1997 (the "Purchase Agreement"), among Parent,
CTLLC Acquisition Corp., a Florida corporation and wholly owned subsidiary of
Parent ("LLC Acquisition"), Airhub, the Airhub Members, CTLLC and the CTLLC
Members, all of the outstanding interests in Airhub and CTLLC will be acquired
(the "Acquisition") and as a result of the Acquisition, all outstanding
interests in Airhub will be acquired by Parent and all of outstanding interests
in CTLLC will be acquired by Parent and LLC Acquisition.
C. In consideration of Parent entering the Reorganization Agreement,
the Purchase Agreement and the Registration Rights Agreement and to induce
Parent to consummate the transactions contemplated thereby, the Indemnitors are
making certain representations and warranties set forth herein and indemnifying
Parent with respect to certain matters under the Reorganization Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, covenants and agreements contained herein, the parties hereto
agree as follows:
1
<PAGE>
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Due Authorization; Enforceability; No Conflict. Each of the
Indemnitors represents and warrants to Parent with respect to such Indemnitor
that the Indemnitor has the full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and has taken all actions
necessary to secure all approvals required in connection therewith. This
Agreement has been duly executed and delivered by the Indemnitor and constitutes
the valid and binding obligation of the Indemnitor enforceable against the
Indemnitor in accordance with its terms. The execution and delivery of this
Agreement does not, and the performance will not: (a) violate or conflict with
any permit, order, license, decree, judgment, statute, law, ordinance, rule or
regulation applicable to the Indemnitor or (b) result in any breach or violation
of, or constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of,
or result in the creation of any mortgage, pledge, lien, encumbrance, charge, or
other security interest (a "Lien") on any of the properties or assets of the
Indemnitor pursuant to, or require the consent of any party to any mortgage,
indenture, lease, contract or other agreement or instrument, bond, note,
concession or franchise applicable to the Indemnitor or any of its properties or
assets, except, in the case of this clause (c) only, where such conflict,
violation, default, termination, cancellation or acceleration would not have and
could not reasonably be expected to prevent the consummation of the transactions
contemplated hereby. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to the Indemnitor in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by the Reorganization Agreement and the Purchase Agreement,
including the payment and performance of all payment and other obligations
hereunder.
1.2 Other Representations and Warranties of Circuit Test Shareholders.
Each of the Shareholders represents and warrants to Parent with respect to such
Shareholder that the representations and warranties in Sections 1 of the Voting
Agreement, dated as of July 9, 1997, among the Shareholders and Parent are true
and correct in all respects. The Shareholder has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges (except
as specified in Section 4.28 of the Reorganization Agreement) in connection with
this Agreement or any transaction contemplated by the Reorganization Agreement
and the Purchase Agreement, including the payment and performance of all payment
and other obligations hereunder.
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ARTICLE II
SURVIVAL; INDEMNIFICATION
2.1 Indemnification. (a) In the event
(i) Circuit Test breaches a covenant, or if any representation or
warranty of Circuit Test in the Reorganization Agreement is
inaccurate (and, if there is an applicable survival period
pursuant to Section 11.1 (Survival of Representations and
Warranties) of the Reorganization Agreement, provided that
Parent makes a written claim for indemnification against any
Indemnitor within the applicable survival period),
(ii) Airhub, any Airhub Member, CTLLC or any CTLLC Member breaches
a covenant, or if any representation or warranty in the
Purchase Agreement is inaccurate (and, if there is an
applicable survival period pursuant to Section 10.1 (Survival
of Representations and Warranties) of the Purchase Agreement,
provided that Parent makes a written claim for indemnification
against any Indemnitor within the applicable survival period),
then each Indemnitor shall indemnify and hold Parent harmless from and against
such Indemnitor's Pro Rata Share (as defined in Section 2.1(b)) of any action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
injunction, judgment, order, decree, ruling, damage, dues, penalty, fines,
costs, amounts paid in settlement, liabilities, obligations, Taxes (as defined
in Section 2.1(b)), Liens, losses, expenses and fees, including court costs and
attorneys' fees and expenses (collectively, "Losses") that Parent or any of its
subsidiaries may suffer through and after the date of the claim for
indemnification (including any Losses Parent or its subsidiaries suffer after
the end of any applicable survival period) caused by or arising out of any such
breach or inaccuracy; except that the Indemnitors will not have any obligation
to indemnify Parent from and against any Losses caused by or arising out of any
such breach or inaccuracy: (i) until Parent or its subsidiaries have suffered
Losses by reason thereof in excess of a $100,000 aggregate threshold (at which
time the Indemnitors will indemnify Parent relating back to the first dollar of
such Losses and any further such Losses) or thereafter, and (ii) to the extent
the Losses Parent has suffered by reason of all such breaches and inaccuracies
exceeds a $2,500,000 aggregate ceiling (after which the Indemnitors will have no
obligation to indemnify Parent from and against any further such Losses) unless
such Losses are caused by or arise out of any breach or inaccuracy of which any
Indemnitor had actual knowledge at the time of the related agreement or
representation was made or deemed made, in which case there shall be no
limitation on the aggregate liability of the Indemnitors hereunder.
(b) The "Indemnitor's Pro Rata Share" means that fraction equal to the
amount of Consideration received by the Indemnitor over the Total Consideration,
where
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(i) "Consideration" with respect to (A) any Shareholder means the number of
shares of Parent Common Stock received by such Shareholder pursuant to the
Reorganization Agreement times the $7.80, plus the amount of cash, if any,
received by such Shareholder pursuant to the Reorganization Agreement and, (B)
any Airhub Member or CTLLC Member means such member's ratable portion
(determined by reference to such members proportionate ownership of Airhub and
CTLLC taken together) of the aggregate purchase price payable by Parent to the
Airhub Members and the CTLLC Members pursuant to the Purchase Agreement, and
(ii) "Total Consideration" means the sum of the Consideration received by
all Indemnitors.
(c) If Parent has a claim for Losses pursuant to this Article II that
does not involve a Third Party Claim (as defined in Section 2.2(a)), Parent
shall notify the Representative (as defined in Section 2.3(a)) of such claim,
specifying the nature of the Losses and the amount or estimated amount thereof
if feasible. If the Representative does not notify Parent within 30 days from
the date it receives such notice that the Representative disputes such claim,
the amount of such claim shall be conclusively deemed a liability of the
Indemnitors under this Agreement. Nothing herein shall be deemed to prevent
Parent from making a claim for potential or contingent Losses.
2.2 Third Party Claims. (a) If any third party notifies Parent with
respect to any matter that may give rise to a claim for indemnification against
any Indemnitor under this Article II (a "Third Party Claim"), then Parent shall
promptly notify the Representative thereof in writing (a "Notice of Claim"). The
Representative will have the right to assume and thereafter conduct the defense
of the Third Party Claim with counsel of the Representative's choice reasonably
satisfactory to Parent so long as: (i) the Representative notifies Parent in
writing within ten (10) days after Parent has given the Notice of Claim that the
Indemnitors will indemnify the Parent from and against the entirety of any
Losses Parent may suffer caused by or arising from the Third Party Claim, (ii)
the Representative provides Parent with evidence reasonably acceptable to Parent
that the Indemnitors will have the financial resources to defend against the
Third Party Claim and fulfill their indemnification obligations hereunder, (iii)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good faith judgment of
Parent, likely to establish a precedent, custom or practice materially adverse
to the continuing business, operations, assets, prospects or interests of Parent
or its subsidiaries, and (v) the Representative conducts the defense of the
Third Party Claim actively and diligently. In the event of a Third Party Claim
that seeks an injunction or other equitable relief, the Representative will be
entitled to participate with Parent in the defense of such Third Party Claim.
(b) While the Representative is conducting the defense of the Third
Party Claim: (i) Parent may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) Parent
will not consent to the entry of any judgment or
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enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Representative, and (iii) the Representative will
not consent to the entry of any judgment or enter any settlement with respect to
the Third Party Claim without the prior written consent of Parent.
(c) If any condition under Section 2.2(a) is or becomes unsatisfied:
(i) Parent may defend against the Third Party Claim in any manner it reasonably
may deem appropriate, (ii) Parent may consent to entry of any judgment or enter
into any settlement that is consented to by the Representative or to which the
Indemnitors could not reasonably object, (iii) each Indemnitor will reimburse
Parent the Indemnitor's Pro Rata Share promptly and upon request of Parent for
the costs of defending against the Third Party Claim, including reasonable
attorneys' fees and expenses, and (iv) the Indemnitors will remain responsible
for any Losses Parent may suffer caused by or arising from the Third Party Claim
to the fullest extent provided by this Article II. The Indemnitors and the
Representative agree to consent to any entry of judgment or the entering into of
any settlement under clause (ii) above reasonably appropriate under the
circumstances.
2.3 Representative. (a) To the fullest extent permitted by law, each
Indemnitor hereby irrevocably constitutes and appoints Allen S. Braswell, Jr. as
such Indemnitor's attorney-in-fact and legal and judicial representative (the
"Representative"), with full power of substitution, for the purposes of: (i)
receiving all notices and communications directed to any Indemnitor under this
Agreement and taking any action (or determining to take no action) with respect
thereto as the Representative may deem appropriate, including the settlement or
compromise on behalf of any Indemnitor of any Third Party Claim or Losses, and
(ii) executing and delivering on behalf of any Indemnitor all instruments and
documents of every kind the Representative may deem necessary or advisable to
accomplish the foregoing. Each Indemnitor hereby ratifies and confirms, as the
Indemnitor's own act, all that the Representative shall do or cause to be done
pursuant to this Agreement.
(b) If the Representative resigns, the resigning Representative shall
appoint as successor either another Indemnitor or a third party reasonably
acceptable to Parent (a "Successor Representative"). The resigning
Representative's resignation shall not be effective until a Successor
Representative shall have agreed in writing to accept such appointment. If the
Representative should die or become incapacitated, a Successor Representative
shall be appointed within 30 days of the Representative's death or incapacity by
Indemnitors that received a majority of Total Consideration. Upon acceptance by
a Successor Representative of the Successor Representative's appointment, the
appointment shall be final and binding on the Indemnitors.
(c) Each Indemnitor irrevocably agrees that with respect to any Third
Party Claim or any claim for indemnification hereunder, any service of process,
writ, judgment or other notice of legal process shall be deemed and held in
every respect to be effectively served upon the Indemnitor if delivered by
registered or certified mail, postage prepaid with return receipt
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requested to the Representative at such person's address set forth in Section
4.1, whom each Indemnitor irrevocably appoints as its authorized agent for
service of process.
(d) The death or incapacity of any Indemnitor shall not terminate the
authority and agency of the Representative.
(e) Each Indemnitor hereby agrees to indemnify the Representative and
to hold the Representative harmless against any loss, liability or expense
incurred without negligent conduct or bad faith on the part of the
Representative and arising out of or in connection with his duties as
Representative, including court costs and attorneys' fees and expenses incurred
by the Representative in defending against any Third Party Claim or Losses in
connection with this Agreement.
2.4 Payment Terms. If all or part of any indemnification obligation
under this Agreement is not paid when due, the Indemnitors shall pay Parent
interest thereon, payable on demand, for each day from the date the amount
became due until the date of payment in full at a rate of 10% per annum.
2.5 Other Indemnification Matters. Parent's claims pursuant to the
foregoing indemnification provisions shall not be limited by any examination
made by or on behalf of Parent or its subsidiaries, the knowledge of Parent or
it subsidiaries or any of their respective officers, directors, stockholders,
employees or agents, or the acceptance by Parent of any certificate or opinion.
ARTICLE III
DISPUTE RESOLUTION
3.1 Remedies. Parent may proceed to enforce the obligations of the
Indemnitors hereunder in any court or other tribunal by an action at law, suit
in equity or other appropriate proceedings, whether for damages, for the
specific performance of any term hereof, or otherwise, or in aid of the exercise
of any power granted hereby or by law. In the event of any such proceeding, the
prevailing party in such proceeding shall be entitled to receive from the losing
party all reasonable costs and expenses, including the reasonable fees of
attorneys, accountants, and other experts, incurred by the prevailing party in
investigating and prosecuting (or defending) such action at trial or upon any
appeal. The amount of any such costs or expenses awarded hereunder shall not be
subject to the limitations on liability contained in Section 2.1.
3.2 Jurisdiction and Consent to Suit. Any action, suit or proceeding by
Parent to enforce this Agreement may be brought in the District Court in and for
the City and County of Denver, State of Colorado, in the United States District
Court for the District of Colorado or in any other court in which venue and
jurisdiction are proper. Each Indemnitor and the
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Representative consent and submit to the non-exclusive jurisdiction in personam
of any such court in respect of any such action, suit or proceeding.
ARTICLE IV
GENERAL PROVISIONS
4.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
at the following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Parent, to:
EFTC Corporation
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892-4306
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler
Facsimile No.: (303) 866 0200
(b) if to the Indemnitors, to the Representative:
Allen S. Braswell, Jr.
4601 Cromwell Avenue
Memphis, Tennessee 38118
Facsimile No.: (901) 795-5305
with a copy to:
Burch, Porter & Johnson, PLLC
50 North Front Street
Suite 800
Memphis, Tennessee 38103
Attention: Warner B. Rodda
Facsimile No.: (901) 524-5026
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4.2 Interpretation. When a reference is made in this Agreement to
Articles or Sections, such reference shall be to an Article or Section to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and Article and Section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. In this
Agreement, any reference to any event, change, condition or effect being
"material" with respect to any entity or group of entities means any material
event, change, condition or effect related to the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge of a particular fact or matter after due and diligent
inquiry of officers, directors and other employees of such party reasonably
believed to have knowledge of such matters. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter
forms, and with respect to the parties shall include where the context does not
prohibit, their respective permitted successors and assigns.
4.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart.
4.4 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto: (a) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided. This Agreement will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed.
4.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties hereto further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
4.6 Remedies Cumulative; No Waiver. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the
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exercise by a party of any one remedy will not preclude the exercise of any
other remedy. No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be construed to be a
waiver of, or acquiescence in, any breach of any representation, warranty or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right.
4.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado (without regard to the
principles of conflicts of law thereof).
4.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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SIGNATURE PAGE-INDEMNIFICATION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be executed and delivered as of the date first written above.
Parent:
EFTC CORPORATION,
a Colorado corporation
By: /s/
Shareholders:
Allen S. Braswell, Sr. Grantor Retained Income
Trust u/a/d 12/31/89
By /s/
Allen S. Braswell, Jr., Trustee
By /s/
Bruce A. Braswell, Trustee
/s/
Allen S. Braswell, Jr.
/s/
Alma L. Braswell
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SIGNATURE PAGE-INDEMNIFICATION AGREEMENT Continued
Airhub Members:
ALLEN S. BRASWELL, JR. REVOCABLE LIVING
TRUST
By /s/
Allen S. Braswell, Jr., Trustee
CIRCUIT TEST INTERNATIONAL LIMITED
PARTNERSHIP, a Florida limited
Partnership
By ALLEN S. BRASWELL, SR. LIVING TRUST
Its General Partner
/s/
Allen S. Braswell, Sr., Trustee
CTLLC Members:
ALLEN S. BRASWELL, JR. REVOCABLE LIVING
TRUST
By /s/
Allen S. Braswell, Jr., Trustee
CIRCUIT TEST INTERNATIONAL LIMITED
PARTNERSHIP, a Florida limited
Partnership
By ALLEN S. BRASWELL, SR. LIVING TRUST
Its General Partner
/s/
Allen S. Braswell, Sr., Trustee
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
September 30, 1997, is among EFTC CORPORATION, a Colorado corporation
("Parent"), and the undersigned SHAREHOLDERS (individually a "Shareholder" and
together, the "Shareholders") of Parent.
RECITALS
A. Parent, CTI Acquisition Corp., a Florida corporation ("Merger Sub"),
and Circuit Test, Inc., a Florida corporation ("Circuit Test"), have entered
into an Agreement and Plan of Reorganization, dated July 9, 1997 (the
"Reorganization Agreement"), pursuant to which Circuit Test was merged with and
into Merger Sub and the Shareholders received in consideration therefor, among
other things, shares of Common Stock, $.01 par value, of Parent ("Parent Common
Stock").
B. This Agreement is executed and delivered pursuant to Section 8.2(d)
of the Reorganization Agreement and sets forth the terms on which the
Shareholders may require Parent to register, under the Securities Act (as
defined in Article I), securities of Parent owned by them.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings as used in this
Agreement:
1.1 "Agreement" has the meaning set forth in the opening statement of this
Agreement.
1.2 "Circuit Test" has the meaning set forth in Recital A.
1.3 "Demand Registration" has the meaning set forth in Section 2.1.
1.4 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations
promulgated thereunder.
1.5 "Indemnified Party" has the meaning set forth in Section 6.2.
1.6 "Indemnifying Party" has the meaning set forth in Section 6.2.
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1.7 "Losses" has the meaning set forth in Section 6.1.
1.8 "Reorganization Agreement" has the meaning set forth in Recital A.
1.9 "Merger Sub" has the meaning set forth in Recital A.
1.10 "Parent" has the meaning set forth in the opening statement of
this Agreement.
1.11 "Parent Common Stock" has the meaning set forth in Recital A.
1.12 "Person" means any individual, corporation, partnership, limited
liability company, trust, organization, association, governmental body or
agency.
1.13 "Piggyback Registration" has the meaning set forth in Section 3.1.
1.14 "Pro Rata Share" has the meaning set forth in Section 6.2.
1.15 "Registerable Securities" means any outstanding shares of Parent
Common Stock held by the Shareholders on the date hereof and any securities
issued or issuable with respect thereto by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation, reclassification or other reorganization. A Registerable Security
shall cease to be a Registerable Security when: (a) a Registration Statement
with respect to the sale of such security shall have become effective under the
Securities Act and such security shall have been disposed of in accordance with
such Registration Statement; (b) such security shall have been distributed to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act; (c) such security shall have been otherwise transferred, new
certificates for which, not bearing a legend restricting further transfer, shall
have been delivered by Parent and subsequent disposition of the security shall
not require registration or qualification of such security under the Securities
Act or any similar state law then in force, or (d) such security shall have
ceased to be outstanding.
1.16 "Registration Expenses" means all expenses incident to Parent's
performance of or compliance with this Agreement, including, all registration
and filing fees, fees and expenses of compliance with federal and state
securities laws, printing expenses, messenger and delivery expenses, and fees
and disbursements of counsel for Parent and all independent certified public
accountants, underwriters (excluding underwriting discounts, commissions spreads
or fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals), and other Persons retained by Parent for the purpose of
fulfilling its obligations under this Agreement.
1.17 "Registration Statement" means any registration statement or
comparable document under Section 5 of the Securities Act through which a public
sale or disposition of Registrable Securities may be registered.
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1.18 "SEC" means the Securities and Exchange Commission or any other
federal agency administering the Securities Act.
1.19 "Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of promulgated
thereunder.
1.20 "Shareholder" and the "Shareholders" have the meanings set forth in
the opening statement of this Agreement.
ARTICLE II
DEMAND REGISTRATION
2.1 Request for Registration. At any time beginning one year after the
date hereof, the holders of a majority of the then outstanding Registrable
Securities, may request registration under the Securities Act of all or part of
their Registrable Securities (the "Initial Demand"). In addition, at any time
eighteen (18) months after the effectiveness of the Registration Statement filed
with respect to the Initial Demand, the holders of a majority of the then
outstanding Registrable Securities, may request an additional registration under
the Securities Act of all or part of their Registrable Securities not registered
pursuant to the Initial Demand (the "Secondary Demand"). In either instance,
such holders may exercise their right under this Section 2.1 by giving a written
request to Parent signed by them specifying the number of shares of Registrable
Securities requested to be included and the intended method of disposition
thereof. Within ten days after receipt of the request, Parent will give written
notice of the request to all other holders of Registrable Securities and will
include in such registration all Registrable Securities for which Parent has
received written requests for inclusion within fifteen (15) days after Parent's
notice is given to the holders pursuant to this Section 2.1, so long as the
aggregate amount of Registrable Securities that the holders request be included
in each such registration equals at least 40% of all Registrable Securities and
have a fair market value at the time of the request equal to $5,000,000 (a
"Demand Registration").
2.2 Underwritten Offerings; Priority on Demand Registrations. If the
holders of a majority of the Registrable Securities requested to be included so
elect, the Demand Registration may be in the form of an underwritten offering.
If the Demand Registration is an underwritten offering, Parent shall select the
managing underwriters for the offering and Parent may elect to include other
securities in such registration on the same terms and conditions as the
Registrable Securities to be included in such registration; provided however, if
the managing underwriters advise Parent in writing that in their opinion the
number of Registrable Securities and other securities to be included in the
registration exceeds the number that can be sold in such offering at a price
satisfactory to the holders of a majority of the Registrable Securities
requested to be included in such registration, Parent will give priority for
inclusion in such registration: (a) first, to the Registrable Securities
requested to be included in such registration (or to such lesser number of
Registrable Securities that is equal to the number that, in the opinion of the
managing
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underwriters, can be sold, pro rata among the holders thereof based on the
number of Registrable Securities owned), (b) second, to the securities, if any,
requested to be included in such registration pursuant to warrants or options
issued to the representatives of the underwriters with respect thereto; (c)
third, to the securities Parent proposes to include in such registration; (d)
fourth, to the securities that Parent is otherwise obligated to include in such
registration; and (e) fifth, to other securities that Parent may desire to
include in such registration.
2.3 Restrictions on Demand Registration. Notwithstanding anything in
this Article II to the contrary, if Parent shall furnish to the holders of
Registrable Securities requesting registration a certificate signed by the Chief
Executive Officer or President of Parent stating that, in the good faith
reasonable judgment of the Board of Directors of Parent, such registration of
Registrable Securities would materially interfere with, or require premature
disclosure of, any financing, acquisition or reorganization involving Parent or
any of its wholly-owned subsidiaries or would otherwise have a material adverse
effect on Parent or the selling holders if undertaken at the time requested,
Parent shall have the right to defer taking action with respect to such filing
for a period of not more than ninety (90) days after receipt of the request of
the holders of Registrable Securities; provided, however, that Parent may not
utilize this right more than once in any twelve (12) month period.
2.4 Expenses. Except as otherwise provided in this Article II, Parent
will pay all Registration Expenses in connection with a Demand Registration. In
a Demand Registration that is an underwritten offering, all underwriting
discounts, commissions spreads or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
Registrable Securities being offered thereby will be paid by the holders thereof
pro rata based on the number of Registrable Securities that each such holder has
requested be registered.
ARTICLE III
PIGGYBACK REGISTRATION
3.1 Right to Piggyback. Whenever Parent proposes to register any of its
securities under the Securities Act (other than as (a) a Demand Registration;
(b) a registration of securities in connection with a merger, an acquisition, an
exchange offer, other business combination or an employee benefit plan
maintained by Parent or its subsidiaries; or (c) a registration of securities on
Form S-4 or S-8 or any successor or similar form) and the registration form to
be used may be used for the registration of Registrable Securities (a "Piggyback
Registration"), Parent will give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and will
include in such registration, subject to Section 3.3, all Registrable Securities
with respect to which Parent has received written requests for Piggyback
Registration within fifteen (15) days after Parent's notice is given to the
holders of Registrable Securities.
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3.2 Piggyback Expenses. Parent will pay all Registration Expenses in
connection with a Piggyback Registration. In a Piggyback Registration that is an
underwritten offering, all underwriting discounts, commissions spreads or fees
of underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the Registrable Securities being offered thereby will
be paid by the holders thereof pro rata based on the number of Registrable
Securities that each such holder has requested be registered.
3.3 Restrictions on Piggyback Registrations. Notwithstanding anything
to the contrary in this Article III: (a) if, at any time after receiving such
requests and prior to the effective date of the Registration Statement filed in
connection with the Piggyback Registration, Parent for any reason decides not to
register securities of Parent, Parent will give written notice of its decision
to the holders of Registrable Securities and thereupon be relieved of its
obligation to register any Registrable Securities in connection with such
registration; and (b) if Parent determines for any reason to delay a Piggyback
Registration, Parent may do so by giving written notice of its decision to the
holders of Registrable Securities.
3.4 Priority on Underwritten Primary Registrations. If a Piggyback
Registration is an underwritten offering initiated on behalf of Parent and the
managing underwriters advise Parent in writing that in their opinion the number
of securities to be included in such registration exceeds the number that can be
sold in such offering at a price satisfactory to Parent, Parent will give
priority for inclusion in such registration: (a) first, to the securities Parent
proposes to include in such registration; (b) second, to the securities, if any,
requested to be included in such registration pursuant to warrants or options
issued to the representatives of the underwriters with respect thereto; (c)
third, securities that Parent has become, prior to the date hereof, otherwise
obligated to include in such registration; (d) fourth, to the Registrable
Securities requested to be included in such registration (or to such lesser
number of Registrable Securities, which is equal to the number that, in the
opinion of the managing underwriters, can be sold, pro rata among the holders
thereof based on the number of Registrable Securities owned); and (d) fifth, to
other securities that Parent may desire to include in such registration.
3.5 Priority on Underwritten Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
Parent's securities, and the managing underwriters advise Parent in writing that
in their opinion the number of securities requested to be included in the
registration exceeds the number that can be sold in the offering, Parent will
give priority for inclusion in such registration: (a) first, to the securities
requested to be included by the holders requesting such registration; (b)
second, to the securities sought to be included in such registration pursuant to
the warrants or options issued to the representatives of the underwriters with
respect thereto; (c) third, to the Registrable Securities requested to be
included in such registration (or to such lesser number of Registrable
Securities, which is equal to the number that, in the opinion of the managing
underwriters, can be sold, pro rata among the holders thereof based on the
number of Registrable Securities owned), and (d) fourth, to other securities
that Parent may desire to include in such registration.
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ARTICLE IV
REGISTRATION PROCEDURES
4.1 Procedures Parent Will Follow. Whenever the holders of the
Registrable Securities duly request that any Registrable Securities be
registered pursuant to this Agreement, Parent will use its best efforts to
effect the registration of the Registrable Securities on a form available under
the Securities Act for which Parent then qualifies and that counsel for Parent
deems appropriate and which form is available for the sale of the Registrable
Securities in accordance with the intended method of disposition, and pursuant
thereto Parent will do the following as expeditiously as possible:
(a) Registration Statement. Parent will prepare and file with
the SEC, and use its best efforts to cause to become effective, a Registration
Statement with respect to the Registrable Securities Parent has been so
requested to register on a form available under the Securities Act for which
Parent then qualifies and that counsel for Parent deems appropriate and which
form is available for the sale of the Registrable Securities in accordance with
the intended method of disposition.
(b) Maintenance of Effectiveness. Parent will prepare and file
with the SEC such amendments and supplements to the Registration Statement and
prospectus used for the sale of the Registrable Securities as may be necessary
to keep the Registration Statement effective until the earlier of: (i) the date
on which the sale of the Registrable Securities is completed and (ii) the date
ninety (90) days after the Registration Statement with respect to the
Registrable Securities becomes effective, and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement during its effectiveness in accordance with the intended
methods of disposition of such securities.
(c) Copies of Prospectuses. Parent will furnish to the holders
the number of copies of the Registration Statement, each amendment and
supplement thereto, the prospectus included in the Registration Statement
(including each preliminary prospectus) and such other documents that the
holders may reasonably request to facilitate the disposition of the Registrable
Securities Parent has been so requested to register. At any time when a
prospectus with respect to the Registrable Securities is required to be
delivered under the Securities Act, Parent will notify the holders of the
occurrence of any material change in the information contained in the prospectus
included in the Registration Statement. Whenever in Parent's judgment it is
necessary, Parent will prepare a supplement or amendment to the prospectus so
that, as thereafter delivered to the proposed purchasers of the Registrable
Securities, the prospectus will not contain, to Parent's knowledge, any untrue
statement of material fact or omit to state any fact necessary to make the
statements in it not misleading, and the holders will discontinue disposition of
the Registrable Securities until the holders are advised in writing by Parent
that the use of the prospectus may be resumed and are furnished with a
supplement or amendment to the
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prospectus. If Parent shall give any notice to suspend the disposition of
Registrable Securities pursuant to a prospectus, Parent shall extend the period
of time during which Parent is required to maintain the Registration Statement
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice through and including
the date the holders are advised by Parent that the use of the prospectus may be
resumed or receive the copies of the supplement or amendment to the prospectus.
(d) Blue Sky Compliance. Parent will use its best efforts to
register or qualify the Registrable Securities Parent has been so requested to
register under the securities or blue sky laws of such jurisdictions within the
United States of America as any holder of Registrable Securities selling
Registrable Securities in connection with the registration reasonably requests,
and do any and all other acts and things reasonably necessary or advisable to
enable the holder to dispose of the holder's Registrable Securities in such
jurisdictions; except Parent will not be required to: (i) qualify generally to
do business in any jurisdiction where it is not then so qualified or (ii)
consent to, or take any action that would subject it to, general service of
process or taxation in any jurisdiction where it is not then so subject.
(e) Listing; Transfer Agent. Parent will use its best efforts
to cause all such Registrable Securities to be listed on all securities
exchanges or quoted on all automated quotation systems on which securities of
the same class issued by Parent are then listed or quoted and will provide a
transfer agent and registrar for all such Registrable Securities no later than
the effective date of the Registration Statement.
(f) Customary Agreements. In the case of an underwritten
offering, Parent will enter into customary agreements, including an underwriting
agreement in customary form, as the holders of a majority of the Registrable
Securities being registered or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of the Registrable Securities
being so registered.
(g) Certain Information. Parent will make available for
inspection upon reasonable request by any holder of Registrable Securities being
registered, any underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent retained by
the holder or underwriter, all financial and other records, pertinent corporate
documents and properties of Parent, and cause Parent's officers, directors and
employees to supply all information reasonably requested by the holder,
underwriter, attorney, accountant or agent in connection with the Registration
Statement, upon receipt by Parent of confidentiality agreements satisfactory to
Parent.
(h) Compliance with Law. Parent will comply with all rules and
regulations of the SEC and applicable state securities laws governing the manner
of sale of securities in connection with the disposition of any Registrable
Securities pursuant to any Registration Statement.
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(i) Stop-Orders. Parent will promptly notify all holders of
Registrable Securities being registered of its receipt of: (i) any stop-order,
injunction or order suspending the effectiveness of any Registration Statement
covering any Registrable Securities or, to Parent's knowledge, the initiation of
any proceeding for that purpose, or (ii) any notification with respect to the
limitation, restriction or suspension of the offer or sale of any Registrable
Securities in any jurisdiction in which the Registrable Securities were
qualified to be sold or, to Parent's knowledge any proceeding for that purpose.
If Parent notifies the holders of any such event, the holders will immediately
discontinue all sales or other dispositions of the Registrable Securities
pursuant to the Registration Statement until Parent notifies the holders that
such stop-order, injunction, order, limitation, restriction or suspension has
been lifted, except, unless Parent notifies the holders otherwise, if a
stop-order, injunction, order, limitation, restriction or suspension issued by a
state securities or blue sky administrator applies only to offers and sales in
such state, the holders will immediately discontinue all sales and other
disposition of the Registrable Securities in such state. Parent, with
cooperation of the holders, will use its reasonable efforts to contest any such
proceeding and to obtain the withdrawal of any such stop- order, injunction,
order, limitation, restriction or suspension.
4.2 Procedures Holders of Registrable Securities Will Follow. Whenever
the holders of the Registrable Securities duly request that any Registrable
Securities be registered pursuant to this Agreement, the holders will do the
following as expeditiously as possible:
(a) Certain Information. The holders will provide Parent with
such information and affidavits about the holders and the intended manner of
disposition of the Registrable Securities and otherwise use their best efforts
to cooperate with Parent and the underwriters, if any, Parent may require to
satisfy any obligation of Parent under this Agreement to register the
Registrable Securities under federal and state securities laws and otherwise
take actions related thereto. If the holders fail to provide the information
required under this Section 4.2(a), Parent may delay the registration until the
information is provided and the holders agree to pay Parent its out-of-pocket
expenses that arise from the failure to provide such information. The holders
will notify Parent of the occurrence of any material change in the information
provided by them that is contained in the prospectus included in the
Registration Statement, as then in effect. Whenever in Parent's judgment it is
necessary, Parent will prepare a supplement or amendment to the prospectus so
that, as thereafter delivered to the proposed purchasers of the Registrable
Securities, the prospectus will not contain, to Parent's knowledge, any untrue
statement of material fact or omit to state any fact necessary to make the
statements in it not misleading, and the holders will discontinue disposition of
the Registrable Securities until the holders are advised in writing by Parent
that the use of the prospectus may be resumed and are furnished with a
supplement or amendment to the prospectus. If Parent shall give any notice to
suspend the disposition of Registrable Securities pursuant to a prospectus,
Parent shall extend the period of time during which Parent is required to
maintain the Registration Statement effective pursuant to this Agreement by the
number of days during the period from and including the date of the giving of
such notice through and including the date the holders are advised by
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Parent that the use of the prospectus may be resumed or receive the copies of
the supplement or amendment to the prospectus.
(b) Compliance with Law. The holders will comply with all
rules and regulations of the SEC and applicable state securities laws governing
the manner of sale of securities in connection with the disposition of any
Registrable Securities pursuant to any Registration Statement.
(c) Participation in Underwritten Offerings. No holder of
Registrable Securities may participate in any underwritten offering hereunder
unless such holder: (i) agrees to sell such holder's securities on the basis
provided in any underwriting arrangements approved, subject to the terms and
conditions hereof, by the holders of a majority (by number of shares) of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents reasonably required under the terms of such underwriting
arrangements.
ARTICLE V
BLACK OUT PERIODS
5.1 Restrictions on Public Sale by Holders. Whenever Parent proposes to
register any of its securities under the Securities Act in an underwritten
offering (other than as (a) a Demand Registration; (b) a registration of
securities in connection with a merger, an acquisition, an exchange offer, other
business combination or an employee benefit plan maintained by Parent or its
subsidiaries; or (c) a registration of securities on Form S-4 or S-8 or any
successor or similar form) and if requested by the managing underwriters, each
holder of Registrable Securities will not effect any public sale or disposition
of securities of Parent the same as or similar to those being registered, or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 under the Securities Act, except as part
of such registration, during the 14-day period prior to, and during the 90-day
period (or, with respect to a Piggyback Registration, such longer period of up
to 120 days as may reasonably be requested by such managing underwriters)
beginning on the effective date of the related Registration Statement, to the
extent timely notified in writing by Parent or the managing underwriters.
5.2 Restrictions on Public Sale by Parent and Others. In connection
with any Demand Registration that is an underwritten offering and if requested
by the managing underwriters, Parent will not effect any public sale or
disposition of any securities the same as or similar to those being registered
by Parent, except as part of such registration, during the 14-day period prior
to, and during the 90-day period beginning on the effective date of the related
Registration Statement to the extent timely notified in writing by the managing
underwriters. Notwithstanding anything to the contrary in the foregoing, the
restrictions under this Section 5.2 shall not limit the issuance of securities
of Parent, or options or warrants to purchase such securities, that Parent is
required to issue pursuant to: (a) any employee stock option plan or
non-employee director stock option plan in effect at the time Parent receives a
request for Demand Registration; (b) the exercise of any outstanding options or
warrants with respect to securities of Parent; or (c) the exercise of any
conversion or exchange right in accordance with the terms of any other security
convertible into or exchangeable for securities the same as or similar to those
being registered by Parent.
5.3 Third-Party Registration Rights. This Agreement is in all cases
subject to the contractual registration rights granted pursuant to the
Registration Rights Agreement between Parent and certain of its shareholders
dated January __, 1994 and with the contractual registration rights granted
pursuant to the Registration Rights Agreement between Parent and certain former
shareholders of Current Electronics, Inc. dated February __, 1997.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Parent. Parent will indemnify and hold harmless,
to the extent permitted by law, each each holder of Registrable Securities and,
if applicable, the officers and directors of the holder, and each Person who
controls the holder (within the meaning of the Securities Act or the Exchange
Act) from and against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, injunction, judgment, order, decree, ruling,
damage, dues, penalty, fines, costs, amounts paid in settlement, liabilities,
obligations, losses, expenses and fees, including court costs and attorneys'
fees and expenses (collectively, "Losses") that the holder and, if applicable,
the officers and directors of the holder, and each Person who controls the
holder may suffer through and after the date of the claim for indemnification
caused by or arising out of any untrue or alleged untrue statement of material
fact contained in any Registration Statement, prospectus, preliminary
prospectus, or other related filing with the SEC or any other federal or state
governmental agency, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to Parent by any holder of Registrable
Securities expressly for use therein or by any holder's failure to comply with
any legal requirement applicable to such holder and not contractually assumed by
Parent to deliver a copy of the Registration Statement or prospectus or any
amendments or supplements thereto after Parent has furnished the holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, Parent shall indemnify the underwriters, their officers and directors,
and each Person who controls the underwriters (within the meaning of the
Securities Act or the Exchange Act) to the extent customary.
6.2 Indemnification by Holders. In connection with any registration in
which a holder of Registrable Securities is participating, each such Holder will
indemnify and hold harmless, to the extent permitted by law, Parent, its
directors and officers and each Person who controls Parent (within the meaning
of the Securities Act or the Exchange Act) from and against the
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holder's Pro Rata Share (as defined in this Section 6.2) of all Losses that
Parent, its directors and officers and each Person who controls Parent may
suffer through and after the date of the claim for indemnification caused by or
arising out of any untrue or alleged untrue statement of material fact contained
in any Registration Statement, prospectus, preliminary prospectus, or other
related filing with the SEC or any other federal or state governmental agency,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only to the extent that the same are caused by or contained in any
information furnished in writing to Parent by any holder of Registrable
Securities expressly for use therein or by any holder's failure to comply with
any legal requirement applicable to such holder and not contractually assumed by
Parent to deliver a copy of the Registration Statement or prospectus or any
amendments or supplements thereto after Parent has furnished the holder with a
sufficient number of copies of the same. For purposes of the foregoing, a
holder's "Pro Rata Share" means that fraction equal to the amount of the
proceeds received or to be received by the holder in connection with the
registration over the total proceeds received or to be received by all holders
in connection with the registration.
6.3 Indemnification Procedure. If any Person has a claim for Losses
hereunder (an "Indemnified Party"), the Indemnified Party will: (a) notify the
party or parties hereto from which it is entitled to make such claim
(individually, an "Indemnifying Party" and, together, the "Indemnifying
Parties") of such claim, specifying the nature of the Losses and the amount or
estimated amount thereof if feasible, and (b) unless in the Indemnified Party's
reasonable judgment (based on written advice of counsel) a conflict of interest
between the Indemnified Party and the Indemnifying Parties may exist with
respect to the matter giving rise to such claim, permit the Indemnifying Party
to assume and thereafter conduct the defense of the matter with counsel of the
Indemnifying Party's choice reasonably satisfactory to the Indemnified Party. If
the defense is so assumed, the Indemnifying Party will not be subject to any
liability for any settlement made with respect to such claim by the Indemnified
Party without its consent, which will not be unreasonably withheld. An
Indemnifying Party who is not entitled to or elects not to assume the defense of
a claim, will not be obligated to pay the fees and expenses of more than one
counsel for all parties it indemnifies with respect to such claim, unless in the
reasonable judgment of any Indemnified Party (based on written advice of
counsel) a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim.
ARTICLE VII
GENERAL PROVISIONS
7.1 Remedies. Any Person having rights under this Agreement will be
entitled to enforce them specifically, to recover damages caused by reason of
any breach of any provision of this Agreement, and to exercise all other rights
granted by law.
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7.2 Successors and Assigns. This Agreement will bind and inure to the
benefit of the respective successors and assigns of the parties hereto, whether
so expressed. Any provision of this Agreement for the benefit of the holders of
Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities to which the subsequent holder has
been expressly assigned such rights at the time of the transfer of the
Registrable Securities to him, but not otherwise.
7.3 Term; Effect of Expiration or Termination. This Agreement shall be
effective as of the date hereof, and unless earlier terminated in accordance
with this Agreement, shall expire on the earliest of: (a) three (3) years from
the date of this Agreement or (b) such time as all Registrable Securities have
been sold pursuant to an effective Registration Statement under the Securities
Act or may be publicly sold without registration. Moreover, the obligation of
Parent to register its securities under this Agreement as to any Shareholder
shall terminate at such time as such Shareholder can then publicly sell all of
its Registrable Securities without registration under the Securities Act during
a three-month period pursuant to Rule 144 under the Securities Act or otherwise.
In the event of termination or expiration of this Agreement, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of the parties hereto, except the provisions of Article VI
(Indemnification) and this Article VII (General Provisions) shall remain in full
force and effect and survive any termination of this Agreement.
7.4 Amendments; Modifications. This Agreement may be amended or modified in
writing by Parent and the holders of a majority of the Registrable Securities at
the time of such amendment or modification.
7.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
at the following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Parent, to:
EFTC Corporation
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892 8306
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(b) if to the Shareholders, to:
Allen S. Braswell, Jr.
4601 Cromwell Avenue
Memphis, Tennessee 38118
Facsimile No.: (901) 795-5305
7.6 Entire Agreement. This Agreement and the documents and instruments
and other agreements specifically referred to herein or delivered pursuant
hereto constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof.
7.7 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties hereto further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
7.8 Remedies Cumulative; No Waiver. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right.
7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado (without regard to the
principles of conflicts of law thereof).
7.10 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
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7.11 Interpretation. When a reference is made in this Agreement to
Articles, Recitals or Sections, such reference shall be to an Article, Recital
or Section to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party hereto to whom such information is to be made available.
The table of contents and Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement, any reference to
a party's "knowledge" means such party's actual knowledge after due and diligent
inquiry of officers, directors and other employees of such party reasonably
believed to have knowledge of such matters. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter
forms.
7.12 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart.
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SIGNATURE PAGE--REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Registration Rights Agreement as of the date first written above.
Parent:
EFTC CORPORATION,
a Colorado corporation
By: /s/
Shareholders:
Allen S. Braswell, Sr. Grantor
Retained Income Trust u/a/d
12/31/89
By /s/
Its Trustee
/s/
Allen S. Braswell, Jr.
/s/
Alma L. Braswell
/s/
Bruce A. Braswell
/s/
Amy A. Braswell
/s/
Anita B. Murman
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EARNOUT AGREEMENT
THIS EARNOUT AGREEMENT (this "Agreement"), dated as of September 30,
1997, is among EFTC CORPORATION, a Colorado corporation ("Parent"), and the
undersigned MEMBERS (the "Airhub Members") of AIRHUB SERVICES GROUP, L.C., a
Kentucky limited liability company ("Airhub"), and the MEMBERS (the "CTLLC
Members" and, together with the Airhub Members, the "LLC Members") of CIRCUIT
TEST INTERNATIONAL, L.C., a Florida limited liability company ("CTLLC").
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization, dated
as of July 9, 1997 (the "Reorganization Agreement"), among Parent, CTI and CTI
Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of
Parent, CTI Acquisition Corp. will be merged with and into CTI (the "Merger")
and as a result of the Merger, all shares of CTI Common Stock will be converted
into the right to receive shares of Parent Common Stock.
B. Pursuant to that certain Limited Liability Company Unit Purchase
Agreement, dated as of July 9, 1997 (the "Purchase Agreement"), among Parent,
CTILLC Acquisition Corp. ("LLC Acquisition"), Airhub, the Airhub Members, CTLLC
and the CTLLC Members, all of the outstanding interests in Airhub and CTLLC will
be acquired (the "Acquisition") and as a result of the Acquisition, all
outstanding interests in Airhub will be acquired by Parent and all of
outstanding interests in CTLLC will be acquired by Parent and LLC Acquisition.
C. In connection with, and in order to induce Parent, Airhub, the
Airhub Members, CTLLC and the CTLLC Members to enter into the Purchase Agreement
and as additional consideration for the interests acquired pursuant to the
Purchase Agreement, Parent, Airhub, the Airhub Members, CTLLC and the CTLLC
Members are entering into this Agreement.
D. Capitalized terms used not defined herein shall have that meaning as
given in the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Earnout Payments. (a) Within ninety (90) days after December 31,
1997, 1998 and 1999, Parent agrees to make certain cash earnout payments (the
"Earnout Payments") to the Airhub Members and the CTLLC Members, payable pro
rata (determined by the percentage set forth opposite the name of each of the
Airhub Members and the CTLLC Members in Schedule A attached hereto). The three
Earnout Payments will be in the following amounts:
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(i) 1997: $2 million, but only if the aggregate EBIT, if any, of the CTI
Group for the first such year exceeds $4.5 million,
(ii) 1998: $4 million, less the payment made, if any, pursuant to 1(a)(i)
above, but only if the aggregate EBIT of the CTI Group for 1997 and 1998 exceeds
$9.0 million, and
(iii) 1999: $6 million, less payments made, if any, pursuant to 1(a)(i) and
(ii) above, but only if the aggregate EBIT of the CTI Group for 1997, 1998, and
1999 exceeds $13.5 million;
(b) For the purposes of this Agreement,
(i) "CTI Group" means CTI, CTLLC and Airhub, taken as a group; and
(ii) "EBIT" means the earnings, before interest and taxes, determined on a
consolidated basis in accordance with generally accepted accounting principles
at the time of determination of CTLLC and Airhub (and including, if necessary to
achieve the target amounts of EBIT specified in 1(a), CTI).
(c) For the purpose of determining the EBIT for each year specified in
Sections 1(a)(i), (ii) and (iii), the CTI Group shall be audited in accordance
with generally accepted auditing standards at the time by a certified public
accounting firm of Parent's selection for each such year and EBIT shall be
conclusively determined by such accounting firm from the results of each such
audit. Such audit shall be conducted and EBIT shall be determined independently
of Parent and its affiliates other than the CTI Group, without any allocation of
income or expense not directly incurred by the CTI Group (based on its historic
operations measured as of the effective time). Each party agrees to cooperate
in, and to provide all information necessary or reasonably requested by such
accounting firm in connection with, the conduct of such audit. EBIT shall be
calculated to not include charges and expenses, deferred compensation in the
amount of $500,000, and bonuses payable by the CTI Group paid or payable in
connection with the Transaction as contemplated by the Reorganization Agreement
and the Purchase Agreement (the "Transaction Expenses"), and payments made to
Broadview Associates described in Section 4.28 of the Reorganization Agreement.
In the event of a dispute over the EBIT as determined by Parent's accountants,
but not over the Transaction Expenses, at the election of an Airhub or CTLLC
Member, an independent certified public accounting firm (the "Member Accounting
Firm"), other than the firm used by Parent, may examine the records of the CTI
Group to determine the accuracy of such EBIT determination. Prior to conducting
such a review, the Member Accounting Firm shall sign such reasonable
confidentiality agreements as are requested by Parent. The expense of any such
audit shall be the responsibility of the Airhub or CTLLC Member who has elected
to dispute the EBIT determination, unless such Member Accounting Firm determines
that an error which would result in payment of an Earnout Payment which
otherwise was not to be paid. In such case, Parent shall be responsible for any
fees reasonably incurred in such audit. The report of such Member Accounting
Firm shall be final,
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<PAGE>
binding and conclusive on the parties. In the event of a dispute over the
calculation of the Transaction Expenses, the parties shall first endeavor in
good faith to resolve such a dispute. If no resolution of such a dispute is had,
the dispute shall be resolved by final and binding arbitration by three
arbitrators. One selected by Parent, the other selected by Allen S. Braswell,
Jr. and the third selected by the two arbitrators appointed by Parent and Allen
S. Braswell, Jr. The arbitration shall take place in Denver, Colorado and in no
other place. The arbitration shall be conducted in accordance with the rules and
procedures of the American Arbitration Association. During the pendency of any
such arbitration to determine Transaction Expenses, Parent's payment obligations
under this Agreement, if any, shall be tolled and only be due, if at all, ninety
(90) days after the entry of a final award or decision of the arbitrators.
2. Payment in the Event of an Offering or Change in Control. (a) If, on
or prior to December 31, 1999, Parent consummates any transaction involving
either (i) the registration and underwritten sale of shares of Parent Common
Stock or securities convertible into or exchangeable for Parent Common Stock for
the account of Parent; or (ii) the private placement of shares of Parent Common
Stock, or securities convertible into or exchangeable for Parent Common Stock,
for the account of Parent with aggregate net proceeds to Parent from such
private placement of not less than $40 million, then Parent shall pay the Airhub
Members and the CTLLC Members $6 million, less any Earnout Payments paid or due
and payable pursuant to Section 1. Any payment made according to this Section
2(a) shall be paid in full to the Airhub Members and the CTLLC Members pro rata
(determined as provided above in Section 1) within thirty (30) days of the
closing of such underwritten sale or private placement. No payment obligation
shall arise under this Section 2(a) if, prior to any such underwritten sale or
private placement, a Change in Control (as defined below) shall have occurred,
in which case Parent's payment obligation shall be governed by Section 2(b).
(b) If a Change in Control occurs on or prior to December 31,
1999 after the date of this Agreement, Parent shall pay the Airhub Members and
the CTLLC Members $6 million, less any Earnout Payments already paid or due and
payable pursuant to Section 1. Any payment made according to this Section 2(b)
shall be paid in full to the Airhub Members and the CTLLC Members pro rata
(determined as provided above in Section 1) within thirty (30) days of the
closing of such Change in Control. No payment obligation shall arise under this
Section 2(b) if, prior to any such Change in Control, an underwritten sale or
private placement giving rise to a payment under Section 2(a) shall have
occurred, in which case Parent's payment obligation shall be governed by Section
2(a).
(c) For the purposes of this Agreement,
(i) the term "Change in Control" means (A) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of Parent to any
Person (as defined below) or group (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934), other than any Permitted Owner (as defined
below), (B) the merger or consolidation of Parent with any Person that is not
controlled by a Permitted Holder,
3
<PAGE>
(C) the liquidation or dissolution of Parent, or (D) the occurrence of any
other transaction, excluding a public offering of voting capital stock of
Parent, that results in Permitted Holders directly or indirectly owning in the
aggregate less than 35% of all of the voting capital stock of Parent then
outstanding,
(ii) the term "Permitted Holders" means any (A) Person owning, immediately
after the effectiveness of the Merger, greater than 5% of Parent's outstanding
Common Stock, (B) Person serving, immediately after the effectiveness of the
Merger as an executive officer or director of Parent, or (C) group (used as
specified above) of Persons that includes at least one Person meeting the
criteria in either of the foregoing clauses (A) and (B), and
(iii) the term "Person" means any individual, corporation, firm, joint
venture, association, partnership, organization, business, trust, other legal
entity or enterprise, government or political subdivision, department or
instrumentality thereof, including any governmental authority or district.
3. Binding Effect; Expiration. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement is intended to bind each Airhub Member as a
member of Airhub and each CTLLC Member as a member of CTLLC only with respect to
the specific matters set forth herein and shall not prohibit any Airhub Member
or CTLLC Member from acting in accordance with any applicable fiduciary duties
as a member of Airhub or CTLLC.
4. Further Assurances. The parties will take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or advisable,
in the reasonable opinion of Parent, to carry out the intents and purposes of
this Agreement, including the execution and delivery of additional documents and
instruments.
5. General Provisions.
(a) All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or sent via
facsimile, in either case with confirmation of receipt, or shall be deemed given
the business day after delivery of such notice (together with a proper request
for overnight delivery and confirmation of receipt) to a nationally recognized
overnight courier service that guarantees next-business-day delivery to the
applicable destination, in each such case to the parties at the following
address or at such other address for a party as shall be specified by notice
hereunder:
4
<PAGE>
(i) if to Parent, to:
EFTC Corporation
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892-4306
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler
Facsimile No.: (303) 866-0200
or
(b) if to the Airhub or CTLLC Members, to:
Allen S. Braswell, Jr.
4601 Cromwell Avenue
Memphis, Tennessee 38118
Facsimile No.: (901) 795-5305
with a copy to:
Burch, Porter & Johnson, PLLC
50 North Front Street, Suite 800
Memphis, Tennessee 38103
Attention: Warner B. Rodda
Facsimile No.: (901) 524-5026
(b) When a reference is made in this Agreement to a Section,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms.
(c) This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart.
(d) This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto: (i) constitute the
entire agreement among
5
<PAGE>
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
hereto with respect to the subject matter hereof; (ii) are not intended to
confer upon any other Person any rights or remedies hereunder; and (iii) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(e) In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties hereto further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
(f) Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. No failure or delay on the part of any party
hereto in the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. This Agreement may be amended or modified in writing by the party
hereto against whom enforcement of such amendment or modification is sought.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado (without regard to the
principles of conflicts of law thereof).
(h) The parties hereto acknowledge that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
(i) In the event of any proceeding to enforce this Agreement,
the prevailing party shall be entitled to receive from the losing party all
reasonable costs and expenses, including the reasonable fees of attorneys,
accountants and other experts, incurred by the prevailing party in investigating
and prosecuting (or defending) such action at trial or upon any appeal.
6
<PAGE>
SIGNATURE PAGE--EARNOUT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Earnout
Agreement to be executed and delivered as of the date first written above.
PARENT:
EFTC CORPORATION,
a Colorado corporation
By:
ALLEN S. BRASWELL, JR. REVOCABLE LIVING
TRUST
By /s/
Allen S. Braswell, Jr., Trustee
CIRCUIT TEST INTERNATIONAL LIMITED
PARTNERSHIP, a Florida limited
Partnership
By ALLEN S. BRASWELL, SR. LIVING TRUST
Its General Partner
/s/
Allen S. Braswell, Sr., Trustee
CTLLC MEMBERS:
ALLEN S. BRASWELL, JR. REVOCABLE LIVING
TRUST
By /s/
Allen S. Braswell, Jr., Trustee
CIRCUIT TEST INTERNATIONAL LIMITED
PARTNERSHIP, a Florida limited
Partnership
By ALLEN S. BRASWELL, SR. LIVING TRUST
Its General Partner
/s/
Allen S. Braswell, Sr., Trustee
7
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of __________,
1997, is between ELECTRONIC FAB TECHNOLOGY CORP., a Colorado corporation
("Parent"), and Circuit Test, Inc., a Florida corporation ("Circuit Test"), and
_____________ __________ ("Executive").
RECITAL
Parent, CTI Acquisition Corp., a Florida corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), Circuit Test have entered into the
Agreement and Plan of Reorganization, dated as of July 9, 1997, pursuant to
which [Merger Sub was merged with and into Circuit Test]. This Agreement is
executed and delivered pursuant to Article VII of that agreement and sets forth
the terms on which the Company, (as defined below)engages Executive to provide
the services to Circuit Test.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. The following terms shall have the following meanings as
used in this Agreement:
"Company" means Parent, its successors and assigns, and any of
its present or future subsidiaries, and persons controlled by, controlling or
under common control with it.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder.
"Executive" has the meaning set forth in the opening statement
to this Agreement.
7.7-1
<PAGE>
"Expiration Date" has the meaning set forth in Section 4.
"Parent" has the meaning set forth in the opening statement to
this Agreement.
"Participate In" means, with respect to the Executive,
directly or indirectly, for his own benefit or for, with or through any other
person or entity, own, manage, operate, control, lend money to or participate in
the ownership, management, operation or control of, or be connected as a
director, officer, employee, partner, consultant, agent, independent contractor
or otherwise with, or acquiesce in the use of his name in or by.
"Proprietary Information" means information disclosed to or
known or developed by Executive about the Company's plans, strategies,
prospects, products, processes and services, including information and materials
relating to the Company's products, manufacturing procedures and techniques and
information relating to the Company's research, development, inventions,
manufacture, purchasing, accounting, engineering, marketing, merchandising and
selling, but excluding information that Executive conclusively establishes, (i)
was known, other than under an obligation of confidentiality or binder of
secrecy, to Executive prior to the engagement of Executive hereunder or as a
result of Consultant's employment by Circuit Test or any of its affiliates; (ii)
has passed into the public domain other than through acts or omissions
attributable to Executive; or (iii) was subsequently obtained other than under
an obligation of confidentiality or binder of secrecy from a third party not
possessing the information under an obligation of confidentiality from the
disclosing party.
2. Engagement; Duties. The Company will employ Executive as [TITLE] or
in such other executive capacity as the Company determines from time to time.
During his employment by the Company, Executive will faithfully and to the best
of his ability serve the Company perform the duties and bear the
responsibilities commensurate with his position as the Chief may request.
Executive will devote his entire working time, attention and energies to the
business of the Company. Executive will not at any time discredit the Company or
any of its products and services. Except for his involvement in personal
investments that do not require any significant services on his part, Executive
will not Participate In any other business activity or activities that require
significant personal services by Executive or that, in the judgment of the
Company, may conflict with the proper performance of Executive's duties
hereunder. Employee initially will be based in the Company's facilities in
______________. The Company may relocate Executive to other facilities of the
Company.
3. Compensation; Bonuses; Benefits; Incentives; Expenses.
(a) As compensation for Executive's services hereunder, the
Company will pay Executive a salary of $________ per year (the "Base Salary"),
prorated for any partial year, for each year during the term of this Agreement,
payable monthly in arrears or as the parties hereto may otherwise agree.
(b) The Company will award Executive bonuses in the same
amount, if any, as it awards to any other employee, who in the Company's
judgment holds a position with the
7.7-2
<PAGE>
Company comparable to Executive's position and whose duties and responsibilities
and performance thereof are, in the Company's judgment, comparable to
Executive's duties, responsibilities and performance. If a bonus is so awarded
and has not been paid prior to termination or expiration of this Agreement
(other than in connection with a termination under Section 4(c) or 4(d)), the
Company will pay to Executive, within 90 days after the end of the calendar year
in which such termination or expiration occurs, a proportionate part of the
bonus so awarded based on the number of days elapsed during the calendar year in
which such termination or expiration occurs from January 1 of such year through
and including the date termination or expiration occurs.
(c) In addition to Base Salary, the Company will provide
Executive with the benefits of such insurance plans, hospitalization plans,
pension or profit sharing plans and other employee fringe benefit plans as are
customarily provided to employees of the Company and for which Executive is
eligible under the terms of such plans. Nothing in this Agreement shall require
the Company to adopt or maintain any such plan.
(d) In addition to the stock options the Company has awarded
Executive on or before the date hereof, the Company also may award or grant
Executive such stock options and other equity incentives as are approved by the
Company in its sole discretion. Nothing in this Agreement shall require the
Company to establish an equity incentive program or confer on Executive any
right to receive any stock option or other equity incentive not awarded on or
before the date hereof.
(e) The Company will reimburse Executive for the reasonable
out-of-pocket expenses incurred by Executive at the request of the Company in
the performance of his duties hereunder and such other expenses as may be
approved by the Company, in each case upon presentation to the Company of an
itemized accounting of such expenses with reasonable supporting data.
4. Term. This Agreement shall be effective on the date hereof and,
unless earlier terminated in accordance with Section 5, shall expire three years
from the date hereof (the "Expiration Date"). If this Agreement terminates or
expires, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of the parties hereto, except as otherwise
provided herein and except the provisions of this Section 4 and Sections 6, 7,
8, 9 and 10 will remain in full force and effect and survive any termination or
expiration of this Agreement.
5. Termination.
(a) If Executive dies, the Company will pay Executive's estate
the compensation that would otherwise have been payable to him for the month in
which his death occurs, and this Agreement will be deemed terminated on the last
day of such month.
(b) If Employee is prevented from performing his duties by
reason of illness or incapacity for a continuous period of 120 days, the Company
may terminate this Agreement
7.7-3
<PAGE>
by notice to Employee or his duly appointed legal representative. For purposes
of this Section 5(b), a period of illness or incapacity will be deemed to have
occurred for a "continuous" period of 120 days notwithstanding Employee's
performance of his duties during a single period of less than 15 continuous days
during such 120 day period.
(c) The Company may terminate this Agreement at any time, with
cause, by giving written notice of termination to Executive. For purposes of
this Agreement, "cause" means any one or more of the following: (i) gross
negligence or willful misconduct that is injurious to the Company; (ii) conduct
on the part of Executive that would constitute a felony or other crime of moral
turpitude where committed; (iii) failure by Executive to perform assigned
services and duties under this Agreement, which failure continues for at least
thirty (30) days after notice in writing thereof is given by the Company; or
(iv) breach or threatened breach by Executive or Vendor of any provision of
Section 6, 7 or 8.
(d) (i) The Company may terminate this Agreement at any time,
without cause, by giving written notice of termination to Executive. In
connection with any termination by the Company pursuant to this Section
5(d), except as set forth below in clause (ii) of this Section 5(d),
the Company will not be obligated to pay any amount to other than the
amounts specified in Section 3(a) that have accrued through the date of
termination. The Company will make a termination payment to in
connection with a termination under this Section 5(d) if and only if
the conditions set forth below in Section 5(d)(ii) are satisfied, in
which event the amount of termination payments will be determined
pursuant to Section 5(d)(ii).
(ii) In order to receive termination payments under
this Section 5(d), Executive must sign a release, in form and substance
reasonably satisfactory to the Company, fully releasing the Company
(and its officers, directors, shareholders, employees and agents) from
any claim or cause of action that Executive may have against the
Company or such other persons relating in any way to this Agreement,
Executive's employment by the Company or any aspect of Employee's
relationship with the Company, through the date of such release. The
release will be signed at such times as are reasonably requested by the
Company in order for the release to be fully effective under state and
federal age discrimination laws and other laws that may impose similar
requirements, and, except to the extent that Executive may exercise his
rights as a shareholder of the Company, will prohibit Executive from
making any communications or taking other acts that may injure the
business, goodwill or reputation of the Company or its officers,
directors, shareholders, employees or agents. The Company will then
begin making termination payments at such time as any revocation period
set forth in the release will have expired. The amount of the
termination payments payable under this Section 5(d) will equal the
amounts that Executive would have received had this Agreement remained
in effect through twelve (12) months pay if terminated within the first
eighteen (18) months of this Agreement, six (6) months pay if
terminated after eighteen (18) months of this Agreement. Any payments
pursuant to this Section 5(d) will be paid in equal monthly
installments.
7.7-4
<PAGE>
6. Non-Disclosure of Information.
(a) Except as specifically permitted by the Company in writing
and as is required for Executive to perform his services and duties hereunder,
Executive will not, during or prior to two years after the term of this
Agreement, disclose any Proprietary Information to any person or entity for any
purpose or use or permit the use of any Proprietary Information. In addition,
Executive will not, during and for two years after the termination or expiration
hereof, undertake on behalf of any other person or entity any commercial
project, employment or consultancy that would result in use or disclosure of
Proprietary Information or that would appear to involve such use or disclosure
unless the Company shall have consented in writing to such undertaking,
employment or consultancy. The Company may require that Executive and any person
or entity proposing to engage Executive in such a capacity provide appropriate
written assurances regarding the avoidance of any such conflict.
(b) Upon the termination or expiration of this Agreement,
Executive will deliver to the Company all notes, letters, prints, drawings,
records, forms, contracts, studies, reports, appraisals, financial data, lists
of names or other customer data, and any other articles or papers, computer
tapes and materials that have come into their possession by reason of
Executive's employment by the Company or Executive's prior employment by the
Circuit Test or its affiliates and subsidiaries, whether or not prepared by
Executive, and Executive will not retain memoranda or copies of any of those
items.
(c) Executive acknowledges that Proprietary Information of the
Company is unique and a valuable asset of the Company, the loss or unauthorized
disclosure or use of which would cause the Company irreparable harm.
7. Inventions.
(a) Executive hereby assigns and agrees to assign to the
Company, or to any person or entity designated by the Company, without royalty
or other consideration to Executive therefor other than the compensation set
forth in this Agreement, all of his right, title and interest in and to all
Inventions, to applications for United States of America and foreign letters
patent and United States of America and foreign letters patent granted upon
Inventions, and to all material related thereto subject to copyright. Executive
further acknowledges that all copyrightable materials developed or produced by
Executive within the scope of his engagement by the Company constitute works
made for hire.
(b) Executive will communicate promptly and disclose to the
Company, in such form as the Company may reasonably request, all information,
details and data pertaining to any Invention.
(c) At the request of the Company, Executive will do all acts
necessary or appropriate to secure for the Company the full benefits of each
Invention, and otherwise to carry into full force and effect the assignment
contained in Section 7(a). Such acts may include, giving testimony in support of
Executive's inventorship and promptly executing and delivering to the
7.7-5
<PAGE>
Company such papers, instruments and documents, without expense to Executive, as
may be appropriate in the Company's opinion to apply for, secure, maintain,
reissue, extend or defend the Company's worldwide rights in Inventions or in any
or all United States of America and foreign letters patent.
8. Covenants Not to Compete or Interfere.
(a) In view of the unique and valuable services that Executive
has been engaged to provide to the Company and Executive's current and future
knowledge of the Company's Proprietary Information, Executive will not, (i)
during the term hereof and (ii) for two years after the termination or
expiration hereof (or, if this Agreement is terminated under Section 5(d) and
Executive receives termination payments, during the period such payments are
received), Participate In the electronic contract manufacturing or repair
business and any other business in which the Company is engaged, or has taken
material steps to be engaged, at the time of such termination or expiration.
Notwithstanding the foregoing, Executive will not be deemed to Participate In a
business merely because Executive owns less than 5% of the outstanding stock of
a corporation (measured in voting power or equity), if, at the time of its
acquisition by Executive, such stock is listed on a national securities exchange
or is reported on the Nasdaq National Market.
(b) During the period specified in Section 8(a) and in no
event less than two years after any termination or expiration of this Agreement,
Executive will not (i) directly or indirectly cause or attempt to cause any
employee of the Company to leave the employ of the Company; (ii) in any way
interfere with the relationship between the Company and any of its employees,
customers or suppliers; (iii) directly or indirectly hire any employee of the
Company to work for any entity of which Executive is an officer, director,
employee, Executive, independent contractor or owner of an equity or other
financial interest; or (iv) interfere or attempt to interfere with any
transaction in which the Company was involved during the term of this Agreement.
(c) If any restriction contained in this Section 8 is deemed
to be invalid, illegal or unenforceable by a court of competent jurisdiction by
reason of its duration, geographical scope or otherwise, then such provision
will be deemed reduced in extent, duration, geographical scope or otherwise by
the minimum reduction necessary to cause the restriction to be enforceable.
9. Injunctive Relief. Executive acknowledges that the breach or
threatened breach by Executive of any of the provisions of Section 6, 7 or 8
would cause the Company irreparable harm. Upon the breach or threatened breach
of any of the provisions of Section 6, 7 or 8, the Company will be entitled to
an injunction, without bond, restraining Executive from committing such breach.
This right shall not be construed to limit the Company's ability to obtain any
other remedies available to it for such breach or threatened breach, including
the recovery of damages.
10. General Provisions.
7.7-6
<PAGE>
(a) Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. No failure or delay on the part of any party
hereto in the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado (without regard to the
principles of conflicts of law thereof). Except as otherwise provided herein, in
the event that any provision of this Agreement, or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal, void
or unenforceable, the remainder of this Agreement will continue in full force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. Except as otherwise provided herein, the parties hereto further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
7.7-7
<PAGE>
(c) All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
hereto at the following address or at such other address for a party hereto as
shall be specified by notice hereunder:
(i) if to the Company, to:
EFTC Corporation
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892-4306
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler
Facsimile No.: (303) 866-0200
(ii) If to Executive:
=========================
=========================
(d) Except as otherwise provided herein, no party hereto may
assign its rights or delegate its obligations under this Agreement. The Company
may assign its rights and delegate its obligations under this Agreement to any
affiliate of the Company or to any person or entity that acquires all or
substantially all of the business of the Company whether through merger,
purchase of assets, purchase of stock or otherwise. This Agreement will be
binding upon and inure to the benefit of the parties and their respective legal
representatives, heirs, and permitted successors and assigns.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties
hereto with respect to the subject matter hereof
(f) This Agreement may be amended or modified only in
writing signed by all of the parties hereto.
(g) When a reference is made in this Agreement to a
Section, such reference
7.7-8
<PAGE>
shall be to a Section of this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The Section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.
(h) The parties hereto acknowledge that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
(i) This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart.
(j) In the event of any proceeding to enforce this Agreement,
the prevailing party shall be entitled to receive from the losing party all
reasonable costs and expenses, including the reasonable fees of attorneys,
accountants and other experts, incurred by the prevailing party in investigating
and prosecuting (or defending) such action at trial or upon any appeal.
7.7-9
<PAGE>
SIGNATURE PAGE--EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
Parent:
EFTC CORPORATION,
a Colorado corporation
By: _______________________
Circuit Test, Inc.,
a Florida corporation
By: _______________________
Executive:
---------------------------
7.7-10
<PAGE>
$45,000,000
CREDIT AGREEMENT
Dated as of September 30, 1997
by and among
EFTC CORPORATION, as Borrower
and
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
and
BANK ONE, COLORADO, N.A., as Agent
Arranged by
Bank One Capital Markets
- -----------------------------------------------------------------
October 3, 1997 10:35 am
<PAGE>
<TABLE>
TABLE OF CONTENTS
Page
<CAPTION>
<S> <C>
Recitals..........................................................................................................1
Agreement.........................................................................................................1
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS..........................................................1
SECTION 1.1 Definitions. ...................................................................1
SECTION 1.2 Accounting Terms and Determinations.............................................24
ARTICLE II COMMITMENT; AMOUNTS AND TERMS OF THE ADVANCES AND
LETTERS OF CREDIT........................................................................24
SECTION 2.1 Commitment......................................................................24
(a) Revolving Loans Commitment..............................................24
(b) Term Loan Commitment....................................................25
(c) Swing Loan Commitment...................................................25
SECTION 2.2 Advances........................................................................26
SECTION 2.3 Making the Advances.............................................................27
(a) Request for Advance, Revolving Loans and
Term Loan. ............................................................27
(b) Swing Loan Request......................................................27
(c) Request for Advance Irrevocable.........................................28
(d) Availability of Funds, Revolving Loans
and Term Loan...........................................................28
(e) Advances by Agent.......................................................28
SECTION 2.4 Letters of Credit...............................................................29
(a) Letter of Credit Commitment.............................................29
(b) Terms of Letters of Credit and
Applications............................................................29
(c) Renewals and Extensions.................................................29
(d) Issued on Business Day..................................................30
(e) Request for Letter of Credit............................................30
(f) Participations..........................................................30
(g) Notice of Draw..........................................................31
(h) Payment of Draw.........................................................31
(i) Participation in Draw...................................................31
(j) Obligations of Banks....................................................32
(k) Waiver of Liability; Indemnity..........................................33
SECTION 2.5 Fees............................................................................35
(a) Commitment Fee..........................................................35
(b) Letter of Credit Fees...................................................35
(c) Other Fees..............................................................36
SECTION 2.6 Reduction of the Revolving Loans
Commitment......................................................................36
SECTION 2.7 Repayment.......................................................................36
(a) Voluntary Repayment.....................................................36
(b) Installment Payments of Term Loan.......................................36
(c) Mandatory Repayment.....................................................37
(d) Repayment of Swing Loans................................................38
-i-
<PAGE>
Page
(e) Application of Repayments...............................................38
SECTION 2.8 Distribution of Payments by the Agent...........................................38
SECTION 2.9 Promissory Notes................................................................39
(a) The Revolving Notes.....................................................39
(b) Term Notes..............................................................39
(c) Swing Loan Note.........................................................40
SECTION 2.10 Pro Rata Treatment..............................................................40
SECTION 2.11 Interest........................................................................40
(a) Prime Rate Loans........................................................40
(b) LIBOR Rate Loans........................................................40
(c) Default Rate Interest...................................................41
SECTION 2.12 Yield Protection................................................................41
(a) Increased Costs.........................................................41
(b) Additional Interest.....................................................41
(c) Increased Capital.......................................................42
(d) Breakage Costs..........................................................42
SECTION 2.13 Conversion of Loans; Change of Interest
Periods.........................................................................43
SECTION 2.14 Illegality, Etc.................................................................43
SECTION 2.15 Payments and Computations.......................................................44
SECTION 2.16 Effect of Letters of Credit on Revolving
Loans Commitment Utilization....................................................45
SECTION 2.17 Cash Collateralization of Letters of
Credit..........................................................................45
SECTION 2.18 Borrowing Base..................................................................45
ARTICLE III CONDITIONS OF LENDING....................................................................46
SECTION 3.1 Conditions Precedent to Initial Advance or
Issuance of Initial Letter of Credit............................................46
SECTION 3.2 Conditions Precedent to All Advances and
Issuance of All Letters of Credit...............................................50
ARTICLE IV REPRESENTATIONS AND WARRANTIES...........................................................51
SECTION 4.1 Representations and Warranties of the
Borrower........................................................................51
(a) Corporate Existence.....................................................51
(b) Powers, Etc.............................................................51
(c) Authorization; No Conflict..............................................52
(d) Approvals...............................................................52
(e) Enforceability..........................................................52
(f) Financial Statements....................................................53
(g) Litigation..............................................................53
(h) Federal Reserve Regulations.............................................53
(i) Investment Company Act..................................................54
(j) ERISA...................................................................54
(k) Compliance with Laws....................................................55
(l) Payment of Debts and Taxes..............................................55
(m) Indebtedness, Guaranties................................................55
(n) Material Agreements.....................................................56
-ii-
<PAGE>
Page
(o) Properties, Inventory and Equipment.....................................56
(p) Financial Condition.....................................................56
(q) Insurance...............................................................57
(r) Full Disclosure.........................................................57
(s) No Default..............................................................58
(t) Status of Loans as Senior Debt..........................................58
(u) Swap Obligations........................................................58
ARTICLE V COVENANTS OF THE BORROWER................................................................58
SECTION 5.1 Affirmative Covenants...........................................................58
(a) Use of Proceeds.........................................................58
(b) Reporting and Notice Requirements.......................................59
(c) Maintenance of Existence, Etc...........................................61
(d) Compliance With Laws....................................................61
(e) Insurance...............................................................61
(f) Material Agreements.....................................................62
(g) Obligations and Taxes...................................................62
(h) Maintaining Records; Access to
Properties and Inspections..............................................62
(i) Environmental and Safety Matters........................................63
(j) Deposit Balances........................................................63
(k) Interest Rate Protection................................................64
(l) Surveys.................................................................64
(m) Audit of Accounts Receivable and
Inventory...............................................................64
(n) Acquisition of Tucson Real Property.....................................65
(o) AlliedSignal Acquisition Agreements.....................................65
(p) Greeley Phase I Environmental Assessment................................66
(q) Further Assurances......................................................66
SECTION 5.2 Negative Covenants..............................................................66
(a) Financial Covenants.....................................................66
(b) Prohibition of Fundamental Changes......................................69
(c) Limitation on Liens.....................................................69
(d) Debt....................................................................69
(e) Guarantees..............................................................70
(f) Investments, Loans, Advances, etc.......................................70
(g) Sales of Assets.........................................................71
(h) Transactions with Affiliates............................................71
(i) Modification of Certain Documents;
Performance of Material Agreements......................................71
(j) Dividends...............................................................72
(k) Accounting..............................................................72
(l) Subordinated Debt...........................................................72
(m) Change of Address; Business Name(s).........................................72
ARTICLE VI EVENTS OF DEFAULT........................................................................73
SECTION 6.1 Events of Default...............................................................73
(a) Payments under the Agreement and the
Notes...................................................................73
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<PAGE>
Page
(b) Representations and Warranties..........................................73
(c) Other Loan Instrument Obligations.......................................73
(d) Other Debt..............................................................74
(e) Insolvency..............................................................74
(f) Judgments...............................................................75
(g) Termination of Certain Loan
Instruments.............................................................75
(h) Collateral Liens........................................................75
SECTION 6.2 Bank's Rights Upon an Event of Default..........................................75
ARTICLE VII THE AGENT................................................................................76
SECTION 7.1 Appointment and Powers..........................................................76
SECTION 7.2 Limitation on Agent's Liability.................................................76
SECTION 7.3 Defaults........................................................................77
SECTION 7.4 Rights as a Bank................................................................77
SECTION 7.5 Indemnification.................................................................77
SECTION 7.6 Non-Reliance on Agent and Other Banks...........................................78
SECTION 7.7 Execution and Amendment of Loan
Instruments on Behalf of the Banks..............................................78
SECTION 7.8 Resignation of the Agent........................................................79
ARTICLE VIII MISCELLANEOUS............................................................................79
SECTION 8.1 Amendments; Waivers.............................................................79
SECTION 8.2 Notices, Etc....................................................................80
SECTION 8.3 Remedies........................................................................81
SECTION 8.4 Costs, Expenses and Taxes.......................................................81
SECTION 8.5 Right of Set-off................................................................82
SECTION 8.6 Binding Effect..................................................................82
SECTION 8.7 Indemnity.......................................................................82
SECTION 8.8 Consent to Exclusive Jurisdiction...............................................83
SECTION 8.9 Waiver of Jury Trial and Certain Damages........................................83
SECTION 8.10 Governing Law...................................................................84
SECTION 8.11 Inconsistent Provisions.........................................................84
SECTION 8.12 Sharing of Recoveries...........................................................84
SECTION 8.13 Assignments and Participations..................................................85
(a) Assignments.............................................................85
(b) Participations..........................................................86
SECTION 8.14 Survival of Representations and
Warranties......................................................................87
SECTION 8.15 Counterparts....................................................................87
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<PAGE>
Schedules
Schedule I Banks
Schedule 2.1 Banks; Address; Commitment
Percentages
Schedule 4.1(a) Borrower's and Guarantors' Capital
Structure and Shareholders
Schedule 4.1(b) Borrower's and Guarantors' Business
Names and Jurisdictions where
Qualified to do Business
Schedule 4.1(d) Approvals
Schedule 4.1(f) Financial Disclosures
Schedule 4.1(g) Litigation
Schedule 4.1(j) ERISA Disclosures
Schedule 4.1(m) Indebtedness; Guaranties
Schedule 4.1(n) Material Agreements
Schedule 4.1(o) Real Property; Inventory; Liens
Schedule 4.1(q) Insurance
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<PAGE>
Exhibits
Exhibit A-1 Form of Revolving Note
Exhibit A-2 Form of Term Note
Exhibit A-3 Form of Swing Loan Note
Exhibit B-1 Form of Request for Advance
Exhibit B-2 Form of Request for Letter of Credit
Exhibit B-3 Form of Interest Period/Conversion
Notice
Exhibit B-4 Form of Borrowing Base Certificate
Exhibit B-5 Form of Compliance Certificate
Exhibit C Form of Guaranty
Exhibit D Form of Pledge and Security Agreement
Exhibit E Form of Security Agreement and
Assignment
Exhibit F-1 Form of Deed of Trust
Exhibit F-2 Form of Collateral Assignment of Leases
Exhibit F-3 Landlord's Waiver and Consent
Exhibit F-4 Consent to Assignment of Contracts
Exhibit G-1 Form of Borrower's Omnibus
Certificate
Exhibit G-2 Form of Guarantor's Omnibus Certificate
Exhibit H-1 Form of Opinion of Counsel to Borrower
Exhibit H-2 Form of Opinion of Counsel to Guarantors
Exhibit H-3 Form of Opinion of Local Counsel
Exhibit I Form of Notice of Assignment
-vi-
</TABLE>
<PAGE>
CREDIT AGREEMENT
Dated as of September 30,1997
THIS CREDIT AGREEMENT (the "Agreement") is made and entered
into as of September 30, 1997 by and between EFTC CORPORATION, a Colorado
corporation,(the "Borrower") and the Banks listed on the attached Schedule I, as
revised from time to time (collectively the "Banks" and individually the
"Bank"); and BANK ONE, COLORADO, N.A.,as letter of credit issuing bank and in
its capacity as agent for the Banks hereunder(in such capacity, the "Agent").
Recitals
Pursuant and subject to the terms and conditions of this
Agreement, the Banks will make available to the Borrower (a) until September 30,
2000, a Senior Secured Revolving Line of Credit in the maximum amount of up to
$25,000,000 which shall include the issuance of Bank letters of credit up to
$5,000,000 and Swing Loans up to $2,500,000, and (b) until September 30, 2002, a
Senior Secured Term Loan of $20,000,000. Payment by the Borrower of the amounts
due hereunder will be secured by liens on and security interests in the real and
personal property of the Borrower.
Agreement
In consideration of the covenants contained herein the Parties
hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Definitions.
As used in this Agreement, the terms identified in
this Section 1.1 shall have the meanings specified below.
"Account Receivable" means any account (as such term is
defined in the Uniform Commercial Code as adopted in the State of Colorado) or
other right to payment for goods sold or services rendered of the Borrower and
its Subsidiaries.
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<PAGE>
"Advance" means an advance of funds by the Bank to the
Borrower as a Loan pursuant to a Request for Advance as provided in Section 2.2.
"Affiliate" means a Person that controls, is controlled by or
is under common control with another Person. For purposes hereof, "control"
means the practical power to direct the activities of a Person.
"Agent" means Bank One, Colorado, N.A., as agent for and
representative (within the meaning of Section 9-105(m) of the Uniform Commercial
Code) of the Banks under the Loan Instruments, and any successor Agent appointed
pursuant to Section 7.8.
"Agreement" means this Credit Agreement dated as of September
, 1997 between the Borrower and the Banks, together with all schedules and
exhibits hereto, and all modifications, amendments, supplements, renewals and
extensions hereof in the manner provided herein.
"Airhub Services " means, Airhub Services Group, LLC, a
Kentucky limited liability company, which is a wholly-owned subsidiary of the
Borrower and its Affiliates.
"AlliedSignal Acquisition" means the purchase of certain
assets and assumption of certain liabilities by the Borrower as provided for
under the AlliedSignal Acquisition Agreements.
"AlliedSignal Acquisition Agreements" means
collectively the License Agreement and the Master Agreement
Regarding Asset Purchase and Related Transactions by and between
AlliedSignal Avionics, Inc., AlliedSignal Inc. and the Borrower
dated as of July 15, 1997.
"Applicable Law" means,(a) all applicable common law and
principles of equity and (b) all applicable provisions of all (i) constitutions,
statutes, rules, regulations and orders of governmental bodies, (ii) approvals
of Government Authorities and (iii) orders, decisions, judgements and decrees of
all courts (whether at law or in equity or admiralty) and arbitrators.
"Applicable Margin" means such percentage for the Type of Loan
as set forth in the following table opposite the applicable ratio of Total Debt
to Trailing Four Quarter EBITDA determined as of the fiscal quarter immediately
preceding such period:
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Greater Less Than Revolving Revolving Term Loan Term Loan
Than or Loan Loan LIBOR Prime +
Equal to LIBOR Prime + Base Rate
Base Rate +
+
3.75x - 2.750% 1.000% 3.250% 1.500%
3.25x 3.75x 2.500% 0.625% 3.000% 1.125%
2.75x 3.25x 2.250% 0.375% 2.750% 0.875%
- 2.75x 2.000% 0.00% 2.500% 0.500%
</TABLE>
The ratio of Total Debt to Trailing Four Quarter EBITDA shall be computed by the
Borrower and such ratio and the Applicable Margin for each Type of Loan will be
set forth in the Compliance Certificate furnished under Section 5.1(b)(iv). The
Applicable Margin shall be subject to adjustment, if necessary, on a date fifty
(50) days after the end of each fiscal quarter of the Borrower ("Margin
Adjustment Date"). Any change in the Applicable Margin shall apply to all Loans
outstanding of any Type as of the Margin Adjustment Date. Notwithstanding the
foregoing, the Applicable Margin will be equal to:
Revolving Term Loan
Loan
LIBOR Base Rate LIBOR + 3.25%
+ 2.75% or
or Prime + 1.50%
Prime + 1.00%
as the case may be, from the Effective Date to fifty (50) days after the fiscal
quarter ended September 30, 1997, at which point the Applicable Margin will be
as set forth in the Compliance Certificate accompanying the financial statements
furnished under Section 5.1(b)(iv) for the fiscal quarter ended September 30,
1997. If the Borrower fails to furnish the Compliance Certificate and the
financial statements fifty (50) days after the end of any fiscal quarter, the
Applicable Margin shall be for the relevant fiscal quarter
Revolving Term Loan
Loan
LIBOR Base Rate LIBOR + 3.25%
+ 2.75% or
or Prime + 1.50%
Prime + 1.00%
-3-
<PAGE>
"Arranger" shall mean Bank One Capital Markets, an
affiliate of Bank One, Colorado, N.A.
"Authorized Signatory" means such Person or Persons as may be
designated from time to time in the most recent certificate delivered to the
Bank by the Borrower as being authorized to execute and deliver certificates or
other documents required or permitted to be executed and delivered to the Bank
by the Borrower or other Persons pursuant to this Agreement or any other Loan
Instrument, and in any case shall include the President and the Chief Financial
Officer of the Borrower.
"Bank" and "Banks" means (a) the Agent and any Person listed
on the signature pages hereof following the Agent and (b) any Person that has
been assigned any or all of the rights or obligations of a Bank pursuant to
Section 8.13.
"Borrower" means EFTC Corporation, a Colorado
corporation.
"Borrower's Account" means a demand deposit account maintained
by the Borrower with the Agent.
"Borrower Loan Instruments" means, the Loan Instruments
to which the Borrower is a party.
"Borrower's Omnibus Certificate" means a certificate from the
Borrower substantially in the form of Exhibit G-1 hereto.
"Borrower's Real Property" has the meaning given
thereto in Section 4.1(o).
"Borrowing Base" shall have the meaning specified in
Section 2.18.
"Borrowing Base Certificate" shall mean a certificate to be
provided to the Bank by the Borrower from time to time in accordance with
Section 2.18 substantially in the form of Exhibit B-4 hereto.
"Braswell Earn-Out Agreement" means the Earnout
Agreement dated as of July 9, 1997 by and among EFTC Corporation,
Allen S. Braswell, Jr. Revocable Living Trust, Circuit Test
International Limited Partnership and the Allen S. Braswell, Sr.
Living Trust.
"Business Day" means a day of the year other than Saturday or
Sunday on which banks are not authorized to close in Denver, Colorado and, if
the applicable Business Day relates to any LIBOR Rate Loans, on which dealings
are carried on in the London interbank market.
-4-
<PAGE>
"Capital Expenditures" means amounts paid or indebtedness
incurred by the Borrower or any of its Subsidiaries in connection with the
acquisition, purchase or lease by such Borrower or any of its Subsidiaries of
capital assets that would be required to be capitalized (including the
applicable amount in respect of capitalized interest) and which amounts would be
shown as such capital expenditures on the consolidated statement of cash flow of
such Person in accordance with GAAP, provided, however, Capital Expenditures
shall not include (i) amounts paid with insurance proceeds or the proceeds of a
condemnation award within twelve (12) months after receipt by the Borrower or
its Subsidiaries, as the case may be, in connection with the purchase of capital
assets to replace the capital assets destroyed in the casualty loss giving rise
to such insurance proceeds or taken in the condemnation proceeding giving rise
to such condemnation proceeds, as the case may be, and (ii) amounts expended in
connection with the acquisition of the Drexel Road Property in accordance with
Section 5.1(n).
"Circuit Test" means, Circuit Test, Inc., a Florida
corporation, that is a wholly-owned subsidiary of the Borrower.
"Circuit Test Acquisition" means the acquisition by the
Borrower of the Persons identified in the Circuit Test Acquisition Agreement.
"Circuit Test Acquisition Agreement" means the Limited
Liability Company Unit Purchase Agreement among the Borrower,
CTLLC Acquisition Corp., Circuit Test International, L.C., Airhub
Services Group, L.C., and the Members of Airhub Services Group,
L.C. and Circuit Test International, L.C. dated as of July 9,
1997.
"Circuit Test International" means Circuit Test International,
L.C., a Florida limited liability company, that is wholly-owned by the Borrower
and its Affiliates.
"CMLTD" means, with respect to the Borrower or any Guarantor,
all principal amounts due and payable by the Borrower or such Guarantor during
the then-current month and during the following eleven months with respect to
Debt of such Person other than accounts payable, accrued expenses and income
taxes payable.
"Code" means the Internal Revenue Code of 1986, as amended,
and as the same may be supplemented, modified, amended or restated from time to
time, and the rules and regulations promulgated thereunder, or any corresponding
or succeeding provisions of applicable law.
"Collateral" shall mean all rights and interests of the
Borrower and of the Guarantors which are subject to the Collateral Documents.
-5-
<PAGE>
"Collateral Documents" means the Deeds of Trust, the
Security Agreements, the Guaranties, the Landlord Consent and
Waiver, the Collateral Assignments of Leases, and the Pledge
Agreement.
"Commitment" means, with respect to each Bank, such Bank's
obligation to make Loans pursuant to the Revolving Loan Commitment and Term Loan
Commitment.
"Commitment Fee" has the meaning specified in
Section 2.5(a) hereof.
"Compliance Certificate" means, a certificate
substantially in the form of Exhibit B-5.
"Fixed Charges" means, as of any date of determination, the
following, determined with respect to the immediately preceding four fiscal
quarters of the Borrower and the Guarantors for which financial statements have
been delivered pursuant to Section 5.1, the sum of (a) CMLTD and (b) Interest
Expense for such period. There shall be included in the computation of Fixed
Charges for any period the pro-forma effect for such period of the financial
results of Current Electronics and Circuit Test for such period to the extent
that such financial results were included in the computation of EBITDA.
"Convert", "Conversion" and "Converted" each refers to a
conversion of a Loan of one Type into a Loan of another Type pursuant to Section
2.13 or 2.14.
"CTLLC Acquisition" means, CTLLC Acquisition Corp., a Florida
corporation, that is a wholly-owned subsidiary of the Borrower.
"Current Electronics" means, Current Electronics, Inc., an
Oregon corporation, that is a wholly-owned subsidiary of the Borrower.
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services,
(iv) obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (v) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above.
-6-
<PAGE>
"Deed of Trust" and "Deeds of Trust" mean, respec tively, any
mortgage, deed of trust or other collateral security document pertaining to
non-leasehold interests in real property executed by the Borrower or any
Guarantor from time to time in favor of the Agent (on behalf of the
Banks)supporting or securing any of the Obligations, including the Deeds of
Trust substantially in the form of Exhibit F-1 hereto from the Borrower and
certain of the Guarantors, as the same may be supplemented, modified, amended or
restated from time to time in the manner provided therein.
"Default" means any event or state of affairs that, with the
giving of notice or the passage of time (or both) would constitute an Event of
Default.
"Default Rate" means an interest rate per annum equal to three
percent (3%) above the Prime Rate in effect with respect to Loans at the time of
occurrence of any Event of Default.
"Disposition" means any sale, assignment, transfer or other
disposition (including a ground lease or other long term obligation which under
GAAP is the equivalent of a sale of such asset) or any asset (whether now owned
or hereafter acquired) of any Person, other than inventory in the ordinary
course of business.
"Dollars", "dollars" and "$" means lawful money of the
United States of America.
"Draw" shall mean any payment by the Issuing Bank to a
beneficiary of a Letter of Credit pursuant to the terms of a Letter of Credit.
"EBITDA" means, with respect to the Borrower on a consolidated
basis, in a twelve-month period, an amount equal to earnings (determined in
accordance with GAAP)before deduction of interest expenses, taxes, depreciation
expenses and amortization, provided, however that for purposes of calculating
the financial covenants in Section 5.2 during the twelve (12) month period
following the Effective Date, EBITDA shall be calculated by also taking into
account during the relevant period, without duplication,(x) the results of
operations of Circuit Test and Current Electronics determined in accordance with
the financial statements of Circuit Test and Current Electronics as provided to
the Agent,(y) the amount imputed to the Allied Signal Acquisition described on
the Compliance Certificate to be furnished under Section 5.1(b)(iv) , and (z)
the results of operations of any other acquired Person as determined in
accordance with the financial statements of any such Person for such period as
provided to the Agent. Operations of such acquired Person shall be treated as if
it had been a Subsidiary of the Borrower for the preceding four fiscal quarters.
-7-
<PAGE>
"Effective Date" means September 30, 1997.
"Eligible Account Receivable" means all Accounts Receivable of
the Borrower and its Subsidiaries which are subject to a first and prior Lien in
favor of the Agent on behalf of the Banks pursuant to the Collateral Documents
(reduced by the amount of any refund, rebate, allowance, discount or other
concession to the account debtor in connection therewith) except for the
following:
(i) Accounts Receivable with respect to which the
account debtor is an Affiliate of the Borrower or any
Guarantor, or a director, officer, employee or agent of
the Borrower or any Guarantor;
(ii) Accounts Receivable with respect to which goods are
placed on consignment, guaranteed sale, "sale or return" or
other terms by reason of which the payment of the account
debtor may be conditional;
(iii) Accounts Receivable which are subject to
dispute, counterclaim or set off;
(iv) Accounts Receivable with respect to which the
goods have not been shipped or the services rendered to
the account debtor;
(v) Accounts Receivable from account debtors whose financial
condition or creditworthiness of such account debtor is
unacceptable under the credit policy of the Borrower, which
credit policy shall be consistent with prudent industry
practice;
(vi) Accounts Receivable which are not due and
payable within 60 days after their invoice date;
(vii) Accounts Receivable which are more than 60 days
past their due date;
(viii) That portion of Accounts Receivable owed by a single
account debtor that exceeds (a) fifty percent (50%) of total
Eligible Accounts Receivable for an account debtor rated BBB-
by Standard & Poor's and Baa3 by Moody's Investor Services,
Inc., or higher ("Investment Grade Accounts Receivable") and
(b) twenty five percent (25%) for non-Investment Grade
Accounts Receivable.;
(ix) Accounts Receivable owing from a single account
debtor if twenty-five percent (25%) of its Accounts
-8-
<PAGE>
Receivable with the Borrower and all Guarantors is more
than 60 days past due;
(x) Accounts Receivable from account debtors which do not
maintain their principal place of business in the United
States, unless they are supported by an irrevocable letter of
credit from a banking institution in the United States
acceptable to the Agent in its sole discretion;
(xi) Accounts Receivable from an account debtor which has
filed, or which has had filed against it, and is pending, a
petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency or
debtor-relief statute; or which has had appointed, and
continues to be appointed, a trustee, custodian or receiver
for the assets of such account debtor; or which has made, and
is pending, an assignment for the benefit of creditors or has
become, and remains, insolvent or has failed, and continues to
fail, generally to pay its debts (including its employee
payroll) as such debts become due;
(xii) Accounts Receivable with respect to which the account
debtor is the United States, or any department or agency
thereof (other than such Accounts Receivable in which the
Banks have been granted an enforceable assignment in
compliance with the provisions of 41 U.S.C. Section 15); and
(xiii) Accounts Receivable which are not subject to a Lien in
favor of the Agent, or which are subject to a Lien in favor of
a Person other than the Agent, whether or not such Lien is
junior to the Lien of the Agent other than Liens imposed by
any Governmental Authority for taxes, assessments or charges
not yet due or which are being contested in good faith and
with due diligence and with respect to which adequate
reserves, determined in the reasonable discretion of the
Agent, have been established and Liens which do not materially
and adversely affect the Banks' rights and interests in such
Accounts Receivable, the Collateral, or the collectibility of
the Accounts Receivable.
"Eligible Inventory" means Inventory of the Borrower and its
Subsidiaries subject to a first and prior Lien in favor of the Agent on behalf
of the Banks pursuant to the Collateral Documents, except for the following:
(i) any portion of Inventory consisting of work-in-
process that is not subject to an enforceable purchase
order or purchase agreement;
-9-
<PAGE>
(ii) Inventory which is not subject to a Lien in favor of the
Bank or which is subject to a Lien in favor of a Person other
than the Banks, whether or not such Lien is junior to the Lien
of the Banks other than Liens imposed by any Governmental
Authority for taxes, assessments or charges not yet due or
which are being contested in good faith and with due diligence
and with respect to which adequate reserves, determined in the
reasonable discretion of the Agent, have been established and
Liens which do not materially and adversely affect the Banks'
rights and interests in such Inventory or the Collateral;
(iii) Finished goods that do not meet the
specifications of the purchase order for such goods;
(iv) Inventory situated at a premises leased by the Borrower
or a Subsidiary located in Ft. Lauderdale, Florida, or Oregon
for which there is no valid landlord waiver, mortgagees waiver
or warehouseman's or bailee's agreement, if appropriate, in
form and substance acceptable to the Agent in its sole
discretion except that such waivers for Inventory located on
leased premises in all other locations must be provided within
thirty (30) days after the Effective Date or they will be
excluded;
(v) Inventory produced in violation of the Fair
Labor Standards Act and in particular the provisions of
that statute contained in 29 U.S.C. ss.215(a)(i);
(vi) Inventory which is deemed to be obsolete, unsaleable,
damaged and unfit for further processing in accordance with
GAAP, provided that, if the Agent reasonably disagrees with
the valuation of such inventory it may, once annually, at
Borrower's expense, require a collateral audit to establish
the value of such; and
(vii) Inventory which is not located in the United
States.
"Environmental Claim" means: (a) any responsibility, liability
or unlawful act or omission under any Environmental Law (whether alleged or
otherwise); (b) any tortious act or omission or breach of contract pertaining to
any Environmental Substance (whether alleged or otherwise); or (c) any other
violation or claim under any Environmental Law or in respect of any Hazardous
Materials (whether alleged or otherwise).
-10-
<PAGE>
"Environmental and Safety Laws" means any and all federal,
state, local and foreign statutes, laws, regulations, ordinances, codes and
similar provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and common
law concerning public health or safety, worker health or safety or pollution of
protection of the environment, including without limitation those relating to
any emissions, discharges or releases of Hazardous Materials to ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, control,
clean-up or handling of Hazardous Materials.
"Equipment" means the Borrower's equipment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and as the same may be supplemented, modified, amended or
restated from time to time, and the rules and regulations promulgated
thereunder, or any corresponding or succeeding provisions of applicable law.
"ERISA Affiliate" and "ERISA Affiliates" shall mean,
respectively, any one or more of any trade, business, person or persons that
together with the Borrower would be deemed to be a single employer within the
meaning of Section 4001(b)(1) of ERISA.
"ERISA Effect" means any material and adverse effect on (a)
any Plan, (b) the assets and properties of any Plan or (c) any funding or other
liability of any one or more of the Borrower or any ERISA Affiliate in respect
of any Plan (individually or in the aggregate).
"ERISA Event" means any (a) "accumulated funding deficiency"
(whether or not waived), "prohibited transaction," "reportable event" (other
than any event for which the 30-day notice requirement has been waived by
regulation), "disqualification," "partial withdrawal," involuntary "partial
termination" or "termination," "insolvency," "reorganization" or the imposition
of any "penalty" or "withdrawal liability" in respect of any Plan under (and as
such words and phrases are defined in" ERISA or the Code, as applicable), (b)
any other violation of ERISA, the Code or any other applicable law in respect of
any Plan (whether asserted or otherwise), (c) supplement or amendment to or
modification or restatement of any Plan that could have or has had an ERISA
Effect, or (d) imposition, increase or other adverse change in any funding
obligation or other liability of any one or more of the Borrower or any ERISA
Affiliate in respect of any Plan or to the Pension Benefit Guaranty Corporation
(individually or in the aggregate).
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"Event of Default" shall have the meaning assigned thereto in
Section 6.1 hereof.
"Excess Cash Flow" means, for any fiscal period, the excess of
(a) EBITDA over (b) the sum of (i) Consolidated Fixed Charges for such
period,(ii) Capital Expenditures actually made during such period, (iii) cash
taxes for such period, and (iv) optional prepayments of principal of the Term
Loan made during such period.
"Existing Debt" means any Debt outstanding on the Effective
Date to the extent set forth on Schedule 4.1(m).
"Existing Loan Agreement" means the Business Loan Agreement,
dated as of February 24, 1997, between the Borrower and Bank One, Colorado, N.A.
"Existing Loan Instruments" means the Existing Loan Agreement,
and all notes, security agreements, deeds of trust, mortgages and other
collateral security documents, all financing statements relating thereto, and
all other instruments executed by the Borrower in connection with the Existing
Loan Agreement.
"Federal Funds Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York or, if such rate is not so published for any
day that is a Business Day, the average of quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent.
"Fees" means the Commitment Fee and the Letter of
Credit Fees.
"GAAP" means generally accepted accounting principals applied
in the United States and practices which are recognized as such by the American
Institute of Certified Public Accountants or successor organization.
"Governmental Authorities" means any federal, state, county,
municipal, local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantee" and "Guarantees" mean a guarantee, endorsement,
contingent agreement to purchase or furnish funds for the payment or maintenance
of, or otherwise to be or become contingently liable under or with respect to,
any indebtedness (including Debt) or other obligations of any Person, or a
guarantee of the payment of dividends or other distributions upon
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the stock or other equity interests in any Person, or an agreement to purchase,
sell or lease (as lessee or lessor) real or personal property or services
primarily for the purpose of enabling a debtor to make payment of its
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank to issue a letter of credit for the benefit
of another Person.
"Guarantor" and "Guarantors" means, respectively, any
one or more of Current, Circuit Test, Airhub Services, Circuit
Test International and CTLLC Acquisition.
"Guarantor Omnibus Certificate" means a certificate to be
provided to the Bank by each of the Guarantors, each substantially in the form
of Exhibit G-2 hereto.
"Guaranty" and "Guaranties" means, the Guaranty from each of
the Guarantors to the Bank substantially in the form of Exhibit C-1 hereto, as
the same may be supplemented, modified, amended or restated from time to time in
the manner provided therein.
"Hazardous Materials" means, collectively, any polychlorinated
biphenyls, petroleum or petroleum derived substance, friable asbestos, and any
toxic or otherwise hazardous waste, material or substance, including, without
limitation, all substances with respect to which liability or standards of
conduct may be imposed pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, the
Resource Conservation and Recovery Act of 1976, as amended from time to time, or
any other Environmental and Safety Law.
"Interest Expense" means, with respect to the Borrower, for
any fiscal year, the interest payable by the Borrower during such fiscal year in
cash. Expressly excluded from the definition of "Cash Interest Expense" is any
interest expense imputed to the Borrower by the Borrower's independent
accountants for GAAP accounting purposes, for purposes of federal or state
taxation, or for any other purposes.
"Interest Period" means, for each LIBOR Rate Loan, the period
commencing on the date of the Advance thereof or the date of the Conversion of
any Prime Rate Loan into such a LIBOR Rate Loan and ending on the last day of
the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be 1, 3 or 6 months as the Borrower may, upon notice
received by the Bank not later than 10:00 a.m. (Denver, Colorado time) on the
third
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Business Day prior to the first day of such Interest Period, select; provided,
however, that:
(i) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the
next succeeding Business Day, provided, that if such extension
would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business
Day; and
(ii) no Interest Period applicable to a Term Loan or portion
thereof shall extend beyond any date upon which is due any
scheduled principal payment in respect of the Term Loans
unless the aggregate principal amount of Term Loans
represented by Prime Rate Loans or LIBOR Rate Loans having
Interest Periods that will expire on or before such date,
equals or exceeds the amount of such principal payment; and
(iii) no Interest Period for any Term Loan shall extend beyond
September 30, 2002 and no Interest Period for any Revolving
Loan shall extend beyond September 30, 2000.
"Interest Period/Conversion Notice" means a notice from the
Borrower to the Bank substantially in the form of Exhibit B-3 concerning
Conversions of Types of Advances, or concerning Interest Period elections.
"Interest Rate Protection Agreement" means any interest rate
protection agreement, future, option swap, cap or collar agreement or other
arrangement designed to fix interest rates or other wise hedge against
fluctuations in interest rates.
"Inventory" means all raw materials, work in process, finished
goods, merchandise, parts and supplies of every kind and description of the
Borrower, and of the Guarantors, and goods held for sale or lease or furnished
under contracts of service in which the Borrower or any Guarantor now has or
hereafter acquires any right, whether held by the Borrower or others, and all
documents of title, warehouse receipts, bills of lading, and all other documents
of every type covering all or any part of the foregoing. Inventory includes
inventory temporarily out of the Borrower's or any Guarantor's custody or
possession.
"Issuing Bank" means Bank One, Colorado, N.A. in its
capacity as issuer of one or more Letters of Credit hereunder
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"Landlord Waiver and Consent" means the Landlord Waiver and
Consent pertaining to the lessor's interest the leasehold estates held by the
Borrower or its Subsidiaries in the of form of Exhibit F-2 hereto.
"Letter of Credit" and "Letters of Credit" means one or more
letters of credit issued by the Bank for the account of the Borrower as provided
in Section 2.4 hereto.
"Letter of Credit Fees" shall have the meaning
specified in Section 2.5(b).
"Letter of Credit Rate" means, the percentage set forth below
in the following table opposite the applicable ratio of Total Debt to Trailing
Four Quarter EBITDA determined as of the fiscal quarter immediately preceding
such period:
Greater Than or Less Than Letter of
Equal to Credit Rate
3.75x - 2.750%
3.25x 3.75x 2.500%
2.75x 3.25x 2.250%
- 2.75x 2.000%
The ratio of Total Debt to Trailing Four Quarter EBITDA shall be computed by the
Borrower and such ratio and the Letter of Credit Rate for the fiscal quarter
will be set forth in the Compliance Certificate furnished under Section
5.1(b)(iv). The Letter of Credit Rate shall be subject to adjustment, if
necessary, on a date fifty (50) days after the end of each fiscal quarter of the
Borrower. Notwithstanding the foregoing, the Letter of Credit Rate will be 2.75%
from the Effective Date to fifty (50) days after the fiscal quarter ended
September 30, 1997, at which point the Letter of Credit Rate will be as set
forth in the Compliance Certificate accompanying the financial statements
furnished under Section 5.1(b)(iv) for the fiscal quarter ended September 30,
1997.
"Letter of Credit Sublimit" means $5,000,000.
"LIBOR Base Rate" means, for any Interest Period for any LIBOR
Rate Loan, the offered rate for U.S. Dollar deposits of not less than
$1,000,000.00 as of 11:00 A.M. City of London, England time two London Business
Days prior to the first date of each Interest Period as shown on the display
designated as "British Bankers Assoc, Interest Settlement Rates" on the Telerate
System ("Telerate"), Page 3750 or Page 3740, or such other page or pages as may
replace such pages on Telerate for the
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purpose of displaying such rate. Provided, however, that if such offered rate is
not available on Telerate then such offered rate shall be calculated by the
Agent by a substantially similar methodology as that theretofore used to
determine such offered rate in Telerate. "London Business Day" means any day
other than a Saturday, Sunday or a day on which banking institutions are
generally authorized or obligated by law or executive order to close in the City
of London, England.
"LIBOR Rate" means, for any LIBOR Rate Loan for any Interest
Period therefor, a rate per annum (expressed as a decimal, rounded upwards, if
necessary, to the nearest 1/100,000 of 1%) determined by the Agent to be equal
to the sum of (a) the LIBOR Base Rate for such Advance for such Interest Period,
plus (b) the Applicable Margin. The LIBOR Base Rate shall be adjusted
automatically as to all LIBOR Rate Loans outstanding as of the effective date of
any change in the Reserve Requirement.
"LIBOR Rate Loan" means a Loan which bears interest as
provided in Section 2.11(b).
"Lien" means any mortgage, deed of trust, lien, chattel
mortgage, conditional sale contract, pledge, charge, security interest or
encumbrance of any kind whatsoever.
"Loan" and "Loans" means, respectively, all funds Advanced by
the Banks to the Borrower pursuant to Requests for Advance submitted by the
Borrower to the Agent, all Swing Loans, all Draws under Letters of Credit, and
all other amounts paid or otherwise advanced by the Issuing Bank on behalf of
the Borrower pursuant hereto or pursuant to any other Loan Instrument, which
Loans will be evidenced by the Notes.
"Loan Instrument" and "Loan Instruments" means, respectively,
any one or more of this Agreement, the Notes, the Requests for Advance, the
Requests for Letter of Credit, the Letters of Credit, the Guaranties, the
Collateral Documents, and the various other deeds of trust, mortgages,
assignments, instruments and other documents creating or evidencing the Banks'
interest in any collateral securing or intended to secure anyone's obligations
under any of the foregoing, and all waivers, consents, agreements,
representations and warranties, reports, statements, certificates, schedules and
other documents executed by the requisite Person(s) pursuant to or in connection
with any of the foregoing and accepted or delivered by the Agent (whether prior
to, on or from time to time after the Effective Date), as each may be
supplemented, modified, amended or restated from time to time in the manner
provided therein.
"Material Adverse Effect" means any material and adverse
effect, whether individually or in the aggregate, upon (a) the assets, business,
operations, properties or condition,
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financial or otherwise, of the Borrower and its wholly owned Subsidiaries, taken
as a whole, (b) the ability of the Borrower to make payment as and when due of
all or any part of the Obligations, or (c) the Collateral.
"Material Agreements" means all agreements of the Borrower
which are included in the Collateral, and all other agreements and contracts
(written or oral, now existing or hereafter entered into) to which the Borrower
is a party, or by which the Borrower, or the Collateral is bound, the
nonperformance of which by the Borrower, or by the Borrower's counter parties
thereto would have a Material Adverse Effect on the Borrower which Material
Agreements in effect on the date hereof are identified in Schedule 4.1(n)
hereto.
"Maturity Date" means, (a) with respect to the Revolving
Loans, the first to occur of (i) the Revolving Loans Scheduled Maturity Date and
(ii) the date on which the due date of the Loans has been accelerated and
payment demanded by the Bank by reason of an Event of Default pursuant to
Article VI; and (b) with respect to the Term Loans, the first to occur of (iii)
the Term Loans Scheduled Maturity Date and (iv) the date on which the due date
of the Loans has been accelerated and payment demanded by the Agent by reason of
an Event of Default pursuant to Article VI.
"Maximum Revolving Credit Amount" means the lesser of (y)
$25,000,000 and (z) the Borrowing Base in effect from time to time, as such
$25,000,000 may be reduced by the Borrower pursuant to Section 2.6.
"Monfort Subordinated Notes" means the promissory note or
promissory notes issued by the Borrower to Richard L. Monfort in the aggregate
face amount of $15,000,000 due December 31, 2002 that are subordinated to the
Revolving Loans, Term Loans and Swing Line Loans on terms and conditions
satisfactory to the Agent.
"Multiemployer Plan" of any Person shall mean a multiemployer
plan defined as such in Section 3(37) of ERISA to which contributions have been
made by such Person or any ERISA Affiliate of such Person and which is covered
by Title IV of ERISA.
"Net Income" means, for any computation period, with respect
to the Borrower on a consolidated basis, cumulative net income earned during
such period as determined in accordance with GAAP.
"Net Proceeds" means the proceeds received by the Borrower in
cash from the sale, lease, assignment or other disposition of any asset or
property (other than sales of assets
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in the ordinary course of business, which, for purposes of this definition,
shall not include any disposition of assets in which the total consideration
received or receivable is in excess of $500,000), net of (a) reasonable and
customary fees, costs, commissions and expenses, including attorneys' fees,
incurred in connection with such sale, lease, assignment or other disposition
and payable by or on behalf of the seller or the transferor of the assets to
which sale or disposition relates, and (b) the amount of all foreign, Federal,
state and local taxes payable as a direct consequence of such sale, lease,
assignment or other disposition. For this purpose, all proceeds of insurance
paid on account of the loss of or damage to any such asset or property, or group
of assets or properties, and awards of compensation for any such asset or
property, or group of properties, taken by condemnation or eminent domain shall
be deemed to be Net Proceeds (provided that, in the case of proceeds from
insurance paid with respect to any loss or damage to any asset, such proceeds,
or any portion thereof, shall not constitute Net Proceeds if the Agent has
received notice from the Borrower of its intention to use such proceeds or
portion thereof at the time of such loss or damage, and such proceeds or portion
thereof are in fact so used within six months after the occurrence of such loss
or damage to repair, restore or replace such assets). With respect to the
issuance or sale of equity securities, Net Proceeds means the cash proceeds of
such issuance or sale net of attorneys' fees, accountants' fees, underwriters'
fees, discounts and commissions and other expenses actually incurred in
connection with such sale or issuance. Net Proceeds do not include the proceeds
from the exercise of (A) warrants issued to Richard L. Monfort in connection
with the Monfort Subordinated Notes and (B) stock options issued pursuant to an
employee stock option plan described in the Borrower's proxy statements.
"Net Worth" means the net worth of a Person, determined
in accordance with GAAP.
"Notes" means, collectively, the Revolving Notes, the
Term Notes and the Swing Loan Notes.
"Obligations" means the obligations of the Borrower to repay
the balance of the Loans outstanding hereunder, together with accrued and unpaid
interest thereon, fees payable hereunder, and all other amounts payable or
obligations to be performed by the Borrower hereunder or under any other Loan
Instrument or under any Permitted Swap Obligations for which the counterparty is
a Bank.
"Permitted Lien" means:
(a) Liens imposed by any Governmental Authority for
taxes, assessments or charges not yet due or which are
being contested in good faith and with due diligence
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and with respect to which adequate reserves have been
established;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, or other like Liens arising in the ordinary
course of business not yet delinquent or which are being
contested in good faith and with due diligence and with
respect to which adequate reserves have been established;
(c) Liens (other than Liens imposed by ERISA) consisting of
pledges or deposits under workers' compensation, unemployment
insurance and other social security legislation;
(d) easements, rights-of-way, zoning restrictions and other
similar encumbrances of record on real property incurred in
the ordinary course of business which, in the aggregate, are
not material in dollar amount, and which do not in any case
interfere with the ordinary conduct of the business of the
Borrower or any Guarantor;
(e) Liens existing on the date hereof and disclosed in
Schedule 4.1(p) hereto;
(f) purchase money security interests securing payment by the
Borrower or any Guarantor of a portion of the purchase price
of any asset, provided that (i) any such Lien attaches to such
property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the
property so acquired in such transaction, (iii) the principal
amount of the debt secured thereby does not exceed 100% of the
cost of such property, and (iv) the aggregate principal
outstanding of such purchase money security interest Liens
shall not at any one time exceed $2,500,000;
(g) Liens, deposits or pledges to secure the non-delinquent
performance of bids, tenders, contracts(other than contracts
for the payment of money), leases (permitted under this
Agreement), public or statutory obligations, surety, stay,
appeal, indemnity, performance or other similar bonds, or
other similar obligations arising in the ordinary course of
business; or
(h) any attachment or judgment Lien either in existence less
than 30 calendar days after the entry thereof, or with respect
to which execution has been stayed, or with respect to which
payment in full above any deductible is covered by insurance,
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"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Borrower or any Subsidiary existing or arising under Swap
Contracts with one or more creditworthy parties as the swap counterparty,
provided that such obligations are (or were) entered into by such Person in the
ordinary course of business for the purpose of directly mitigating risks
associated with liabilities, commitments or assets held or reasonably
anticipated by such Person and not for the purpose of speculation. For the
purposes of this definition, the term "creditworthy party" means any Bank, any
Affiliate of any Bank or any third party having a credit rating from Standard &
Poor's and Moodys Investor's Services, Inc. not less than that of the Bank with
the lowest credit rating. All Swap Contracts with counterparties who are not
Banks will be unsecured.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, limited
liability partnership, trust, unincorporated organization or government (or any
agency, instrumentality or political subdivision thereof).
"Plan" of a Person shall mean an employee benefit or other
plan established or maintained by such Person or any ERISA Affiliate of such
Person and which is covered by Title IV of ERISA, other than a Multiemployer
Plan of such Person.
"Pledge Agreement" means the Pledge and Security Agreement of
the Borrower pertaining to its interests and its other personal property
substantially in the form of Exhibit D hereto.
"Prime Rate" means, for any Interest Period or any other
period, a fluctuating interest rate per annum as shall be in effect from time to
time as announced publicly by the Agent in Denver, Colorado, from time to time,
as the Agent's prime rate. Such rate will not necessarily be the lowest interest
rate charged by the Agent for loans to its customers. The Prime Rate shall
change on each day on which the Agent announces a change in such Prime Rate.
"Prime Rate Loan" means an Advance or a Draw which bears
interest as provided in Section 2.11(a).
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth decimal) at
such time of such Bank's Commitment divided by the combined Commitments of all
Banks.
"Real Property" shall mean Borrower's Real Property.
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"Record" means the grid attached to a Note, or the
continuation of such grid, or any other similar record, including computer
records, maintained by any Bank with respect to any Loan referred to in such
Note.
"Regulations D, G, T, U and X" mean, respectively, Regulations
D, G, T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be amended or supplemented from time to time.
"Regulatory Change" means, with respect to the Banks, any
change enacted or adopted after the date of this Agreement in United States
federal or state law or regulations or any foreign law or regulations
(including, without limitation, Regulation D) or the adoption or publication
after the date of this Agreement of any interpretations, directives or requests
(whether or not having the force of law) applying to a class of banks, including
the Banks, by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Request for Advance" means a written request by the Borrower
to the Agent for an Advance of funds as a Loan hereunder, which written request
will be in the form of Exhibit B-1 hereto.
"Request for Letter of Credit" means a written request by the
Borrower for the issuance of a Letter of Credit for the account of the Borrower
hereunder, which written request will be in the form of Exhibit B-2 hereto.
"Required Banks" means, at any particular time, those Banks
having 66 2/3% of the Loans or, if there are no Loans outstanding, at least 66
2/3% of the Commitments.
"Requirement of Law" means, as to any Person, any law
(statutory or common), ordinance, treaty, code, rule or regulation or
determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon the Person or any of its assets to which the
Person or any of assets is subject.
"Reserve Requirement" means, for any Interest Period for any
LIBOR Rate Loan, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change against (i) any category of liabilities which
includes
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deposits by reference to which the LIBOR Base Rate is to be determined as
provided in the definition of "LIBOR Base Rate" in this Section 1.1, or (ii) any
category of extensions of credit or other assets which includes LIBOR Rate
Loans.
"Revolving Loans" means all Advances of funds by the Banks to
the Borrower pursuant to the Revolving Loans Commitment, and all Draws under
Letters of Credit, which Loans will be evidenced by the Revolving Note.
"Revolving Loans Commitment" means the commitment of the Banks
to Advance Revolving Loans and Swing Loans to the Borrower or to issue Letters
of Credit for the account of the Borrower from time to time in the aggregate
amount of $25,000,000.00 as provided in Section 2.1.
"Revolving Loans Scheduled Maturity Date" means
September 30, 2000.
"Revolving Note" means the promissory notes in the aggregate
principal amount of $25,000,000, made by the Borrower and payable to the order
of the Banks, substantially in the form of Exhibit A-1 hereto, as the same may
be supplemented, modified, amended or restated from time to time in the manner
provided herein.
"Revolving Note Record" means a Record with respect to
a Revolving Note.
"Secured Party" has the meaning ascribed to such term in the
Security Agreements, Pledge Agreements and the Deeds of Trust.
"Security Agreement" means a Security Agreement and Assignment
from certain Guarantors substantially in the form of Exhibit E hereto.
"Security Interest" means the Liens created, or
purported to be created, by the Loan Instruments.
"Senior Debt" means the Loans.
"Subordinated Debt" means (i) the Monfort Subordinated Notes
and (ii) any other Debt of the Borrower that is subordinated on terms and
conditions, and that is subject to other terms and conditions, satisfactory in
form and substance to the Required Banks.
"Subsidiary" or "Subsidiaries" of a Person means, any
corporation, association, partnership, limited liability company, joint venture
or other business entity of which more than 50% of the voting stock, membership
interests or other equity interest
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(in the case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refers to a Subsidiary of the Borrower.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency option or any
other, similar transaction ( including any option to enter into any of the
foregoing) or any combination of the foregoing, and, unless the context
otherwise clearly requires, any master agreement relating to or governing any or
all of the foregoing.
"Swing Loan" means an amount advanced by the Swing Loan Lender
pursuant to Section 2.2 hereof.
"Swing Loan Commitment" means the commitment of the Swing Loan
Lender to Advance Swing Loans to the Borrower from time to time as provided in
Section 2.1.
"Swing Loan Lender" means Bank One, Colorado, N.A.
"Swing Loan Note" means any promissory note in the form
of Exhibit A-3.
"Term Loan" means the Advance of funds by the Banks to the
Borrower pursuant to the Term Loan Commitment, which Loans will be evidenced by
the Term Notes.
"Term Loan Commitment" means the commitment of each Bank to
Advance the Term Loan to the Borrower in a single Advance, as provided in
Section 2.1.
"Term Note" means the promissory notes in the aggregate
principal amount of $20,000,000 evidencing the Term Loan, made by the Borrower
and payable to the order of the Banks, substantially in the form of Exhibit A-2
hereto, as the same may be supplemented, modified, amended or restated from time
to time in the manner provided herein.
"Term Loan Record" means a Record with respect to a
Term Loan.
"Term Loan Scheduled Maturity Date" means September 30,
2002.
"Total Debt" means, at any time, the Debt of the
Borrower and Subsidiaries on a consolidated basis for the
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purposes of calculating the financial covenants in Section 5.2(a), the
Applicable Margin and the Letter of Credit Rate at such time.
"Trailing Four Quarter EBITDA" means, with respect to the
Borrower, the EBITDA for the immediately preceding four fiscal quarters of the
Borrower.
"Type" means a type of Advance, being a Prime Rate Loan or a
LIBOR Rate Loan, as the case may be.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of Colorado.
SECTION 1.2 Accounting Terms and Determinations. Except
-----------------------------------
as otherwise expressly provided herein, all accounting terms used herein shall
be interpreted, all calculations for purposes of determining compliance with the
terms of this Agreement shall be made, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Agent hereunder shall be prepared in accordance with GAAP applied for all
periods to the extent practicable on a basis consistent with that used in the
preparation of the financial statements identified in Section 4.1(f), so as to
fairly present the
--------------
financial condition and results of operations of the applicable
Person.
ARTICLE II
COMMITMENT; AMOUNTS AND TERMS OF THE ADVANCES AND
LETTERS OF CREDIT
SECTION 2.1 Commitment. Each Bank severally agrees, on the terms and
subject to the conditions contained in this Agreement and the Loan Instruments,
to make Loans to the Borrower for the account of the Borrower in accordance with
the provisions of this Section 2.1.
(a) Revolving Loans Commitment. Pursuant to the Revolving
Loans Commitment, from the Effective Date until the first to
occur of the Revolving Loans Scheduled Maturity Date and the
Maturity Date, each Bank severally agrees to Advance funds to
the Borrower as Revolving Loans and issue for the account of
the Borrower Letters of Credit up to the maximum face amount
of the Letter of Credit Sublimit, provided, however, that at
no time shall the Banks be required to Advance Revolving Loans
to the Borrower or to issue Letters of Credit for the account
of the Borrower if, after such Advance or issuance of such
Letter of Credit
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the sum of the principal amount of Revolving Loans outstanding
plus the face amount of Letters of Credit outstanding is in
excess of the Maximum Revolving Credit Amount; and provided
further, that no Bank shall be required to Advance Revolving
Loans and participate in Letters of Credit in an aggregate
amount exceeding the Bank's Revolving Loan Commitment as
described on Schedule 2.1. All Draws honored by the Banks
shall constitute Revolving Loans. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow funds
Advanced to the Borrower as Revolving Loans.
(b) Term Loan Commitment. Pursuant to the Term Loan
Commitment, each Bank severally agrees to Advance, on
the Effective Date, a Term Loan to the Borrower, in a
single Advance, in a principal amount not exceeding the
Bank's Term Loan Commitment as described on Schedule
2.1.
(c) Swing Loan Commitment.
(i) Pursuant to the Swing Loan Commitment and subject to the
terms and conditions of this Agreement, the Swing Loan Lender
agrees to make, from time to time from the Effective Date to
the first to occur of the Revolving Loans Scheduled Maturity
Date or the Maturity Date, one or more Swing Loans to the
Borrower in an aggregate unpaid principal amount not to exceed
the lesser of (a) the Revolving Loans Commitment at such time
minus the sum of the aggregate unpaid principal amount of all
Revolving Loans and Swing Loans outstanding at such time and
the aggregate amount of the Letters of Credit outstanding at
such time and (b) $2,500,000.
(ii) Upon demand made to all of the Banks by the Swing Loan
Lender, which demand may be made before or after an Event of
Default, each Bank (other than the Swing Loan Lender) shall
irrevocably and unconditionally purchase from the Swing Loan
Lender, without recourse or warranty, an undivided interest
and participation in the Swing Loans then outstanding, by
paying to the Swing Loan Lender, without reduction or
deduction of any kind, including but not limited to reductions
or deductions for set-off, recoupment or counterclaim, in
Dollars immediately available to the Swing Loan Lender, an
amount equal to such Bank's Pro Rata Share of the principal
amount of all Swing Loans then outstanding, and thereafter,
except as otherwise provided in the second succeeding
sentence, the Banks' respective interests in such Swing Loans,
and the
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remaining interest of the Swing Loan Lender in such Swing
Loans, shall in all respects be treated as Revolving Loans
under this Agreement, but such Swing Loans shall continue to
be evidenced by the Swing Note, and shall continue to be due
and payable by the Borrower in accordance with Section 2.7(d).
If any Bank does not pay any amount which it is required to
pay forthwith upon the Swing Loan Lender's demand therefor,
the Swing Loan Lender shall be entitled to recover such amount
on demand from such Bank, together with interest thereon, at
the Federal Funds Rate for the first three Business Days, and
thereafter at the Prime Rate, for each day from the date of
such demand, if made prior to 2:00 p.m. (Denver, Colorado
time) on any Business Day, and if made thereafter on any
Business Day, or made on any day that is not a Business Day,
from the next Business Day following the date of such demand,
until the date such amount is paid to the Swing Loan Lender by
such Bank. If such Bank does not pay such amount forthwith
upon the Swing Loan Lender's demand therefor, and until such
time as such Bank makes the required payment, the Swing Loan
Lender's remaining interest in the applicable Swing Loan shall
continue to include the amount of such unpaid participation
obligation.
SECTION 2.2 Advances.
(a) The Banks agree, on the terms and conditions set forth
herein, (a) to make Advances to the Borrower of Revolving Loans (as
LIBOR Rate Loans or as Prime Rate Loans) from time to time on any
Business Day from and after the Effective Date through the first to
occur of the Revolving Loans Scheduled Maturity Date and the Maturity
Date, (b) to make an Advance to the Borrower of the Term Loan (as a
LIBOR Rate Loan or a Prime Rate Loan) in a single Advance on the
Effective Date and each LIBOR Rate Loan shall be in an amount not less
than $1,000,000 or in integral multiples of $250,000 in excess thereof,
and each Prime Rate Loan shall be in an amount not less than $500,000
or in integral multiples of $100,000 in excess thereof, except that an
Advance of a Prime Rate Loan may be in an amount equal to the entire
unused Revolving Loans Commitment. The total number of individual LIBOR
Rate Loan Advances outstanding at any time shall not exceed three (3)
for the Revolving Loans and one (1) for the Term Loan.
(b) Pursuant to the Swing Loan Commitment, from the Effective
Date until the first to occur of the Revolving Loans Scheduled Maturity
Date or the Maturity Date, the Swing Loan Lender agrees to make Swing
Loan Advances in an amount not less than $50,000 or in integral
multiples of
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$10,000 in excess thereof. All Swing Loan Advances shall be
made as Prime Rate Loans. All Swing Loans shall be credited
to the Borrower's Account.
SECTION 2.3 Making the Advances.
(a) Request for Advance, Revolving Loans and Term Loan. Each
Revolving Loan and Term Loan Advance shall be made after
delivery by the Borrower to the Agent of a Request for
Advance, duly executed by an Authorized Signatory, delivered
to the Agent (i) in the case of a Prime Rate Loan, not later
than 11:00 a.m.(Denver, Colorado time) on the Business Day
which is the date of the proposed Advance and (ii) in the case
of a LIBOR Rate Loan, not later than 11:00 a.m. (Denver,
Colorado time) on the third Business Day prior to the date of
the proposed Advance. The Request for Advance shall specify
(i) the date and amount of the Advance, (ii) whether a
Revolving Loan or Term Loan is requested, (iii) the Type of
Advance requested, and (iv) if a LIBOR Rate Loan is requested,
the initial Interest Period therefor. Promptly upon receipt of
such Request for Advance, the Agent shall notify the Banks
thereof and of their Pro Rata Share of such proposed Advance.
Not later than 2:00 p.m. (Denver, Colorado time) on the date
of such Advance, subject to fulfillment of the applicable
conditions set forth in Article III, the Agent will make such
Advance available to the Borrower in same day funds by
depositing such funds in the Borrower's Account.
(b) Swing Loan Request. Each Swing Loan Advance shall be made
after notice by the Borrower to the Swing Loan Lender ("Notice
of Swing Loan Request"). Each Notice of Swing Loan Request
shall be by telephone, telex or telecopier, confirmed
immediately in writing, specifying therein the requested (a)
date of such Swing Loan, (b) amount of such Swing Loan and (c)
the maturity of such Swing Loan (which maturity shall be no
later than the seventh Business Day after the requested date
of such Advance). Each Notice of Swing Loan Request shall
constitute a representation and warranty by the Borrower as of
the time of such notice that the conditions specified in
Sections 3.1 and 3.2 have been fulfilled at such time. The
Swing Loan Lender will make such Swing Loan Advance available
to the Borrower in same day funds by depositing such funds in
the Borrower's Account (i) not later than the close of
business on the date of such notice if such notice is given
not later than 11:00 a.m. (Denver, Colorado time) on the date
of the proposed Swing Loan Advance, or (ii) not later than the
close of business on the date after
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such notice if such notice is given later than 11:00 a.m.
(Denver, Colorado time) on the date of the proposed Swing Loan
Advance. Within the limits of the Swing Loan Commitment, the
Borrower may borrow under this Section 2.3, repay pursuant to
Section 2.7 and reborrow under this Section 2.3.
(c) Request for Advance Irrevocable. Each Request for Advance
from the Borrower to the Agent shall be irrevocable and
binding on the Borrower. In the case of any request for a
LIBOR Rate Loan the Borrower shall indemnify the Banks against
any loss, cost or expense incurred by the Banks as a result of
any failure to fulfill on or before the date specified in such
notice for such Advance the applicable conditions set forth in
Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Banks to fund the
Advance when the Advance, as a result of such failure, is not
made on such date.
(d) Availability of Funds, Revolving Loans and Term Loan. Not
later than 2:00 p.m.(Denver, Colorado time)on the proposed day
of the Advance of any Revolving Loan, each of the Banks will
make available to the Agent, at its address referred to in
Section 8.2, in immediately available funds, the amount of
such Bank's Pro Rata Share of the requested Revolving Loan.
Upon receipt from each Bank of such amount and upon receipt of
the documents required by Sections 3.1 and 3.2 and the
satisfaction of the other conditions set forth therein, to the
extent applicable, the Agent will make available to the
Borrower the aggregate amount of such Revolving Loan made
available to the Agent by the Banks. The failure or refusal of
any Bank to make available to the Agent at the aforesaid time
and place the amount of its Pro Rata Share of the requested
Revolving Loan shall not relieve any other Bank from its
several obligation hereunder to make available to the Agent
the amount of such other Bank's Pro Rata Share of any
requested Revolving Loan Advance.
(e) Advances by Agent. The Agent may, unless notified
to the contrary by any Bank prior to an Advance,
reasonably assume that such Bank has made available to
the Agent on such day the amount of such Bank's Pro
Rata Share of the Revolving Loan to be made on such
day, and the Agent may (but it shall not be required
to), in reliance upon such assumption, make available
to the Borrower a corresponding amount. If any Bank
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makes available to the Agent such amount on a date after such
day of Advance, such Bank shall pay to the Agent on demand an
amount equal to the product of (a) the Federal Funds Rate each
day included in such period, times (b) the amount of such
Bank's Pro Rata Share of such Revolving Loan, times (c) a
fraction, the numerator of which is the number of days that
elapse from and including such day of Advance to the date on
which the amount of such Bank's Pro Rata Share of such
Revolving Loan shall become immediately available to the
Agent, and the denominator of which is 360. A statement of the
Agent submitted to such Bank with respect to any amounts owing
under this paragraph shall be prima facie evidence of the
amount due and owing to the Agent by such Bank. If the amount
of such Bank's Pro Rata Share of such Revolving Loan is not
made within three (3) Business Days following such Advance,
the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per
annum applicable to such Revolving Loan.
SECTION 2.4 Letters of Credit.
(a) Letter of Credit Commitment. Upon the terms and subject to
the conditions of this Agreement, the Issuing Bank shall, from
time to time during the period from the Effective Date through
the tenth Business Day preceding the Maturity Date, issue one
or more Letters of Credit for the account of the Borrower;
provided, that the aggregate principal amount of all Letters
of Credit shall not exceed at any time the lesser of (A) the
aggregate amount of the Revolving Loans Commitment at such
time minus the aggregate unpaid principal amount of all
Revolving Loans outstanding at such time and (B) the Letter of
Credit Sublimit.
(b) Terms of Letters of Credit and Applications. Applications
for each Letter of Credit shall be in a form and shall contain
such terms as shall be reasonably satisfactory to the Issuing
Bank. Each Letter of Credit that is issued, extended or
renewed shall be in a form and contain such terms as shall be
reasonably satisfactory to the Issuing Bank. Each such Letter
of Credit shall be subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision),International Chamber
of Commerce Publication No. 500 or any successor version.
(c) Renewals and Extensions. Each Letter of Credit
shall be denominated only in Dollars and shall expire
on or before the first anniversary of the issuance
thereof (provided, that, any Letter of Credit may
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include terms that provide for the automatic renewal thereof
for successive one-year periods so long as such terms include
a provision whereby the Issuing Bank shall be entitled to
elect that any such renewal shall not occur if the conditions
set forth in Sections 3.1 and 3.2 could not be fulfilled at
such time, and the Issuing Bank shall give notice of such
election to the beneficiary thereof) and in any event not
later than the fifth Business Day preceding the Maturity Date.
Any extension of the expiry date, or automatic renewal, of a
Letter of Credit to a date beyond the first anniversary of the
issuance thereof shall constitute an "issuance" of such Letter
of Credit for all purposes hereof on, in the case of any such
extension, the date on which such extension shall have been
granted and, in the case of any such automatic renewal, on the
tenth Business Day preceding the last day on which the Issuing
Bank is entitled to give notice of its election that any such
renewal shall not occur.
(d) Issued on Business Day. Letters of Credit shall
be issued only on a Business Day, and shall be used for
the corporate purposes of the Borrower or the
Subsidiaries.
(e) Request for Letter of Credit. The Borrower shall request
the issuance of a Letter of Credit by furnishing to the Agent
and the Issuing Bank a Request for Letter of Credit or such
other notice as shall be reasonably satisfactory to the
Issuing Bank. The Request for Letter of Credit shall, among
other things, specify the date of the requested issuance of
the Letter of Credit. Subject to approval of the form and
terms of the Letter of Credit as requested and to the other
terms and conditions hereof, the Issuing Bank will issue the
Letter of Credit and make delivery thereof to the Borrower or
as the Borrower shall have instructed the Issuing Bank, on the
date of requested issuance, provided that the Issuing Bank
will not be required to issue the Letter of Credit prior to
(i) the close of business on the second Business Day after it
has received the Request for Letter of Credit, if the Request
for Letter of Credit is received by 11:00 a.m. (Denver,
Colorado time) of the date of receipt, or (ii) the close of
business on the third Business Day after it has received the
Request for Letter of Credit, if the Request for Letter of
Credit is received on or after 11:00 a.m. (Denver, Colorado
time) of the date of receipt.
(f) Participations. Upon the date of issuance of a
Letter of Credit, the Issuing Bank shall be deemed to
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have granted to each Bank (other than the Issuing Bank), and
each Bank (other than the Issuing Bank) shall be deemed to
have acquired from the Issuing Bank without further action by
any party hereto, a participation in such Letter of Credit and
any Draw that may at any time be made thereunder, to the
extent of such Bank's Pro Rata Share thereof.
(g) Notice of Draw. The Issuing Bank shall promptly notify the
Borrower of its receipt of each Draw request with respect to a
Letter of Credit, stating the date and amount of the Draw
requested thereby and the date and amount of each Draw
disbursed pursuant to such request. The failure of the Issuing
Bank to give, or delay in giving, any such notice shall not
release or diminish the obligations hereunder of the Borrower
in respect of such Draw.
(h) Payment of Draw. The Borrower shall, on the day it
receives notice of each Draw, if such notice is received prior
to 11:00 a.m. (Denver, Colorado time) on such day, and on the
Business Day following the day it receives such notice, if
such notice is received after 11:00 a.m. (Denver, Colorado
time) on such day, reimburse such Draw by paying to the
Issuing Bank in immediately available funds the amount of the
payment made by the Issuing Bank with respect to such Draw,
together with interest thereon at a rate per annum equal to
the Letter of Credit Rate as in effect from time to time until
the day such reimbursement is made if such Draw is not
reimbursed on the day notice is received. In the event that
the Borrower shall fail to make any such payment when due and
for so long as such failure shall be continuing, the Issuing
Bank may give notice of such failure to the Agent and each
Bank, which notice shall include the amount of such Bank's Pro
Rata Share of such Draw, whereupon each such Bank (other than
the Issuing Bank) shall promptly remit such amount to the
Agent for the account of the Issuing Bank as provided in
Section 2.4(i).
(i) Participation in Draw. Each Bank (other than the Issuing
Bank) shall, in the event it receives the notice from the
Issuing Bank pursuant to Section 2.4(g) at or before 12:00
noon (Denver Time) on any Business Day, fund its participation
in any unreimbursed Draw by remitting to the Agent, no later
than 2:00 p.m. (Denver, Colorado Time) on such day, in
immediately available funds, its Pro Rata Share of the
reimbursement obligation in respect of each Draw. The Agent
shall, in the event it receives such funds from such Bank at
or before 2:00 p.m. (Denver, Colorado
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Time) on any day, no later than 4:00 p.m. (Denver, Colorado
Time) on such day, make available the amount thereof to the
Issuing Bank, in immediately available funds. Any amount
payable by any Bank to the Agent for the account of the
Issuing Bank under this Section 2.4(i), and any amount payable
by the Agent to the Issuing Bank under this Section 2.4(i),
shall bear interest for each day from the date due (and
including such day if paid after 2:00 p.m. (Denver, Colorado
Time), in the case of any such payment by a Bank to the Agent,
or 4:00 p.m. (Denver, Colorado Time), in the case of any such
payment by the Agent to the Issuing Bank, on such day) in
accordance with this Section 2.4(i) until the date it is
received by the Issuing Bank at a rate equal to the Federal
Funds Rate until (and including) the third Business Day after
the date due and thereafter at the Prime Rate. Each Bank
shall, upon the demand of the Issuing Bank, reimburse the
Issuing Bank, to the extent the Issuing Bank has not been
reimbursed by the Borrower after demand therefor, for the
reasonable costs and expenses (including reasonable legal
fees) incurred by it (other than as a result of its willful
misconduct or gross negligence) in connection with the
collection of amounts due under, the administration of, and
the preservation and enforcement of any rights conferred by,
the Letters of Credit or the performance of the Issuing Bank's
obligations under this Agreement in respect thereof (other
than its obligation to make Loans in its capacity as a Bank),
to the extent of such Bank's Pro Rata Share (as of the time
such costs and expenses are incurred) of the amount of such
costs and expenses. The Issuing Bank shall refund any costs
and expenses reimbursed by such Bank that are subsequently
recovered from the Borrower in an amount equal to such Bank's
Pro Rata Share thereof.
(j) Obligations of Banks. The obligation of each Bank to make
available to the Issuing Bank the amounts set forth in this
Section 2.4 shall be absolute, unconditional and irrevocable
under any and all circumstances without reduction for any
set-off or counterclaim of any nature whatsoever, and may not
be terminated, suspended or delayed for any reason whatsoever,
shall not be subject to any qualification or exception and
shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Instruments;
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(ii) the existence of any claim, set off, defense or other
right which the Borrower or any Subsidiary may have at any
time against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), the Agent, the Issuing Bank,
any Bank or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transaction between the Borrower or any Subsidiary and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue
or inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of
any of the Loan Instrument; or
(v) the occurrence of any Default.
(k) Waiver of Liability; Indemnity.
(i) Without affecting any rights the Banks may have under
Applicable Law, the Borrower agrees that none of the Banks,
the Issuing Bank, the Agent or their respective officers or
directors shall be liable or responsible for, and the
obligations of the Borrower to the Banks, the Issuing Bank and
the Agent hereunder shall not in any manner be affected by:
(A) the use that may be made of any Letter of Credit or the
proceeds thereof by the beneficiary thereof or any other
Person or any acts or omissions of such beneficiary or any
other Person; (B) the validity or genuineness of documents
presented in connection with any Draw, or of any endorsements
thereon, even if such documents should, in fact, prove to be
in any or all respects, invalid, fraudulent or forged; or (C)
any other circumstances whatsoever in making or failing to
make payment under any Letter of Credit or any other action
taken or omitted to be taken by any Person under or in
connection with any Letter of Credit, except that the Borrower
shall have a claim against the Issuing Bank and the Issuing
Bank shall be liable to the Borrower, in each case to the
extent and only to the extent of any damages suffered by the
Borrower that are caused by (1) the Issuing Bank's willful
misconduct or
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gross negligence (as determined by a court of competent
jurisdiction) in determining whether documents presented under
any Letter of Credit issued by the Issuing Bank complied with
the terms of such Letter of Credit or (2) the Issuing Bank's
willful failure (as determined by a court of competent
jurisdiction) to pay under such Letter of Credit after the
presentation to it of documents strictly complying with the
terms and conditions of such Letter of Credit. In furtherance
and not in limitation of the foregoing, in determining whether
to pay under any Letter of Credit, the Issuing Bank shall not
have any obligation relative to the other Banks other than to
determine that any documents required to be delivered under
such Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of
such Letter of Credit, regardless of any notice or information
to the contrary. Any action taken or omitted to be taken by
the Issuing Bank under or in connection with any Letter of
Credit, if taken or omitted in the absence of gross negligence
or willful misconduct, shall not create for the Issuing Bank
any resulting liability to any Bank.
(ii) In addition to any other amounts payable under this
Agreement, the Borrower agrees to protect, indemnify, pay and
hold the Issuing Bank harmless from and against any and all
claims, costs, charges and expenses (including reasonable
attorneys' fees) which the Issuing Bank may incur or be
subject to as a consequence, direct or indirect, of the
issuance of, or payment of any Draw under, any Letter of
Credit, other than as a result of the gross negligence or
willful misconduct of the Issuing Bank as determined by a
court of competent jurisdiction.
(iii) The Issuing Bank shall not be responsible for:
(A) the validity, accuracy, genuineness or
legal effect of any document submitted
by any party in connection with the
issuance of Letters of Credit,
(B) the validity of any instrument
transferring or assigning or purporting
to transfer or assign a Letter of Credit
or the rights or benefits thereunder or
proceeds thereof in whole or in part,
(C) errors, omissions, interruptions or
delays in transmissions or delivery of
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any messages, by mail, cable, telecopy,
telex or otherwise,
(D) the misapplication by the beneficiary of
any Letter of Credit of the proceeds of
any Draw under such Letter of Credit,
and
(E) any consequence arising from causes
beyond the control of the Issuing Bank,
including, without limitation, any
governmental acts.
SECTION 2.5 Fees.
(a) Commitment Fee. The Borrower agrees to pay to the Agent a
commitment fee (the "Commitment Fee") on the average daily
unused portion of the Revolving Loans Commitment at the rate
of one-half of one percent (1/2%) per annum, payable in
arrears on the last day of each fiscal quarter of the
Borrower, and payable on the Maturity Date. The Commitment Fee
payable with respect to the Revolving Loans will be calculated
for the period from the Effective Date through the first to
occur of the Revolving Loans Scheduled Maturity Date and the
Maturity Date, and shall be based upon the amount by which the
daily average of the aggregate principal amount of Revolving
Loans and Swing Loans outstanding and face amount of Letters
of Credit outstanding is less than $25,000,000 or such lesser
amount as may have been established by the Borrower pursuant
to Section 2.6.
(b) Letter of Credit Fees. Upon issuance, extension
or renewal of each Letter of Credit, the Borrower will
promptly pay the Issuing Bank, in advance,
(i) with respect to, standby Letters of Credit a fee equal to
the product of the Letter of Credit Rate, then in effect,
times the aggregate face amount of the Letter of Credit, and
(ii) with respect to documentary Letters of Credit a fee equal
to the product of .50% times the Letter of Credit Rate, then
in effect, times the aggregate face amount of the Letter of
Credit.
A portion of such fee equal to 0.25% of such face amount to be
for the account of the Issuing Bank and the remainder shall be
distributed to each Bank in accordance with its Pro Rata
Share. Such fee will not be refunded if the Letter of Credit
is terminated by
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agreement prior to the date of expiration thereof, or if a
Draw occurs under the Letter of Credit. The Borrower will also
pay the Issuing Bank, for its own account, its usual and
customary issuance, modification, negotiation, transfer and
similar processing and administration fees and charges for
documentary letters of credit as are in effect from time to
time.
(c) Other Fees. The Borrower shall pay certain
Underwriting, Administrative and other fees as required
by the letter agreement ("Fee Letter") among the
Borrower, the Arranger and the Agent dated June 24,
1997.
SECTION 2.6 Reduction of the Revolving Loans Commitment.
The Borrower shall have the right at any time, upon at least
three (3) Business Days' notice to the Agent, to terminate in whole or reduce in
part the unused portion of the Revolving Loans Commitment, provided that each
partial reduction of the Revolving Loans Commitment shall be in the amount of
not less than $1,000,000 or an integral multiple thereof. Any such termination
or reduction of the Commitment shall be irrevocable and permanent. Promptly
after receiving such notice from the Borrower, the Agent will notify the Banks
of the substance thereof. The Revolving Loans Commitments of the Banks shall be
reduced pro rata pursuant to the notice or, as the case may be, terminated.
SECTION 2.7 Repayment.
(a) Voluntary Repayment. The Borrower may repay the principal
amount of the Loans at any time, at its election, (i) in the
case of a Prime Rate Loan, on any Business Day, without prior
notice, and (ii) in the case of LIBOR Rate Loans, upon not
less than three (3) Business Days prior notice to the Agent,
subject to Breakage Costs provided for in Section 2.12. Any
such voluntary repayment of the Loans shall be in the
principal amount of not less than (y) $500,000 for Prime Rate
Loans and in integral multiples of $100,000 thereafter and
(z)$1,000,000 for LIBOR Rate Loans and in integral multiples
of $250,000 thereafter. Any voluntary repayment of the Term
Loan shall be accompanied by payment of all accrued but unpaid
interest applicable to the principal amount of the Term Loan
so repaid.
(b) Installment Payments of Term Loan. The Borrower
will repay the Term Loan in quarterly installment
payments of principal, commencing on March 31, 1998 and
on the last day of each quarter thereafter, in
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accordance with the following:
Quarterly
Repayment Principal
Date Payment Amount
March 31, 1998 $675,000
June 30, 1998 $675,000
September 30, 1998 $875,000
December 31, 1998 $875,000
March 31, 1999 $875,000
June 30, 1999 $875,000
September 30, 1999 $1,070,000
December 31, 1999 $1,070,000
March 31, 2000 $1,070,000
June 30, 2000 $1,070,000
September 30, 2000 $1,070,000
December 31, 2000 $1,200,000
March 31, 2001 $1,200,000
June 30, 2001 $1,200,000
September 30, 2001 $1,200,000
December 31, 2001 $1,250,000
March 31, 2002 $1,250,000
June 30, 2002 $1,250,000
September 30, 2002 $1,250,000
(c) Mandatory Repayment.
(i) The Borrower will repay the Loans in full on demand upon
the acceleration of the due date of any of the Loans by the
Agent pursuant to Article VI hereof.
(ii) Within not more than five (5) Business Days after notice
by the Agent to the Borrower that the principal amount of
Revolving Loans and face amount of Letters of Credit
outstanding exceed the Borrowing Base, the Borrower will repay
the applicable Loan in an amount sufficient to eliminate the
excess.
(iii) The Borrower shall pay to the Agent Net Proceeds within
not more than five (5) Business Days after the Borrower shall
receive Net Proceeds from(x) Dispositions, (y) any equity
securities issuance or sale, provided that payment of amounts
due under the Braswell Earn Out Agreement(which payment shall
not exceed $6,000,000)may be made if Net Proceeds of such
issuance or sale exceed $20,000,000, or (z) insurance
recoveries and condemnation and eminent domain awards.
Collateral shall be released from the liens of the
Collateral Documents upon any Disposition of such Collateral,
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provided that (i) no Event of Default has occurred and (ii) the Borrower shall
have made the mandatory repayment required under the terms of this Section 2.7.
(iv) On or before the fifth Business Day following the
Borrower's delivery of the Compliance Certificate for the
fiscal year ending December 31, 1998 and annually thereafter
the Borrower will pay to the Agent 50% of the Excess Cash
Flow.
(d) Repayment of Swing Loans. Swing Loans shall be paid in
full by the Borrower on or before the seventh Business Day
after the date of the Swing Loan Advance. Swing Loan
repayments shall be made by the Borrower directly to the Swing
Loan Lender. Such repayments shall be for the account of the
Swing Loan Lender. Outstanding Swing Loans may be repaid from
the proceeds of Revolving Loans Advances. Any repayment of a
Swing Loan shall be in a minimum amount of $50,000 or integral
multiples of $10,000 in excess thereof(or such lesser amount
as may be agreed to by the Swing Loan Lender).
(e) Application of Repayments. All voluntary Loan repayments
received by the Agent from the Borrower will be applied to the
Revolving Loans and Term Loans as the Borrower shall instruct
the Agent in writing concurrently with the payment, and in the
absence of such written instructions, will be applied first to
repayment of the Revolving Loans. All mandatory Loan
repayments will be applied to reduce the Term Loans until the
Term Loans are paid in full, then to the repayment of the
Revolving Loans. All repayments of the Term Loans will be
applied to the installment payments due with respect to the
Term Loans in inverse order of maturity.
SECTION 2.8 Distribution of Payments by the Agent.
-------------------------------------
The Agent shall promptly distribute to each Bank its Pro Rata Share of
each payment received by the Agent under the Loan Instruments for the account of
the Banks by credit to an account of such Bank at the Agent's Office or by wire
transfer to an account of such Bank.
Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Banks under the Loan Instruments
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent in its sole discretion may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date a
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corresponding amount with respect to the amount then due such Bank. If and to
the extent the Borrower shall not have so made such payment in full to the Agent
and the Agent shall have so distributed to any Bank a corresponding amount, such
Bank shall, on demand, repay to the Agent the amount so distributed together
with interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Agent at the Prime
Rate.
SECTION 2.9 Promissory Notes.
(a) The Revolving Notes. The Revolving Loans shall be
evidenced by promissory notes of the Borrower in substantially
the form of Exhibit A-1 hereto (each a "Revolving Note"),
dated as of the Effective Date and completed with appropriate
insertions. One Revolving Note shall be payable to the order
of each Bank in a principal amount equal to such Bank's
Revolving Loans Commitment or, if different, the outstanding
amount of all Revolving Loans made (or held) by such Bank,
plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to
be made, at or about the time of an Advance of any Revolving
Loan or at the time of receipt of any payment of principal on
such Bank's Revolving Note, an appropriate notation on such
Revolving Note Record reflecting the making of such Revolving
Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Revolving Loans set forth on such
Bank's Revolving Note Record shall be prima facie evidence of
the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any
such amount shall not affect the obligation of the Borrower
hereunder or under any Revolving Note to make payments of
principal of or interest on any Revolving Note when due.
(b) Term Notes. The Term Loans shall be evidenced by
promissory notes of the Borrower in substantially the form of
Exhibit A-2 hereto (each a "Term Note"), dated the Effective
Date and completed with appropriate insertions. One Term Note
shall be payable to the order of each Bank in a principal
amount equal to such Bank's Term Loan Commitment and
representing the obligation of the Borrower to pay to such
Bank such principal amount or, if less, the outstanding amount
of such Bank's Term Loan Commitment, plus interest accrued
thereon, as set forth below. The Borrower irrevocably
authorizes each Bank to make or cause to be made a notation on
such Bank's Term Note Record reflecting the original principal
amount of such Bank's Term Loan Commitment and, at or about
the time of such Banks'
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receipt of any principal payment on such Bank's Term Note, an
appropriate notation on such Bank's Term Note Record
reflecting such payment. The aggregate unpaid amount set forth
on such Bank's Term Note Record shall be prima facie evidence
of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any
such amount on such Bank's Term Note Record shall not affect
the obligation of the Borrower hereunder or under any Term
Note to make payments of principal of and interest on any Term
Note when due.
(c) Swing Loan Note. The Swing Loans shall be evidenced by
promissory notes of the Borrower in substantially the form of
Exhibit A-3 hereto (each a "Swing Loan Note"), dated the
Effective Date and completed with appropriate insertions.
SECTION 2.10 Pro Rata Treatment. Except to the extent otherwise
provided herein, (a) Loans shall be made by the Banks pro rata in accordance
with their respective Commitments, (b) Loans of the Banks shall be converted and
continued pro rata in accordance with their respective amounts of Loans of the
Type and, in the case of LIBOR Rate Loans, having the Interest Period being so
converted or continued, (c) each reduction in the Revolving Loans Commitment and
the Term Loan Commitment shall be made pro rata in accordance with the
respective amounts thereof and (d) each payment of the principal of or interest
on the Loans, reimbursement of a Draw under Letters of Credit or of Commitment
or Letter of Credit Fees shall be made for the account of the Banks pro rata in
accordance with their respective amounts thereof then due and payable.
SECTION 2.11 Interest. The Borrower shall pay interest on the unpaid
principal amount of each Loan from the date of the Advance thereof or the date
of the Draw comprising such Loan until such principal amount has been repaid in
full, at the following rates per annum:
(a) Prime Rate Loans. During such periods as such Loan is a
Prime Rate Loan, at a rate per annum equal at all times to the
Prime Rate plus Applicable Margin or the Default Rate,
whichever is applicable. Prime Rate Interest plus the
Applicable Margin shall be payable monthly in arrears, on the
first day of each month. Interest accruing at the Default Rate
shall be payable on demand.
(b) LIBOR Rate Loans. During such periods as such Loan is a
LIBOR Rate Loan, at a rate per annum during the Interest
Period for such Loan equal to the LIBOR Rate plus the
Applicable Margin or the Default Rate,
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whichever is applicable. LIBOR Rate interest plus the
Applicable Margin will be payable on termination of the
Interest Period applicable to the Loan, and, if such Interest
Period is longer than 3 months, then every 3 months. Interest
accruing at the Default Rate shall be payable on demand.
(c) Default Rate Interest. Subject to the provisions
of Section 6.2, all outstanding Loans will bear
interest at the Default Rate during all periods when an
Event of Default has occurred and remains outstanding
hereunder.
SECTION 2.12 Yield Protection. In order to protect the yield of the
Banks in connection with the Advances to be made hereunder, the Borrower agrees
as follows.
(a) Increased Costs. If, due to either (i) the introduction of
or any change in or in the interpretation of any law or
regulation, or (ii) the compliance with any guideline or
request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any
increase in the cost to the Banks of agreeing to make or
making, funding or maintaining LIBOR Rate Loans, then the
Borrower shall from time to time, upon demand by a Bank, pay
to such Bank additional amounts sufficient to compensate the
Bank for such increased cost. A certificate as to the amount
of such increased cost, shall be submitted to the Borrower by
Agent. Such certificate shall show in reasonable detail the
Bank's computations of its increased costs. Notwithstanding
the foregoing, there shall be no duplication of costs to the
Borrower as the result of the application of Section 2.12(b).
Such certificate of increased costs shall be conclusive and
binding for all purposes, absent manifest error.
(b) Additional Interest. The Borrower shall pay to the Banks,
so long as the Banks shall be required under regulations of
the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency liabilities (as such
term is defined in Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time),
additional interest on the unpaid principal amount of each
LIBOR Rate Loan, from the date of the Advance thereof until
the principal amount thereof is paid in full, at an interest
rate per annum equal at all times to the remainder obtained by
subtracting (i) the LIBOR Rate for the Interest Period for
such Loan from
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(ii) the rate obtained by dividing such LIBOR Rate by a
percentage equal to 100% minus the reserve percentage
applicable during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of
such percentages for those days in such Interest Period during
which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) for the Banks with respect to
liabilities or assets consisting of or including Eurocurrency
liabilities having a term equal to such Interest Period,
payable on each date on which interest is payable on such
Loan. Such additional interest shall be determined by the
Agent and notified to the Borrower.
(c) Increased Capital. If a Bank determines that compliance
with any law or regulation or any guideline or request from
any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by the
Bank or any corporation controlling the Bank and that the
amount of such capital is increased by or based upon the
existence of the Bank's commitment to lend hereunder and other
commitments of this type, then, upon demand by the Bank, the
Borrower shall immediately pay to the Bank, from time to time
as specified by the Bank, additional amounts sufficient to
compensate the Bank or such corporation in the light of such
circumstances, to the extent that the Bank reasonably
determines such increase in capital to be allocable to the
existence of the Bank's commitment to lend hereunder. A
certificate as to such amounts submitted to the Borrower by
the Agent or a Bank, shall be conclusive and binding for all
purposes, absent manifest error. Such certificate shall show
in reasonable detail the Agent's or the Bank's computations.
(d) Breakage Costs. If any payment of principal of any LIBOR
Rate Loan is made other than on the last day of the Interest
Period for such Loan as a result of acceleration of the
maturity of the Loans and the Notes pursuant to Section 6.2 or
for any other reason, the Borrower shall, upon demand, pay to
the Bank any amounts required to compensate the Bank for
additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated
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profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds
acquired by the Bank to fund or maintain such Advance.
SECTION 2.13 Conversion of Loans; Change of Interest Periods. At any
time, with respect to Prime Rate Loans, and at any time not less than three (3)
Business Days prior to the end of the then current Interest Period for any LIBOR
Rate Loan, the Borrower may elect, by delivery to the Bank of an Interest
Period/Conversion Notice in the form of Exhibit B-3 duly executed by an
Authorized Signatory, to Convert the Type of Advance or, with respect to LIBOR
Rate Loans, to select an Interest Period for such Advance as permitted herein.
If the Borrower fails to select the duration of any Interest Period for any
LIBOR Rate Loan in the foregoing manner, such Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Prime
Rate Loan.
SECTION 2.14 Illegality, Etc.
(a) Notwithstanding any other provision of this Agreement, if
the Agent or a Bank shall notify the Borrower that the
introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful,
for a Bank to perform its obligations hereunder to make LIBOR
Rate Loans or to fund LIBOR Rate Loans hereunder, (i) the
obligation of the Bank to make, or to Convert Loans into LIBOR
Rate Loans shall be suspended until the Bank shall notify the
Borrower that the circumstances causing such suspension no
longer exist and (ii) the Borrower shall prepay in full all
LIBOR Rate Loans of the Bank then outstanding, together with
interest accrued thereon, either on the last day of the
Interest Period thereof if the Banks may lawfully continue to
maintain LIBOR Rate Loans to such day, or immediately, if the
Banks may not lawfully continue to maintain LIBOR Rate Loan,
unless the Borrower, within five (5) Business Days of notice
from the Bank, Converts all LIBOR Rate Loans of the Bank then
outstanding into Prime Rate Loans in accordance with Section
2.13.
(b) If, with respect to any LIBOR Rate Loan, a Bank notifies
the Borrower that the LIBOR Rate for any Interest Period for
such Advance will not adequately reflect the cost to the Bank,
in the Bank's reasonable judgement, of making, funding or
maintaining such LIBOR Rate Loan for such Interest Period,
such LIBOR Rate Loan will automatically, on the last day of
the then existing Interest Period therefor, Convert into a
Prime Rate Loan, and the obligation of the Bank to make, or
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to Convert Advances into, LIBOR Rate Loans shall be suspended
until the Bank shall notify the Borrower that the
circumstances causing such suspension no longer exist. Upon
receipt of such notice, the Borrower may revoke any Request
for Advance or Interest Period/Conversion Notice then
submitted by it. If the Borrower does not revoke such request
or notice, the Bank shall make, convert or continue the Loan,
as proposed by the Borrower, in the amount specified in the
applicable request or notice submitted by the Borrower, but
such Loan shall be made, converted or continued as a Prime
Rate Loan instead of a LIBOR Rate Loan.
SECTION 2.15 Payments and Computations.
(a) The Borrower shall make each payment under any Loan
Instrument not later than 12:00 noon (Denver, Colorado time)
on the day when due in Dollars to the Agent at its address
referred to in Section 8.2 in same day funds.
(b) The Borrower hereby authorizes the Agent, if and to the
extent payment is not made when due, subject to the expiration
of applicable grace periods, under any Loan Instrument, to
charge from time to time against the Borrower's Account or any
or all other accounts of the Borrower with the Agent any
amount so due.
(c) All computations of interest and of Fees shall be made by
the Agent on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but
excluding the last day) occurring in the period for which such
interest or Commitment Fees are payable. Each determination by
the Agent of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error, on the
Borrower and the Banks.
(d) Whenever any payment under any Loan Instrument shall be
stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the
computation of payment of interest or the Commitment Fee, as
the case may be; provided, however, if such extension would
cause payment of interest on or principal of LIBOR Rate Loans
to be made in the next following calendar month, such payment
shall be made on the next preceding Business Day.
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SECTION 2.16 Effect of Letters of Credit on Revolving Loans Commitment
Utilization. For purposes of determining whether any additional Advances may be
made to the Borrower under the Revolving Loans Commitment, or whether any
additional Letters of Credit may be issued for the account of the Borrower, and
for purposes of establishing the unused portion of the Revolving Loans
Commitment in order to calculate the Commitment Fee, the face amount of each
Letter of Credit shall be added to the outstanding principal amount of all
outstanding Revolving Loans to determine whether any portion of the Maximum
Revolving Credit Amount then in effect remains unutilized.
SECTION 2.17 Cash Collateralization of Letters of Credit. If the due
date for payment of the Loans is accelerated by the Banks pursuant to Section
6.2, the Borrower will immediately deliver to the Issuing Bank in immediately
available funds an amount equal to the undrawn amount of all Letters of Credit
outstanding. Such funds shall be maintained in a blocked interest bearing
account at the Issuing Bank. By such delivery, the Borrower will pledge such
funds to the Issuing Bank and grant to the Issuing Bank a security interest in
such funds, and in all interest which may be earned thereon while held by the
Issuing Bank, to secure payment of all Draws under any such Letters of Credit.
Upon expiration of each Letter of Credit, the Issuing Bank will refund to the
Borrower a portion of such funds in an amount equal to the undrawn amount of the
expiring Letter of Credit. Upon expiration of the last outstanding Letter of
Credit, the Issuing Bank will refund to the Borrower all remaining funds so
delivered to the Issuing Bank, and all interest earned thereon while such funds
were held by the Issuing Bank, less all Draws.
SECTION 2.18 Borrowing Base. Not later than the initial Advance or
initial issuance of a Letter of Credit, and thereafter not later than 25 days
after the conclusion of each month, the Borrower will deliver to the Agent a
Borrowing Base Certificate, in the form of Exhibit B-4, duly executed by an
Authorized Signatory, which Borrowing Base Certificate will set forth the
information contained therein as of the end of the preceding month. The Banks
will have the right to request and the Borrower will promptly provide reasonable
additional information concerning the information set forth in the Borrowing
Base Certificate. Within five (5) days after receipt of the Borrowing Base
Certificate, the amount set forth therein as the Borrowing Base shall become the
Borrowing Base under this Agreement unless prior to the end of such period the
Banks shall have given notice to the Borrower that a different amount is
effective as the Borrowing Base. The Borrowing Base so established shall remain
effective until the Bank elects to redetermine the Borrowing Base, subject to
the terms of this Agreement, whether based upon the next monthly Borrowing Base
Certificate submitted by the Borrower to the Bank, or at any other time, in the
Bank's sole
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discretion. For purposes of determining the applicable Borrowing Base, (i)
Eligible Accounts Receivable shall be valued at eighty percent (80%) of the
amount thereof and (ii) Eligible Inventory shall be valued at sixty percent
(60%) of the amount thereof. The value of Eligible Inventory shall be determined
on a first in, first out basis, and shall be the cost thereof except for
finished goods, which will be valued at the lesser of cost or wholesale sale
price thereof. During the construction of the Borrower's plant in Oregon, the
Borrowing Base Certificate shall reflect a reserve, equal to the remaining
projected construction cost of the plant, that shall be a deduction from the
Borrowing Base. The amount of the reserve shall be satisfactory to the Agent.
Upon provision of evidence satisfactory to the Agent by the Borrower of the
payment of expenses budgeted for the construction of the plant, the reserve for
the construction of the plant will be reduced on the Borrowing Base Certificate.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.1 Conditions Precedent to Initial Advance or Issuance of
Initial Letter of Credit. The obligation of the Banks to make its initial
Advance of the Loans or issue the initial Letter of Credit is subject to the
satisfaction (or waiver by the Banks in their sole discretion) of the following
conditions precedent:
(a) that the Agent shall have received on or before the day of
such Advance or issuance of such Letter of Credit the
following, each dated as of the Effective Date, in form and
substance satisfactory to the Agent:
(i) The Notes, duly executed by Authorized
Signatories on behalf of the Borrower.
(ii) The Guaranties, duly executed by the
Guarantors.
(iii) A Deed of Trust from and duly executed by Authorized
Signatories on behalf of the Borrower pertaining to all of
Borrower's owned Real Property.
(iv) A Security Agreement from and duly executed by Authorized
Signatories on behalf of the Borrower, pertaining to the
Borrower's Equipment, Accounts Receivable, Inventory and all
other personal property of the Borrower.
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(v) A Collateral Assignment of Leases in the form of Exhibit
F-2 duly executed by Authorized Signatories on behalf of the
Borrower pertaining to the portion of Borrower's owned Real
Property consisting of leasehold interests.
(vi) The Pledge Agreement, duly executed by the Borrower,
pertaining to Borrower's shares of stock in Guarantors
together with the original stock certificates subject thereto
and stock powers therefor, and pertaining to Borrower's
Equipment and the Borrower's Accounts Receivable and Inventory
and all the other personal property of the Borrower except the
personal property subject to other Collateral Documents.
(vii) A Deed of Trust from and duly executed by each Guarantor
pertaining to the Real Property owned by such Guarantor.
(viii) A Security Agreement from and duly executed by each
Guarantor pertaining to such Guarantor's portion of
Guarantors' Equipment, such Guarantor's Accounts Receivable,
such Guarantor's Inventory and all other personal property of
each such Guarantor except the personal property subject to
other Collateral Documents.
(ix) Uniform Commercial Code Financing Statements pertaining
to the Security Agreements, the Pledge Agreement and the
Collateral Assignments of Leases, duly executed by the
Borrower and the Guarantors, respectively, as the Agent may
request.
(x) Title insurance commitments in ALTA form pertaining to
Borrower's owned Real Property, in form and content and issued
by a title insurance company or companies reasonably
acceptable to the Agent, in an amount equal to the fair market
value of such Real Property insuring the Agent's first and
prior Lien on all such parcels established pursuant to the
Deeds of Trust and Collateral Assignments of Leases, together
with a revolving credit endorsement and such other
endorsements and affirmative coverages as the Agent may
request, subject only to Permitted Liens and other Liens and
exceptions approved by the Banks in their sole discretion, in
all cases constituting the unconditional commitment of such
title insurance company or companies to issue title insurance
policies in favor of the Agent on the terms of such title
insurance commitments promptly after the recording by
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such title insurance company or companies of the Deeds of
Trust and Collateral Assignments of Leases.
(xi) Lien searches of the appropriate public offices
demonstrating that no Lien is of record with respect to the
Borrower or any Guarantor except (i) Liens which will be
terminated or released upon the consummation of the Circuit
Test Acquisition or upon repayment of the Borrower's
obligations under the Existing Loan Agreement and (ii)
Permitted Liens.
(xii) Certificates of insurance, in form and substance
satisfactory to the Agent from an independent insurance broker
dated as of the Effective Date, identifying insurers, types of
insurance, insurance limits, policy terms, and identifying the
Agent (on behalf of the Banks) as additional insured and loss
payee.
(xiii) The Borrower's Omnibus Certificate, duly
executed by Authorized Signatories on behalf of the
Borrower.
(xiv) A Guarantor's Omnibus Certificate, on behalf of each of
the Guarantors, duly executed by Authorized Signatories on
behalf of each of such Persons.
(xv) The favorable opinion of Holme Roberts & Owen LLP, legal
counsel to the Borrower and the Guarantors, substantially in
the form of Exhibit H-1 and H-2 hereto and local counsel
opinions, substantially in form of Exhibit H-3 and otherwise
satisfactory to the Banks and the Agent, with respect to
matters involving the laws of Oregon, Kentucky and Florida .
(xvi) Certificates from the Colorado, Oregon, Kentucky and
Florida Secretaries of State of recent date pertaining to the
Borrower and to the Guarantors incorporated in such states,
(a) confirming that each of such Persons is duly incorporated
and in good standing in the state of its incorporation, and in
such other states as the Agent may request.
(xvii) A Borrowing Base Certificate August 31,1997 and
Compliance Certificate, effective as of June 30, 1997, with
respect to Eligible Accounts Receivable and Eligible
Inventory, duly executed by the Borrower. These certificates
shall include applicable information from Circuit Test,
Circuit Test International and Airhub Services effective as of
August 30, 1997 and certified as true and correct by the
Borrower.
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(xviii) Phase I Environmental Assessments of all of Borrower's
owned Real Property and Guarantors' owned Real Property and
the AlliedSignal leased premises(excluding such parcels as the
Agent may approve in its sole discretion), in form and content
and prepared by consultants, reasonably acceptable to the
Agent, indicating the absence of conditions which would
warrant a Phase II Environmental Assessment of such Real
Property, provided, however that this condition will be waived
with respect to the AlliedSignal leased premises when the
Agent receives evidence satisfactory to it that the Banks will
be indemnified under the AlliedSignal Acquisition Agreements
against Environmental Claims relating to such leased premises.
(xix) A Landlord's Waiver and Consent for each of the
Borrower's or Guarantor's leased business premises
located in Ft. Lauderdale, Florida and Oregon (101. 115
and 125 South Elliot Road leases only) executed by the
landlord for such premises.
(xx) Such other documents as the Agent and the Banks may
reasonably request to effect the purposes of this Agreement
and the other Loan Instruments.
(b) The Deeds of Trust identified in (a)(iii) and (a)(vii)
shall have been duly recorded and the Uniform Commercial Code
Financing Statements identified in (a)(ix) above shall have
been duly filed except that such Deeds of Trust and Uniform
Commercial Code Financing Statements pertaining to the Persons
to be acquired pursuant to the Circuit Test Acquisition shall
be delivered to the Agent in recordable form and duly
executed.
(c) The Agent shall have received evidence satisfactory to it
that all amounts due from the Borrower to the lender under the
Existing Loan Agreement have been paid in full out of the
proceeds of the Loans on the Effective Date, or provision for
payment thereof in a manner acceptable to the Agent in its
sole discretion, shall have been made by the Borrower and
approved by the Agent, and the Agent shall have received
executed termination statements, in form satisfactory for
filing, evidencing the termination of the security interests
in the Borrower's properties which secured the Existing Loan
Agreement.
(d) The Agent and Banks shall have received evidence
satisfactory to them, in their sole discretion, that the
transactions contemplated by the Circuit Test
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Acquisition Agreement shall be ready for closing in accordance
with the terms of such agreement and that all parties thereto
have agreed to complete the closing thereof promptly after the
Initial Advance is made or the initial Letter of Credit is
issued,
(e) All conditions precedent to the advance of any portion of
the loan contemplated by the Monfort Subordinated Notes shall
have been satisfied, or this condition shall have been waived
by the Required Banks.
(f) The Borrower shall have paid to the Agent the Fees, the
applicable Letter of Credit Fees, and all fees and expenses
set forth in Section 8.4, including, without limitation, all
accrued and unpaid legal fees and disbursements and the
reasonable estimate of the Agent of the attorneys fees and
disbursements incurred by it through the closing (provided
that such estimate shall not thereafter preclude final
settling of accounts between the Agent and the Borrower with
respect to attorneys fees and disbursements incurred by the
Agent hereunder).
SECTION 3.2 Conditions Precedent to All Advances and Issuance of All
Letters of Credit. The obligation of the Banks to make each Advance (including
the initial Advance) and to issue each Letter of Credit shall be subject to the
satisfaction (or written waiver by the Required Banks in their sole discretion)
of the following further conditions precedent that on the date of such Advance:
(a) the following statements shall be true:
(i) Except as provided in Section 3.2(a)(ii), the
representations and warranties contained in Section 4.1 of
this Agreement and in the Guaranties, are correct on and as of
the date of such Advance, before and after giving effect to
such Advance and to the application of the proceeds therefrom,
or before and after issuance of such Letter of Credit, as the
case may be, as though made on and as of such date,
(ii) The information contained in the Schedules to this
Agreement is correct, except that the Borrower may amend such
Schedules at the time of a Request for Advance if such
amendment to the Schedule does not disclose an Event of
Default or a Material Adverse Effect,
(iii) No event has occurred and is continuing, or would result
from such Advance or from the application of the proceeds
therefrom, or would result from the
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issuance of such Letter of Credit, which constitutes a
Default or an Event of Default hereunder, and
(iv) No change shall have occurred in the financial condition
or business of the Borrower or any Guarantor which would
constitute a Material Adverse Effect (other than any such
changes resulting from the closing of the Circuit Test
Agreement and Allied Signal Agreements); and
(b) the Agent shall have received a Request for Advance or a
Request for Letter of Credit, as applicable, with respect to
the Advance or Letter of Credit and such other approvals,
opinions or documents as the Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of the
Borrower. The Borrower represents and warrants as follows:
(a) Corporate Existence. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Colorado. Each of Current, Circuit Test
and CT LLC Acquisition is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of its incorporation. Airhub Services and CT
International are limited liability companies duly
incorporated, validly existing and in good standing under the
laws of Kentucky and Florida, respectively. The capital
structure and shareholders of the Borrower and the Guarantors
are set forth in Schedule 4.1(a).
(b) Powers, Etc. The Borrower and each of the Guarantors (a)
has the power and authority to carry on its business as now
conducted and to own or hold under lease the assets and
properties it purports to own or hold under lease; (b) is duly
qualified, licensed or registered to transact its business and
is in good standing in every jurisdiction in which failure to
be so qualified, licensed or registered could have a Material
Adverse Effect; (c) has the power and authority to execute and
deliver this Agreement and each of the other Loan Instruments
to which it is or will be a party and to perform all of its
obligations hereunder and thereunder; and (d) conducts its
business
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under the names (and only the names) set forth in Schedule
4.1(b) hereto; and (e) is qualified to do business in each of
the states listed on Schedule 4.1(b).
(c) Authorization; No Conflict. The execution, delivery and
performance by the Borrower of each Loan Instrument to which
it is or will be a party are within the Borrower's powers,
have been duly authorized by all necessary corporate action,
and do not contravene (i) the Borrower's Articles of
Incorporation or Bylaws, (ii) any law or judgement, order,
writ, injunction, decree or consent of any court binding on or
affecting the Borrower, (iii) any contract to which the
Borrower is a party, or by which the Borrower or its
properties are bound; and (iv) do not result in or require the
creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with respect
to any of its properties. The execution, delivery and
performance by each of the Guarantors of each Loan Instrument
to which such Person is or will be a party are within the such
Person's respective corporate powers, have been duly
authorized by all necessary corporate or limited liability
company, as applicable, action by such Person, and do not
contravene (i) such Person's articles of incorporation or
by-laws, or (ii) any law or any contractual restriction
binding on or affecting such Person, and do not result in or
require the creation of any lien, security interest or other
charge or encumbrance (other than pursuant hereto) upon or
with respect to any of such Person's properties.
(d) Approvals. No authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due
execution, delivery and performance by the Borrower or the
Guarantors of any Loan Instrument to which any such Person is
or will be a party except as indicated in Schedule 4.1(d), all
of which have been duly obtained and are in full force and
effect.
(e) Enforceability. This Agreement is, and each other Loan
Instrument to which the Borrower will be a party when
delivered hereunder will be, the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms. Each Loan Instrument to which each
Guarantor will be a party when delivered hereunder will be the
legal, valid and binding obligation of each such Person,
enforceable against such Persons, respectively, in accordance
with its terms.
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(f) Financial Statements. The unaudited pro forma consolidated
balance sheets of the Borrower and the Guarantors as at
December 31, 1996, and the related consolidated statements of
income and retained earnings of the Borrower and the
Guarantors for the fiscal year then ended, as disclosed in the
proxy statement mailed to the Borrower's shareholders in
connection with the Circuit Test Acquisition, and the
unaudited balance sheets of the Borrower and the Guarantors as
at June 30, 1997, and the related consolidated statements of
income and retained earnings of the Borrower and Guarantors
for the fiscal quarter then ended, copies of which have been
furnished to the Banks, fairly present the financial condition
of the Borrower and the Guarantors as at such date and the
results of the operations of the Borrower and the Guarantors
for the period ended on such date, all in accordance with
Regulation S-X promulgated under the Securities Exchange Act
of 1934, and since December 31, 1996, there has been no
material adverse change in such condition or operations except
as disclosed in Schedule 4.1(f) hereto.
(g) Litigation. Except as set forth in Schedule 4.1(g) hereto,
there is no pending, or to the Borrower's knowledge,
threatened action or proceeding affecting the Borrower or any
of its properties or business activities or any of the
Guarantors or their respective properties or business
activities, before any court, governmental agency or
arbitrator, in which there is a reasonable possibility of a
Material Adverse Effect or which purports to affect the
legality, validity or enforceability of this Agreement or any
Loan Instrument to which the Borrower or any Guarantor will be
a party.
(h) Federal Reserve Regulations. None of the Advances to be
provided to the Borrower hereunder will be used in violation
of Regulations G, T, U or X. The Borrower is not engaged in
the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying
Margin Stock (within the meaning of Regulations G, T, U and
X). No part of the proceeds of any extension of credit
hereunder, whether directly or indirectly, and whether
immediately, incidentally or ultimately, will be used (i) to
purchase or carry Margin Stock or to extend credit to others
for the purpose of purchasing or carrying Margin Stock or to
refund indebtedness originally incurred for such purpose, or
(ii) for any purpose which entails a violation of, or which is
inconsistent with, the
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provisions of the Regulations of the Board of governors of the
Federal Reserve system, including Regulations G, T, U or X.
(i) Investment Company Act. The Borrower is not an
"investment company' or a company "controlled" by an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(j) ERISA.
(i) The Borrower and Guarantors neither maintain nor
contribute to any Employee Benefit Plan or Multiemployer Plan
other than those specified in Schedule 4.1(j).
(ii) The Borrower and the Guarantors are in compliance in all
material respects with all applicable provisions of ERISA and
the Code with respect to all Employee Benefit Plans. Each
Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to
such Plan has been determined to be exempt from federal income
tax under Section 501(a) of the Code. The actuarial present
value of all accumulated benefit obligations under each Plan,
as disclosed in the most recent actuarial report with respect
to such Plan, do not exceed the fair market value of the
assets of such Plan. No material liability has been insured by
the Borrower, any Guarantor or any of their ERISA Affiliates
which remains unsatisfied for any taxes, penalties or other
amount (other than contributions in the ordinary course) with
respect to any Employee Benefit Plan or any Multiemployer
Plan, and to the best knowledge of the Borrower no such
material liability is expected to be incurred.
(iii) The Borrower and the Guarantors have not (a) engaged in
a nonexempt prohibited transaction described in Section 406 of
ERISA or Section 4975 of the Code; (b) incurred any liability
to the Pension Benefit Guaranty Corporation which remains
outstanding other than the payment of premiums and there are
no premium payments which are due and unpaid; (c) failed to
make a required contribution or payment to a Multiemployer
Plan; or (d) failed to make a required installment or other
required payment under Section 412 of the Code.
(iv) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan or
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Multiemployer Plan maintained or contributed to by the
Borrower or any Guarantor.
(v) No material proceeding, claim (other than routine claims
for benefits) lawsuit and/or investiga tion is existing or, to
the Borrower's knowledge, threatened concerning or involving
any Employee Benefit Plan or Multiemployer Plan maintained or
contributed to by the Borrower or any Guarantor.
(k) Compliance with Laws. The Borrower and the Guarantors are
in compliance with all applicable laws, ordinances, treaties,
rules, regulations and orders of, and all applicable
restrictions imposed by, all Governmental Authorities in
respect of the conduct of their respective businesses and the
ownership of their respective properties, except such
noncompliance as would not, individually or in the aggregate,
have a Material Adverse Effect on the Borrower or a
Guarantor's Adverse Effect on any Guarantor.
(l) Payment of Debts and Taxes.
(i) The Borrower and each Guarantor: (a) has filed all
required federal and material state and local tax returns with
appropriate taxing authorities respecting its operations,
assets and properties; and (b) has paid or caused to be paid
all taxes shown on those returns to the extent due, and has
paid all tax or other assessments imposed by Governmental
Authorities, except in either case taxes which are being
contested in good faith and for which adequate bonds or other
sureties as required by law have been posted by the Borrower
or Guarantor.
(ii) The Borrower and each Guarantor is current in its payment
of Debts (other than Debt in an aggregate amount not to exceed
$1,000,000.00) and performance of material obligations under
Material Agreements (other than taxes) except those being
contested in good faith.
(m) Indebtedness, Guaranties.
(i) Schedule 4.1(m), Part I contains a complete and accurate
list of all Debt of the Borrower and each of the Guarantors,
whether individual, joint, several or otherwise, and whether
fixed or contingent, including commitments, lines of credit
and other credit availabilities, identifying with respect to
each the respective parties, amounts and maturities.
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(ii) Schedule 4.1(m), Part II contains a complete and accurate
list of all guarantees or other surety arrangements or
undertakings of the Borrower and each of the Guarantors for
obligations of any other Person (except for negotiable
instruments endorsed for collection or deposit in the ordinary
course of business), whether individual, joint, several or
otherwise, identifying with respect to each of the parties,
amounts and maturities.
(n) Material Agreements. Except as set forth in Schedule
4.1(n), and except for the Loan Instruments, the Borrower and
the Guarantors are not a party to any Material Agreements. The
Borrower and each Guarantor is in material compliance with all
Material Agreements and has not received any notices from
counter parties thereto asserting violations of any such
Material Agreements by the Borrower or any Guarantor or
asserting rights to terminate or modify any of such Material
Agreements.
(o) Properties, Inventory and Equipment. The Borrower owns or
leases the real property identified in Part I of Schedule
4.1(o) (the "Borrower's Real Property") and owns the Equipment
and Inventory in the states identified in Schedule 4.1(o). The
Guarantors own or lease the real property identified in Part
II of Schedule 4.1(o) (the "Guarantors' Real Property") and
own the Equipment and Inventory in the states identified in
Schedule 4.1(o). The Borrower's Equipment and Inventory is
located in the states set forth in Part I of Schedule 4.1(o).
The Guarantors' Equipment and Inventory is located in the
states listed in Part II of Schedule 4.1(o). The Borrower has
good, marketable and insurable title to, or valid leasehold
interests in, all of Borrower's owned Real Property and good
title to Borrower's Equipment and the other assets of the
Borrower, free and clear of all Liens, other than the Liens
identified in Part III of Schedule 4.1(o) and other Permitted
Liens. The Guarantors have good, marketable and insurable
title to, or valid leasehold interests in, all of Guarantors'
Real Property and good title to Guarantors' Equipment and the
other assets of the Guarantors, free and clear of all Liens,
other than the Liens identified in Part IV of Schedule 4.1(o)
and other Permitted Liens.
(p) Financial Condition. Neither the Borrower nor any
Guarantor is entering into the arrangements contem
plated by this Agreement and the other Loan Instruments
with actual intent to hinder, delay or defraud either
present or future creditors of the Borrower or any
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Guarantor. On and as of the date of execution hereof by the
Borrower, and on and as of the date of each Advance hereunder
by the Banks, on a pro forma basis after giving effect to the
transactions contemplated by the Loan Instruments and to all
indebtedness (including Debt) incurred or to be created in
connection herewith:
(i) the present fair saleable value of the assets of the
Borrower and each Guarantor, respectively, (on a going concern
basis) will exceed the probable liability of the Borrower and
each Guarantor, respectively, on its indebtedness (including
Debt and contingent obligations);
(ii) the Borrower and each Guarantor, respectively, has not
incurred, nor does Borrower intend to or believe it will
incur, nor will Borrower permit any Guarantor to incur
indebtedness (including Debt and contingent obligations)
beyond its ability to pay such indebtedness as such
indebtedness matures (taking into account the timing and
amounts of cash to be received from any source, and of amounts
to be payable on or in respect of such indebtedness); and the
amount of cash available to the Borrower and Guarantors after
taking into account all other anticipated uses of funds is
anticipated to be sufficient to pay all such amounts on or in
respect of its respective indebtedness (including Debt and
contingent liabilities) when such amounts are required to be
paid; and
(iii) the Borrower and each Guarantor will have sufficient
capital with which to conduct its present and proposed
business, and the assets of the Borrower and each Guarantor,
respectively, do not constitute unreasonably small capital
with which to conduct its present or proposed business.
(q) Insurance. The Borrower and each of the Guarantors
currently maintains with financially sound and reputable
insurers insurance concerning its assets and business, with
such deductibles and retentions and having coverages against
risks, losses or damages as are customarily carried by
reputable companies in the same or similar businesses, such
insurance being in amounts no less than those amounts which
are customary for such companies under similar circumstances,
which third-party insurance coverages are identified in
Schedule 4.1(q).
(r) Full Disclosure. No representation or warranty
contained in this Agreement or in any other Loan
Instrument to which the Borrower is a party, or in any
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other document furnished from time to time by the Borrower to
the Bank pursuant to this Agreement, contains any untrue
statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not
misleading in any material respect as of the date made or
deemed to be made. Except as may be set forth herein or in any
of the Schedules hereto, there is no fact known to the
Borrower which has had, or is reasonably expected to have, a
Material Adverse Effect.
(s) No Default. No Default or Event of Default has
occurred and is continuing.
(t) Status of Loans as Senior Debt. All Debt of the Borrower
to the Banks and the Agent in respect of the Loans constitutes
"Senior Debt" or "Senior Indebtedness" (or the analogous term
used therein) under the terms of the Monfort Subordinated
Notes or of any other instrument evidencing or pursuant to
which there is issued indebtedness which purports to be
Subordinate Debt of the Borrower.
(u) Swap Obligations. Neither the Borrower nor any of its
Subsidiaries has incurred any outstanding obligations under
any Swap Contracts, other than Permitted Swap Obligations. The
Borrower has undertaken its own independent assessment of its
consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks
associated with such matters and has not relied on any swap
counterparty or any Affiliate of any swap counterparty in
determining whether on not to enter into any Swap Contract.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.1 Affirmative Covenants. So long as any of the Notes shall
remain unpaid or any Letter of Credit remains outstanding, or the Banks shall
have any Commitment hereunder, or any obligation of the Borrower or any
Guarantor hereunder or under any Loan Instrument has not been fully performed,
the Borrower will, unless the Required Banks shall otherwise consent in writing:
(a) Use of Proceeds. Subject to compliance by the
Borrower with all of the terms and conditions hereof,
use the Advances exclusively to pay amounts due under
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the Existing Loan Agreement, to perform its obligations under
the Circuit Test, Inc Agreement and the Allied Signal
Agreement and for any corporate purpose of the Borrower or any
Guarantor. Letters of Credit issued hereunder may be for any
corporate purpose of the Borrower or any Guarantor.
(b) Reporting and Notice Requirements. Provide to each
Bank:
(i) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, audited
consolidated statements of income, retained earnings and cash
flow for the Borrower and the Guarantors for such fiscal year
and the related audited consolidated balance sheets of the
Borrower and the Guarantors as of the end of such fiscal year,
setting forth in comparative form the corresponding
consolidated figures for such fiscal year and the prior fiscal
year, each accompanied by a report of the Borrower's
independent public accountants (who shall be a nationally
recognized firm or otherwise satisfactory to the Agent), which
reports shall state that such consolidated financial
statements fairly present the consolidated financial condition
and results of operations of the Borrower in accordance with
GAAP without material qualification;
(ii) simultaneously with the delivery of the annual financial
statements referred to in Section 5.1(b)(i) above, a report of
the independent auditors who audited such statements stating
that, in connection with their audit of such statements (and
without conducting any procedures other than those customarily
conducted in a year-end audit), such auditors have obtained no
knowledge of any condition or event which constitutes a
Default or Event of Default hereunder, or if such auditors
have obtained knowledge of any such condition or event,
specifying in such report each such condition or event of
which they have knowledge and the nature and status thereof;
provided, however, that such auditors shall not be liable to
the Banks by reason of any failure to obtain knowledge of any
condition or event which constitutes a Default or Event of
Default that would not be disclosed in the course of their
audit examination;
(iii) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, a
consolidated budget for the Borrower and the Guarantors for
the following fiscal year, and an operating plan for the
Borrower and the Guarantors for
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the then current fiscal year and the two following
fiscal years, in a form and at a level of detail
reasonably acceptable to the Agent;
(iv) within 45 days after the conclusion of each fiscal
quarter of the Borrower, a Compliance Certificate signed by
the chief executive officer or chief financial officer of the
Borrower, in the form of Exhibit B-5, (i) to the effect that
no Default or Event of Default is in existence, (ii)setting
forth in reasonable detail the computations necessary to
demonstrate compliance by the Borrower with the financial
covenants set forth in Section 5.2(a), (iii) the computations
in reasonable detail of the Total Debt to Trailing Four
Quarter EBITDA ratio referred to in the definitions of
Applicable Margin and Letter of Credit Rate and (iv)(if
applicable) reconciliations to reflect any relevant changes in
GAAP since the Effective Date.
(v) as soon as available, and in any event within 45 days
after the end of each fiscal quarter, (A) a Form 10-Q filed by
the Borrower with the Securities and Exchange Commission; and
(B) a backlog summary report in form and substance reasonably
satisfactory to the Agent;
(vi) within 25 days after the end of each month, (A) a
Borrowing Base Certificate;(B) a listing and aging of all
Accounts Receivable of the Borrower and the Guarantors (with
all of the foregoing to be in form and at a level of detail
reasonably acceptable to the Agent) and (C) an inventory
summary report in form and substance reasonably satisfactory
to the Agent;
(vii) promptly upon receipt thereof, copies of all
"management letters" received by the Borrower from the
Borrower's independent accountants;
(viii) as soon as possible, and in any event within
35 days after the Borrower knows or has reason to know
thereof, notice of any ERISA Event;
(ix) promptly upon the occurrence thereof, notice of any
Default or Event of Default describing the same in reasonable
detail, together with a report concerning the steps which the
Borrower is taking or will take to remedy such Default or
Event of Default;
(x) promptly on the occurrence thereof, notice of
any Material Adverse Effect describing the same in
reasonable detail, together with a report concerning
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the steps which the Borrower is taking or will take to
eliminate such Material Adverse Effect;
(xi) promptly after receipt of written request from the Agent
or the Required Banks, such other information concerning the
Borrower or any of the Guarantors, and concerning their
respective businesses, operations, assets or financial
condition (including accounts payable listings and agings,
fixed asset schedules and information concerning leases) as
the Agent or Required Banks may reasonably request; provided
that so long as no Event of Default has occurred, such request
for information shall be limited to one request per month and
(xii) promptly upon the occurrence thereof, notice of
all changes in the articles of incorporation or by laws
of the Borrower or any of the Guarantors, or in the
following executive officers of the Borrower or
Guarantors, Jack Calderon, Allen S. Braswell, Jr. or
Stuart Fuhlendorf; and
(xiii) promptly after the furnishing thereof to the
shareholders of the Borrower copies of all financial
statements, reports and proxy statements so furnished;
and
(xiv) promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or
other regular reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange
Commission.
(c) Maintenance of Existence, Etc. Except as provided in
Section 5.2(b), maintain its corporate existence and cause
each Guarantor to maintain its corporate existence, and
maintain and cause each Guarantor to maintain their respective
material rights, privileges and franchises.
(d) Compliance With Laws. Comply and cause each Guarantor to
comply in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over each
such Person or their respective business, except where the
failure to comply would not have a Material Adverse Effect.
(e) Insurance.
(i) Maintain the third-party insurance identified
in Schedule 4.1(q), provided, however, that in no event
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shall such insurance be for an amount less than the the
replacement cost of the assets so insured.
(ii) Without limiting the obligations of the Borrower under
this Section 5.1(e), in the event the Borrower fails to
maintain the insurance required by the foregoing provisions of
this Section 5.1(e), then the Banks may, but shall have no
obligation to, procure insurance covering the interests of the
Banks, in such amounts and against such risks as the Banks
shall deem appropriate, and the Borrower will reimburse the
Banks in respect of any premiums paid by the Banks as provided
in Section 8.4.
(f) Material Agreements. Perform, and cause
Guarantors to perform, all of each such Person's
obligations under the Material Agreements in
substantial compliance with all terms and conditions
thereof.
(g) Obligations and Taxes. Pay and cause Guarantors to pay
each such Person's Debt in excess of $1,000,000 and other
obligations in accordance with their terms and pay and
discharge promptly all Federal and material State and local
taxes, and all material governmental assessments and charges
or levies imposed upon any such Person or upon such Person's
income or profits or in respect of its assets or business, or
in any event before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to a
Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required
so long as the validity or amount thereof shall be contested
in good faith by appropriate proceedings and the Borrower or
such Guarantor, as applicable, shall have set aside on its
books adequate reserves in accordance with GAAP with respect
thereto.
(h) Maintaining Records; Access to Properties and Inspections.
Maintain, and cause all Guarantors to maintain, all financial
records in accordance with GAAP and permit, and cause all
Guarantors to permit, after two weeks notice unless an Event
of Default has occurred, any Bank employees or other
representatives approved by the Borrower (which approval shall
not be unreasonably withheld) designated by the Agent or the
Required Banks to visit and inspect the properties of the
Borrower or of any Guarantor, and to inspect their respective
financial and business records and make extracts therefrom and
copies thereof, all at reasonable times and in a manner so as
not to
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unreasonably disrupt the operations of the Borrower or of such
Guarantors and as often as reasonably requested, and permit,
and cause Guarantors to permit, any such employees or
representatives to discuss the affairs, finances and condition
of the Borrower and Guarantors with the officers and other
representatives thereof, including the Borrower's independent
accountants if a representative of the Borrower is present and
if the Agent has notified the Borrower not less than 24 hours
prior to such meeting of the issues that will be discussed.
(i) Environmental and Safety Matters.
(i) Comply and cause Guarantors to comply with all
Environmental and Safety Laws applicable to the Borrower and
the Guarantors, respectively, in all material respects.
(ii) Keep its properties and facilities and cause Guarantors
to keep their facilities and properties free from any Liens
arising under any applicable Environmental and Safety Laws.
(iii) If the Banks at any time have reason to believe that any
property or facility owned or operated by the Borrower or any
Guarantor has been or may be operated in violation of any
Environmental or Safety Laws applicable thereto or
contaminated with any Hazardous Materials in excess of levels
allowed by Environmental or Safety Laws or subject to any
government-imposed obligation to conduct any environmental
investigation or clean-up, any of which in the good faith
judgement of the Banks may impair in any material respect the
ability of the Borrower or any Guarantor to satisfy any
obligations of the Borrower hereunder or under any Loan
Instrument, the Borrower shall, upon the written request of
the Banks, at the Borrower's sole cost and expense, conduct
such investigation or study, through retention of a consulting
firm reasonably satisfactory to the Banks, as is necessary in
the good faith judgment of the Banks to demonstrate that no
such impairment could reasonably be expected to have a
Material Adverse Effect.
(j) Deposit Balances. Maintain, and cause the
Guarantors to maintain, their respective primary
operating, payroll and investment deposit account
balances with the Bank One, Colorado, N.A. or its
Affiliates, except for accounts maintained in locations
where the Agent and its Affiliates have no bank.
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(k) Interest Rate Protection. The Borrower will on or prior to
a date that is (a) 30 days after the Effective Date, and
thereafter until the date that is 180 days after the Effective
Date maintain in full force and effect in accordance with the
terms thereof, Interest Rate Protection Agreements in form and
substance satisfactory to the Agent with respect to a notional
principal amount not less than $15,000,000 and (b) 180 days
after the Effective Date, and thereafter maintain in full
force and effect in accordance with the terms thereof,
Interest Rate Protection Agreements in form and substance
satisfactory to the Agent with respect to a notional principal
amount not less than $20,000,000.
(l) Surveys. In the event that the Borrower has not completed
the issuance or sale of its equity securities in an amount in
excess of $20,000,000 by December 31, 1997, the Borrower, at
its expense shall provide to the Agent, on or before March 31,
1998, a current ALTA/ACSM survey of the real property
described in the Deeds of Trust prepared by a surveyor
acceptable to the Agent showing the legal description of the
land, the location of all improvements thereon, the location
of any recorded easements or other restrictions affecting the
land, the flood plain status of the land and a description and
the date of the map or maps reviewed,
(m) Audit of Accounts Receivable and Inventory.
(A) Engage an accounts receivable and
inventory field auditor,
satisfactory to the Required Banks,
to commence and complete within the
thirty (30) day period immediately
after the Effective Date, a field
examination and audit, in scope
satisfactory to the Required Banks,
and to permit such auditor to copy
all of the Borrower's and the
Guarantors' financial books,
records, journals and other records
and data relating to the Collateral
to the extent that the Agent deems
necessary in regard to the Banks'
rights under the Loan Instruments.
(B) After the field examination and audit
described above has been completed, at
the request of the Agent or the Required
Banks, no more often than annually, so
long as there is no Event of Default,
the Borrower shall permit, and cause the
Guarantors to permit, the Agent or
representatives of the Agent to conduct
during regular business hours a field
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examination and inspection of the
Collateral, including the Eligible
Accounts Receivable and the Eligible
Inventory and to audit and copy all
of the Borrower's and the
Guarantors' financial books,
records, journals and other records
and data relating to the Collateral
to the extent that the Agent deems
necessary in regard to the Banks'
rights under the Loan Instruments.
(C) Borrower shall promptly pay or
reimburse the Agent for the actual
cost of all field examinations and
audits including all out of pocket
expenses for travel, food and
lodging.
(n) Acquisition of Tucson Real Property. At the earlier of an
Event of Default or March 13, 1998 Borrower shall acquire good
and marketable title to that 20.5 acre parcel of real property
commonly known as 1159 West Drexel Road, Tucson, Arizona (the
"Drexel Road Property"). Immediately upon acquisition of the
Drexel Road Property, Borrower shall grant to the Agent a Deed
of Trust on such real property, and at its expense, provide to
the Agent an ALTA form title insurance policy, in form and
content satisfactory to the Agent, issued by a title insurance
company acceptable to the Agent. The title insurance policy
shall insure the Agent's first and prior lien in the Drexel
Road Property, subject only to Permitted Liens or such other
Liens approved by the Agent, and shall contain such
endorsements as the Agent may request. The title insurance
policy shall be in such amount as the Agent may reasonably
require. If the Borrower does not acquire the Drexel Road
Property on or before March 13, 1998, then at Agent's request,
Borrower shall immediately assign to the Agent its rights in
the Property Acquisition Agreement dated September 23, 1997
between the Borrower and Granite Properties Incorporated and
its rights in the account held by Asset Preservation Inc.
relating to the purchase of the Drexel Road Property (the
"Escrow"). Borrower shall not amended, modify, assign or
terminate its rights in such Property Acquisition Agreement or
the Escrow without the prior written consent of the Agent.
(o) AlliedSignal Acquisition Agreements. On or before December
31, 1997, Borrower shall furnish to the Agent the written
Consent to Assignment of Contracts with respect to the
AlliedSignal Acquisition Agreements from AlliedSignal and its
Affiliates, as applicable, provided, however, this covenant
shall be waived if the
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Borrower receives Net Proceeds in excess of $20,000,000.00
from an issuance or sale of its equity securities.
(p) Greeley Phase I Environmental Assessment. On or before
thirty (30) Business Days after the Effective Date, Borrower
shall furnish to the Agent, in form and content and prepared
by consultants, reasonably acceptable to the Agent, a Phase I
Environmental Assessment for Borrower's owned Real Property in
Greeley, Colorado, indicating the absence of conditions which
would warrant a Phase II Environmental Assessment of such Real
Property.
(q) Further Assurances. Execute and deliver such further
documents and do such other acts and things as the Banks may
reasonably request in order to effect fully the purposes of
this Agreement and each of the other Loan Instruments and to
provide for payment of the Loans and all other amounts due
hereunder within the scope of this Agreement.
SECTION 5.2 Negative Covenants. So long as any of the Notes shall
remain unpaid or any Letter of Credit remains outstanding, or the Banks shall
have any Commitment hereunder, or any obligation of the Borrower or any
Guarantor hereunder or under any Loan Instrument has not been fully performed,
the Borrower will not, unless the Required Banks shall otherwise consent in
writing:
(a) Financial Covenants.
(i) Maximum Senior Debt to EBITDA Ratio. As of the
end of any Fiscal Quarter, fail to maintain on a
consolidated basis a ratio of (y) Senior Debt to
(z) EBITDA of not greater than
Measured as of the
quarter ending Maximum Ratio
- ------------------ ---------------------
09/30/97 3.00
12/31/97 3.00
03/31/98 2.50
06/30/98 2.50
09/30/98 2.50
12/31/98 2.25
03/31/99 2.25
06/30/99 2.25
09/30/99 2.25
12/31/99 2.00
03/31/00 2.00
06/30/00 2.00
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09/30/00 2.00
12/31/00 1.75
03/31/01 1.75
06/30/01 1.75
09/30/01 1.75
12/31/01 1.75
(ii) Maximum Total Debt to EBITDA Ratio. As of the
end of any Fiscal Quarter fail to maintain on a
consolidated basis a ratio of (y) Total Debt to (z)
EBITDA of not greater than
Measured as of the
quarter ending Maximum Ratio
- ------------------ ---------------------
09/30/97 4.00
12/31/97 4.00
03/31/98 3.50
06/30/98 3.50
09/30/98 3.50
12/31/98 3.25
03/31/99 3.25
06/30/99 3.25
09/30/99 3.25
12/31/99 3.00
03/31/00 3.00
06/30/00 3.00
09/30/00 3.00
12/31/00 2.75
03/31/01 2.75
06/30/01 2.75
09/30/01 2.75
12/31/01 2.75
(iii) Minimum Fixed Charge Coverage Ratio. Fail to
maintain Trailing Four Quarter EBITDA to Fixed Charges
of not less than
Measured as of the
quarter ending Maximum Ratio
- ------------------ ---------------------
09/30/97 N/A
12/31/97 1.75
03/31/98 1.75
06/30/98 1.75
09/30/98 1.75
12/31/98 1.75
03/31/99 1.75
06/30/99 1.75
09/30/99 1.75
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12/31/99 2.00
03/31/00 2.00
06/30/00 2.00
09/30/00 2.00
12/31/00 2.00
03/31/01 2.00
06/30/01 2.00
09/30/01 2.00
12/31/01 2.00
(iv) Minimum EBITDA to Interest Expense As of the end of any
Fiscal Quarter fail to maintain on a consolidated basis a
ratio of (y) EBITDA to (z) Interest Expense of not less than
Measured as of the
quarter ending Maximum Ratio
12/31/97 3.5
03/31/98 350
06/30/98 .50
09/30/98 3.50
12/31/98 3.50
03/31/99 3.50
06/30/99 3.50
09/30/99 3.50
12/31/99 4.50
03/31/00 4.50
06/30/00 4.50
09/30/00 4.50
12/31/00 4.50
03/31/01 4.50
06/30/01 4.50
09/30/01 4.50
12/31/01 4.50
(v) Minimum Net Worth. For each fiscal year
identified below, fail to maintain a minimum Net Worth
of the Borrower and all Subsidiaries on a consolidated
basis in an amount equal to the following:
Measured at each 12/31 Minimum Net Worth equal to
fiscal year end("FYE")
(A) For FYE 12/31/98 $26,613,000 plus 75% of FYE
12/31/97's Net Income
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(B) For FYE 12/31/99 (A) above plus 75% of FYE
12/31/98's Net Income
(C)For FYE 12/31/00 (B) above plus 75% of FYE
12/31/99's Net Income
For FYE 12/31/01 (C) above plus 75% of FYE
12/31/00's Net Income
(vi) Maximum Annual Capital Expenditures. For each
fiscal year identified below, make Capital Expenditures
for the Borrower and all Subsidiaries on a consolidated
basis in excess of the following:
Measured as of the
fiscal year ending Maximum Amount
FYE 12/31/98 $8,500,000
FYE 12/31/99 $7,250,000
FYE 12/31/00 $6,500,000
FYE 12/31/01 $7,750,000
(b) Prohibition of Fundamental Changes. Effect, or permit to
be effected with respect to any Guarantor, any transaction of
merger, consolidation, recapitaliza tion, reorganization,
liquidation or dissolution except any Subsidiary may merge,
consolidate or reorganize with, or liquidate and transfer its
assets to,(i) the Borrower, provided that the Borrower is the
continuing or surviving corporation or (ii) any Subsidiary
provided that if any transaction shall be between a Guarantor
and a Subsidiary, the Guarantor shall be the continuing or
surviving corporation, and except for any such transactions if
the Borrower survives and there is no Default or Event of
Default or Material Adverse Effect. Nothing herein shall
prohibit any sales or purchases of stock and assets that are
contemplated by the Circuit Test Acquisition Agreement, the
AlliedSignal Acquisition Agreements and the Braswell Earn-Out
Agreement.
(c) Limitation on Liens. Create or suffer to exist, or permit
any Guarantor to create or suffer to exist, any Liens on any
assets of any such Person, except for (A) Permitted Liens and
(B) purchase money Liens in an aggregate amount of
$2,500,000.00 for assets acquired by such Persons, provided
that any such purchase money Liens are limited to the asset(s)
acquired.
(d) Debt. Create, incur or suffer to exist, or permit
any Guarantor to create, incur or suffer to exist, any
Debt except, (i) Debt hereunder, (ii) intercompany Debt
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(iii) Debt of such Persons in effect on the date hereof as
reflected in the financial statements identified in Section
4.1(f), (iv) Debt consisting of trade payables incurred in the
ordinary course of business and (v) other Debt in the
aggregate principal amount of $2,500,000.00, of which purchase
money security interest Liens may not exceed $2,500,000.00.
(e) Guarantees. Create or become liable, directly or
indirectly, or permit any Guarantor to create or become
liable, directly or indirectly, with respect to any guarantee
of the obligation of any other Person except, (i) guarantees
resulting from the endorsement of instruments for collection
in the ordinary course of business,(ii) guarantees in effect
on the date hereof and disclosed in the financial statements
identified in Section 4.1(f), (iii) the Guaranties of the
Guarantors in favor of the Bank as contemplated hereby and
(iv) guarantees of performance or obligations of any
Subsidiary by the Borrower, if such Obligations were directly
incurred or maintained by the Borrower would not violate any
provision of any Loan Instrument.
(f) Investments, Loans, Advances, etc. The Borrower shall not
directly or indirectly purchase or otherwise acquire, hold or
invest in the securities of any Person, acquire control of any
Person, make loans or advances or enter into any agreement or
other arrangement for the purpose of providing funds or credit
to any Person (other than guaranties permitted hereunder), or
enter into any partnership, joint venture or other entity or
business arrangement with or make any equity investment in any
Person, or offer or agree to do so, and will not permit any
Guarantor to do so except for: (i) loans or advances between
the Borrower and any wholly owned Subsidiary; (ii) securities
issued or guarantied by the United States of America; (iii)
except as provided in Section 5.1(j), and except for deposit
accounts for payment of ordinary course of business expenses
by the Borrower and Guarantors, with respect to which no
limits concerning the deposit bank apply, deposits in domestic
commercial banks that have, or are members of a group of
domestic commercial banks that has, consolidated total assets
of not less than one billion dollars, or investments in the
certificates of deposit, commercial paper or other permissible
market rate instruments offered by any such bank, the holding
company of any such bank or subsidiary of any such holding
company; (iv) normal business banking accounts in federally
insured institutions in amounts not exceeding the limits of
such insurance; (v) commercial
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paper or other short-term debt securities rated not less than
"A" or its equivalent by Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (vi) investments constituting
Permitted Swap Obligations or payments or advances under Swap
Contracts relating to Permitted Swap Obligations; (vii)
acquisition of the Drexel Road Property pursuant to Section
5.1(n) and (viii) other investments not exceeding $500,000 in
the aggregate at any one time in Persons that are not
Affiliates of the Borrower or any Guarantor.
(g) Sales of Assets. Make any Disposition of assets of the
Borrower, or permit any Guarantor to make any Disposition of
assets of such Guarantor other than (i) sales of inventory in
the ordinary course of business or (ii) Dispositions of
obsolete or surplus equipment or other assets or (iii) up to
$1,000,000 in fair market value of other Dispositions each
fiscal year or (iv) Dispositions provided for under the
AlliedSignal Acquisition Agreement or (v)Dispositions of its
assets to the Borrower or a Subsidiary.
(h) Transactions with Affiliates. Except for transactions
existing on the Effective Date, enter into or permit any
Subsidiary to enter into any transaction or series of
transactions, whether or not related or in the ordinary course
of business of the Borrower, with any Affiliate of the
Borrower or any Subsidiary (except for transactions between
the Borrower and its Subsidiaries and between wholly owned
subsidiaries of the Borrower and a Subsidiary), other than
pursuant to the reasonable requirements of the Borrower's or
such Subsidiaries's business and on terms and conditions no
less favorable to the Borrower or any Subsidiary than would be
obtainable by the Borrower or any Subsidiary at the time in a
comparable arm's-length transaction with a Person not an
Affiliate of the Borrower or any Subsidiary.
(i) Modification of Certain Documents; Performance of Material
Agreements. Amend its articles of incorporation or bylaws in a
manner adverse to the Bank; or amend, modify, cancel,
terminate, waive any default under or breach of, in any manner
any Material Agreement other than in the ordinary course of
business or permit any Guarantor to do any of the foregoing;
or enter into any new agreement that is inconsistent with the
obligations of the Borrower or Guarantor under any Loan
Instrument to which such Person is a party, without the prior
written consent of the Required Banks, which consent shall not
be unreasonably withheld. The Borrower further agrees that it
will not
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be in default under, or otherwise fail to perform and will not
permit any Guarantor to be in default under or otherwise fail
to perform all of its material obligations under any of the
Material Agreements to which any such Person is a party.
(j) Dividends. Declare or pay or permit any Guarantor to
declare or pay cash or stock dividends or other distributions
with respect to the Borrower's stock or Guarantor's stock,
except that any Guarantor may declare and pay dividends and
make distributions to the Borrower.
(k) Accounting. Change, or permit any Guarantor to change its
respective fiscal years or accounting methods or practices
(except to conform to changes in GAAP). If any preparation of
the financial statements referred to in Section 4.1(f),
hereafter occasioned by the promulgation of rules,
regulations, pronouncements and opinions by or required by the
Financial Accounting Standards Board or the American Institute
of Certified Public Accountants (or successors thereto or
agencies with similar functions) result in a material change
in the method of calculation of financial covenants, standards
or terms found in this Agreement, the Borrower will, and will
cause each Guarantor to, enter into good faith negotiations
with the Bank in order to amend such provisions so as to
equitably reflect such changes with the desired result that
the criteria for evaluating the Borrower's consolidated
financial condition shall be the same after such changes as if
such changes had not been made. Unless and until such
provisions have been so amended, the provisions of this
agreement shall govern and the financial covenants hereunder
shall be calculated using GAAP as in effect prior to such
changes.
(l) Subordinated Debt. The Borrower shall not, and shall not
permit any Subsidiary, to amend, waive, terminate or otherwise
modify any Subordinated Debt or any Subordinated Debt loan
instrument, or directly or indirectly, voluntarily prepay,
defease or in substance defease, purchase, redeem, retire or
otherwise acquire, any Subordinated Debt or other Debt.
(m) Change of Address; Business Name(s). Except upon not less
than 30 days prior written notice to the Agent, change or
permit any Guarantor to change the address at which the
Borrower or such Guarantor maintains its chief executive
offices and principal place of business; nor conduct its
business activities under any names other than those set forth
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Schedule 4.1(b) hereto unless the Borrower notifies the Agent
of any such new name not less than 30 days prior to beginning
use of such new name, except that no more than seven days
notice shall be required in the case of a new name resulting
from an acquisition of a business or assets by the Borrower.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1 Events of Default. Each of the following events shall
constitute an Event of Default hereunder:
(a) Payments under the Agreement and the Notes. The Borrower
shall fail to pay any principal of, or interest on, the Notes
when the same become due and payable or the Borrower shall
fail to pay any Fees or other amount due the Bank from the
Borrower hereunder and such failure, in the case of a payment
other than a payment of principal shall continue for five (5)
Business Days.
(b) Representations and Warranties. Any representa tion or
warranty made by the Borrower or any of the Guarantors (or any
of their respective officers, if applicable) under or in
connection with any Loan Instrument shall prove to have been
incorrect in any material respect when made.
(c) Other Loan Instrument Obligations. (i) The Borrower shall
fail to perform or observe any term, covenant or agreement
contained in Section 5.2, or (ii) the Borrower shall fail to
perform or observe any term, covenant or agreement contained
in any Loan Instrument to which it is a party (other than any
such failures addressed by subsections (a), (b) and (c)(i)
above in this Section 6.1) and such failure continues
unremedied for a period of 15 days after the Borrower receives
notice or otherwise has actual knowledge thereof, or (iii) any
Guarantor shall fail to perform or observe any term, covenant
or agreement contained in any Loan Instrument to which they
are a party, and such failure under clause (i), (ii) or (iii)
continues unremedied for a period of 15 Business Days after
the chief executive officer, chief financial officer,
controller or treasurer of any such Person receives notice or
otherwise has actual knowledge thereof.
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(d) Other Debt. The Borrower or any Guarantor shall fail to
pay any principal of or premium or interest on any Debt which
is outstanding in a principal amount of at least $1,000,000 in
the aggregate (but excluding Debt evidenced by the Notes) of
such Person, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand
or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after
the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared
to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to prepay, redeem, purchase
or defease such Debt shall be required to be made, in each
case prior to the stated maturity thereof.
(e) Insolvency. The Borrower or any of the Guarantors shall
generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the
Borrower or any of the Guarantors seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief,
or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of the
actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property)
shall occur; or Borrower or any Guarantor shall take any
corporate action to authorize any of the actions set forth
above in this subsection (e).
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(f) Judgments. Any non-interlocutory judgment or order for the
payment of money which is not covered by existing insurance in
excess of $1,000,000 shall be rendered against the Borrower or
any Guarantor and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in
effect.
(g) Termination of Certain Loan Instruments. Any provision of
this Agreement, the Notes, the Deeds of Trust, the Security
Agreements, the Guaranties, the Pledge Agreement or the
Collateral Assignment of Leases shall for any reason cease to
be valid and binding on the Borrower or Guarantors (as the
case may be), or the Borrower or any of the Guarantors shall
so state in writing.
(h) Collateral Liens. The Deeds of Trust, Security Agreements,
Pledge Agreement or Collateral Assignment of Leases shall,
after delivery thereof pursuant hereto, for any reason (other
than pursuant to the terms thereof) cease to create a valid
and perfected first priority security interest in any of the
collateral purported to be covered thereby.
SECTION 6.2 Bank's Rights Upon an Event of Default. Upon
--------------------------------------
the occurrence and during the continuation of any Event of Default the Agent (i)
may, by notice to the Borrower, declare the obligation of the Banks to make
Advances and to issues Letters of Credit to be terminated, whereupon the same
shall forthwith terminate, (ii) may, by notice to the Borrower, declare the
Notes, all accrued interest on the Loans and all other amounts payable under
this Agreement, the Notes and any other Loan Instrument to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by the
Borrower, (iii) with respect to outstanding Letters of Credit as to which drafts
or demands for payment have not been presented, may, by notice to the Borrower,
require the Borrower to provide cash collateral in the face amount of such
Letters of Credit in accordance with Section 2.17 hereof and (iv) may
------------
exercise the Banks rights and remedies under the Loan Instruments and such other
rights and remedies as may be available to the Banks at law or in equity;
provided, however, that in the event
-------- -------
of an actual or deemed entry of an order for relief with respect to the Borrower
or any of the Guarantors under the Federal Bankruptcy Code, (A) the obligation
of the Banks to make Advances and to issue Letters of Credit shall automatically
be terminated
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and (B) the Advances, the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.1 Appointment and Powers. Each Bank hereby irrevocably
appoints and authorizes Bank One, Colorado, N.A., and Bank One, Colorado, N.A.
hereby agrees, to act as the agent for and representative (within the meaning of
Section 9-105(m) of the Uniform Commercial Code) of such Bank under the Loan
Instruments with such powers as are delegated to the Agent and the Secured Party
by the terms thereof, together with such other powers as are reasonably
incidental thereto. The Agent's duties shall be purely ministerial and it shall
have no duties or responsibilities except those expressly set forth in the Loan
Instruments. The Agent shall not be required under any circumstances to take any
action that, in its judgment, (a) is contrary to any provision of the Loan
Instruments or Applicable Law or (b) would expose it to any Liability or expense
against which it has not been indemnified to its satisfaction. The Agent shall
not, by reason of its serving as the Agent, be a trustee or other fiduciary for
any Bank.
SECTION 7.2 Limitation on Agent's Liability. Neither the Agent nor any
of its directors, officers, employees or agents shall be liable or responsible
for any action taken or omitted to be taken by it or them under or in connection
with the Loan Instruments, except for its or their own gross negligence, willful
misconduct or knowing violations of law. The Agent shall not be responsible to
any Bank for (a) any recitals, statements, representations or warranties
contained in the Loan Instruments or in any certificate or other document
referred to or provided for in, or received by any of the Banks under, the Loan
Instruments, (b) the validity, effectiveness or enforceability of the Loan
Instruments or any such certificate or other document, (c) the value or
sufficiency of the Collateral or (d) any failure by the Borrower or other
parties to the Loan Instruments to perform any of their obligations under the
Loan Instruments. The Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact so long as the Agent was not grossly negligent in selecting or
directing such agents or attorneys-in-fact. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or given by or on behalf of the proper
Person or Persons, and
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upon advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly provided for by
the Loan Instruments, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, under the Loan Instruments in accordance with
instructions signed by the Required Banks, and such instructions of the Required
Banks and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks.
SECTION 7.3 Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment to it of principal of
or interest on Loans or fees) unless the Agent has received notice from a Bank
or the Borrower specifying such Default and stating that such notice is a
"Notice of Default." In the event that the Agent has knowledge of such a
non-payment or receives such a notice of the occurrence of a Default, the Agent
shall give prompt notice thereof to the Banks. In the event of any Default, the
Agent shall (a) in the case of a Default that constitutes an Event of Default,
take any or all of the actions referred to in Section 6.2 if so directed by the
Required Banks and (b) in the case of any Default, take such other action with
respect to such Default as shall be reasonably directed by the Required Banks.
Unless and until the Agent shall have received such directions, in the event of
any Default, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable in the best interests of the Banks.
SECTION 7.4 Rights as a Bank. Each Person acting as the Agent that is
also a Bank shall, in its capacity as a Bank, have the same rights and powers
under the Loan Instruments as any other Bank and may exercise the same as though
it were not acting as the Agent, and the term "Bank" or "Banks" shall include
such Person in its individual capacity. Each Person acting as the Agent (whether
or not such Person is a Bank) and its Affiliates may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Borrower and other
parties to the Loan Instruments and their Affiliates as if it were not acting as
the Agent, and such Person and its Affiliates may accept fees and other
consideration from the Borrower and other parties to the Loan Instruments and
their Affiliates for services in connection with the Loan Instruments or
otherwise without having to account for the same to the Banks.
SECTION 7.5 Indemnification. The Banks agree to indemnify the Agent (to
the extent not reimbursed by the Borrower and other parties to the Loan
Instruments under the Loan Instruments), ratably on the basis of the respective
principal amounts of the Loans outstanding made by the Banks (or, if no Loans
are at the time outstanding, ratably on the basis of their
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respective Commitments), for any and all Liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including the costs and expenses that the Borrower and other
parties to the Loan Instruments are obligated to pay under the Loan Instruments)
in any way relating to or arising out of the Loan Instruments or any other
documents contemplated thereby or referred to therein or the transactions
contemplated thereby or the enforcement of any of the terms thereof or of any
such other documents, provided that no Bank shall be liable for any of the
foregoing to the extent they arise from gross negligence, willful misconduct or
knowing violations of law by the Agent.
SECTION 7.6 Non-Reliance on Agent and Other Banks. Each Bank agrees
that it has made and will continue to make, independently and without reliance
on the Agent or any other Bank, and based on such documents and information as
it deems appropriate, its own credit analysis of the Borrower, its own
evaluation of the Collateral and its own decision to enter into the Loan
Instruments and to take or refrain from taking any action in connection
therewith. The Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower or other parties to the Loan
Instruments of the Loan Instruments or any other document referred to or
provided for therein or to inspect the properties or books of the Borrower or
any Subsidiary thereof or the Collateral. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by the
Agent under the Loan Instruments, the Agent shall have no obligation to provide
any Bank with any information concerning the business, status or condition of
the Borrower or any other party to the Loan Instruments or any Subsidiary
thereof, the Loan Instruments or the Collateral that may come into the
possession of the Agent or any of its Affiliates.
SECTION 7.7 Execution and Amendment of Loan Instruments on Behalf of
the Banks. Each Bank hereby authorizes the Agent to (a) execute and deliver, in
the name of and on behalf of such Bank, (i) the Security Agreements, the
Guaranty Agreements, the Deeds of Trust and the Pledge Agreement, (ii) all
Uniform Commercial Code financing and continuation statements and other
documents the filing or recordation of which are, in the determination of the
Agent, necessary or appropriate to create, perfect or maintain the existence or
perfected status of the Security Interest and (iii) any other Loan Instrument
requiring execution by or on behalf of such Bank, and (b) release Collateral
from the Security Interest to the extent that such Collateral has been disposed
of in accordance with Section 5.2(g). The Agent shall consent to any amendment
of any term, covenant, agreement or condition of the Security Agreements, the
Guaranty Agreements, the Deeds of Trust and the
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Pledge Agreement, or to any waiver of any right thereunder, if, but only if, the
Agent is directed to do so in writing by the Required Banks; provided, however,
that (i) the Agent shall not be required to consent to any such amendment or
waiver that affects its rights or duties and (ii) the Agent shall not, unless
directed to do so in writing by each Bank, (A) consent to any assignment by any
Bank of any of its rights or obligations under any such agreement or (B) release
any Collateral from the Security Interest, except as specified in clause (b)
above.
SECTION 7.8 Resignation of the Agent. The Agent may at any time give
notice of its resignation to the Banks and the Borrower. Upon receipt of any
such notice of resignation, the Required Banks may, with the consent of the
Borrower which shall not be unreasonably withheld, appoint a successor Agent. If
no successor Agent shall have been so appointed by the Required Banks and shall
have accepted such appointment within 30 days after the resigning Agent's giving
of notice of resignation, then the resigning Agent may, on behalf of the Banks
and after consultation with the Borrower, appoint a successor Agent. Upon the
acceptance by any Person of its appointment as a successor Agent, (a) such
Person shall thereupon succeed to and become vested with all the rights, powers,
privileges, duties and obligations of the resigning Agent and the resigning
Agent shall be discharged from its duties and obligations as Agent under the
Loan Instruments and (b) the resigning Agent shall promptly transfer all
Collateral within its possession or control to the possession or control of the
successor Agent and shall execute and deliver such notices, instructions and
assignments as may be necessary or desirable to transfer the rights of the Agent
with respect to the Collateral to the successor Agent. After any resigning
Agent's resignation as Agent, the provisions of this Article VII shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Agent.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments; Waivers. Any term, covenant, agreement or
condition of the Borrower Loan Instruments may be amended, and any right under
the Borrower Loan Instruments may be waived, if, but only if, such amendment or
waiver is in writing and is signed by (a) in the case of an amendment or waiver
with respect to the Borrower Loan Instruments referred to in Section 7.7(a), the
Agent, (b) in the case of an amendment or waiver with respect to any other
Borrower Loan Instrument, the Required Banks and, if the amendment or waiver
would affect the rights and duties of the Agent, by the Agent, and(c) in the
case
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of an amendment with respect to any Borrower Loan Instrument, by the Borrower;
provided, however, that no amendment or waiver shall be effective, unless in
writing and signed by each Bank affected thereby, to the extent it (i) changes
the amount of such Bank's Commitment, (ii) reduces the principal of or the rate
of interest on such Bank's Loans or Note, the amount of such Bank's Letter of
Credit Participations or any fees payable to such Bank hereunder, (iii)
postpones any date fixed for any reduction of the Revolving Loan Commitments or
any payment of principal of or interest on such Bank's Loans, Note, Letter of
Credit Participations or any fees payable to such Bank hereunder, (iv) except as
provided in this Agreement, releases any Collateral from the Security Interest,
or (v) amends Section 2.10, this Section 8.1, the definition of "Required Banks"
contained in Section 1.1 or any other provision of this Agreement requiring the
consent or other action of all of the Banks. Unless otherwise specified in such
waiver, a waiver of any right under the Borrower Loan Instruments shall be
effective only in the specific instance and for the specific purpose for which
given. No election not to exercise, failure to exercise or delay in exercising
any right, nor any course of dealing or performance, shall operate as a waiver
of any right of the Agent or any Bank under the Borrower Loan Instruments or
Applicable Law, nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right of the Agent or any Bank under the Borrower Loan Instruments or Applicable
Law.
SECTION 8.2 Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telecopier, telegraphic, telex or
cable communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered,
if to the Borrower, at its address at:
EFTC Corporation
9351 Grant Street
Horizon Terrace 6th Floor
Denver, Colorado
Attn: Stuart W. Fuhlendorf
Vice President and CFO
Telecopy: (303)451-8210
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with a copy to:
Martha Traudt Collins, Esq.
Holme Roberts & Owen LLP
1700 Lincoln Street, Suite 4100
Denver, Colorado 80203
Telecopy: (303)866-0200
and if to the Agent, at its address at:
Bank One, Colorado, N.A.
1125 Seventeenth Street, 3rd Floor
Denver, CO 80202
Attn: David L. Ericson,
Vice President
Telecopy: (303) 297-4435
with a copy to:
Ted R. Sikora II, Esq.
Davis, Graham & Stubbs LLP
370 Seventeenth Street 47th Floor
Denver, CO 80202
Telecopy: (303) 893-1379
or, as to each Party, at such other address as shall be designated by such Party
in a written notice to the other Party. All such notices and communications
shall, when telecopied, telegraphed, telexed or cabled, be effective when
telecopied, delivered to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, or when personally delivered. Any
notice, if mailed and properly addressed with first class postage prepaid,
return receipt requested, shall be deemed given three Business Days after
deposit in the U.S. mail. Except that notices to the Banks pursuant to the
provisions of Article II shall not be effective until received by the Bank.
SECTION 8.3 Remedies. The remedies provided in the Loan Instruments are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.4 Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all reasonable out-of-pocket costs and expenses in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Instruments and the other documents to be delivered under the Loan
Instruments, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect thereto and with
respect to advising the Agent as to its
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rights and responsibilities under the Loan Instruments. The Borrower further
agrees to pay on demand all reasonable costs and expenses, if any (including
reasonable counsel, consultants and appraisers fees and expenses), in connection
with the enforcement (whether through negotiations, legal proceedings or
otherwise) of the Loan Instruments and the other documents to be delivered under
the Loan Instruments, including, without limitation, reasonable counsel,
consultants and appraisers fees and expenses in connection with the enforcement
of rights under this Section 8.4, expressly including all such costs and
expenses incurred by the Agent and the Banks in connection with or during the
pendency of any bankruptcy or insolvency proceedings involving the Borrower or
any Guarantor. In addition, the Borrower shall pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution,
delivery, filing and recording of the Loan Instruments and the other documents
to be delivered under the Loan Instruments, and agrees to save the Bank harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
SECTION 8.5 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Banks are hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Banks to
or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under any Loan Instrument,
whether or not the Banks shall have made any demand under such Loan Instrument
and although such obligations may be unmatured. The Banks agree promptly to
notify the Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Banks under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Banks may have.
SECTION 8.6 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Banks and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Banks. Any assignment of rights or interests herein by the
Borrower without such prior written consent of the Bank will be void and
ineffective. It is expressly agreed that the Banks may transfer interests herein
to other lending institutions by way of assignment or participation agreement as
an to the extent permitted by Section 8.13.
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SECTION 8.7 Indemnity. The Borrower agrees to indemnify the Agent and
the Banks, and their respective directors, officers, employees and agents for,
and hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the extensions of
credit hereunder or any actual or proposed use by the Borrower of the proceeds
of any extensions of credit hereunder or the past, present or future business
activities of the Borrower including, without limitation, the reasonable fees
and disbursements of counsel incurred in connection with any such investigation
or litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses that are determined pursuant to a final,
non-appealable order of a court of competent jurisdiction to have resulted
solely from the gross negligence or willful misconduct of the Person to be
indemnified).
SECTION 8.8 Consent to Exclusive Jurisdiction. Any legal action or
other proceeding with respect to this Agreement or any other Loan Instrument
shall be brought exclusively in the courts of competent jurisdiction of the
State of Colorado or of the United States located in the City and County of
Denver, and by execution and delivery of this Agreement, each of the Borrower
and the Banks consents, for itself and in respect of its property, to the
exclusive jurisdiction of those courts. Each of the Borrower and the Banks
irrevocably waives any objection, including any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any action or proceeding in such jurisdiction in respect
of this Agreement or any other Loan Instrument. The Borrower and the Banks each
waive personal service of any summons, complaint or other process which may be
made by any other means permitted by Colorado law.
SECTION 8.9 Waiver of Jury Trial and Certain Damages. Each of the
Borrower and the Banks hereby waives, to the extent permitted by applicable law,
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Agreement or any other Loan Instrument or the
validity, protection, interpretation, collection or enforcement thereof; and the
Borrower hereby waives, to the extent permitted by applicable law, the right to
interpret set off or counterclaim or cross-claim in connection with any such
litigation, irrespective of the nature of set off, counterclaim or cross-claim
except to the extent that the failure so to assert a set off, counterclaim or
cross-claim would permanently preclude the prosecution of or recovery upon the
same. Notwithstanding anything contained in this Agreement or any other Loan
Instrument to the contrary, no claim may be made by the Borrower against the
Banks for any lost profits or any special, indirect or consequential damages in
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respect of any breach or wrongful conduct (other than willful misconduct
constituting actual fraud) in connection with, arising out of or in any way
related to the transactions contemplated hereunder or under any other Loan
Instrument, or any act, omission or event occurring in connection therewith; and
the Borrower hereby waives, releases and agrees not to sue upon any such claim
for any such damages. The Borrower agrees that this Section 8.9 is a specific
and material aspect of this Agreement and acknowledges that the Bank would not
extend to the Borrower the credit provided for herein if this Section 8.9 were
not part of this Agreement.
SECTION 8.10 Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of
Colorado, without giving effect to any conflict of law or choice of law
provision or rule (whether of the State of Colorado or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Colorado.
SECTION 8.11 Inconsistent Provisions. In the event of any inconsistency
or conflict between the terms of this Agreement and the terms of any other Loan
Instrument, the provisions of this Agreement will be controlling.
SECTION 8.12 Sharing of Recoveries. Each Bank agrees that, if, for any
reason, including as a result of (a) the exercise of any right of counterclaim,
set-off, banker's lien or similar right, (b) its claim in any applicable
bankruptcy, insolvency or other similar law being deemed secured by a Debt owed
by it to the Borrower and any Guarantor, including a claim deemed secured under
Section 506 of the Bankruptcy Code, or (c) the allocation of payments by the
Agent or the Borrower or any Guarantor in a manner contrary to the provisions of
Section 2.10, such Bank shall receive payment of a proportion of the aggregate
amount due and payable to it hereunder as principal of or interest on the Loans
or fees that is greater than the proportion received by any other Bank in
respect of the aggregate of such amounts due and payable to such other Bank
hereunder, then the Bank receiving such proportionately greater payment shall
purchase Participations (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in the rights of the other Banks hereunder so
that all such recoveries with respect to such amounts due and payable hereunder
(net of costs of collection) shall be pro rata; provided that if all or part of
such proportionately greater payment received by the purchasing Bank is
thereafter recovered by or on behalf of the Borrower or any Guarantor from such
Bank, such purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such Bank to the extent of such recovery,
but without interest (unless the purchasing Bank is required to pay interest on
the amount recovered to the Person recovering
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such amount, in which case the selling Bank shall be required to pay interest at
a like rate). The Borrower expressly consents to the foregoing arrangements and
agrees that any holder of a participation in any rights hereunder so purchased
or acquired pursuant to this Section 8.12 shall, with respect to such
participation, be entitled to all of the rights of a Bank under Sections 2.10,
7.4, 7.5 and 7.7 (subject to any condition imposed on a Bank hereunder with
respect thereto) and may exercise any and all rights of set-off with respect to
such participation as fully as though the Borrower were directly indebted to the
holder of such participation for Loans in the amount of such participation.
SECTION 8.13 Assignments and Participations.
(a) Assignments.
(i) The Borrower may not assign any of its rights or
obligations under the Borrower Loan Instruments without the
prior written consent of (A) in the case of the Borrower Loan
Instruments referred to in Section 7.7(a), the Agent and (B)
in the case of any of the other Borrower Loan Instruments, the
Issuing Bank and each Bank, and no assignment of any such
obligation shall release such Borrower therefrom unless the
Agent, the Issuing Bank and each Bank, as applicable, shall
have consented to such release in a writing specifically
referring to the obligation from which such Borrower is to be
released.
(ii) Each Bank may from time to time assign any or all of its
rights and obligations under the Borrower Loan Instruments to
one or more Persons; provided that, except in the case of the
grant of a security interest to a Federal Reserve Bank (which
may be made without condition or restriction), no such
assignment shall be effective unless (A) the assignment is
consented to by the Borrower (unless an Event of Default
exists) the Issuing Bank and the Agent, such consents not to
be unreasonably withheld, (B) in the case of a partial
assignment, the assignment shall involve the assignment of not
less than $5,000,000 of the assignor Bank's Commitment and
there shall at no time be more than five Banks and the
assignment is consented to by the Borrower, such consent not
to be unreasonably withheld, (C) a Notice of Assignment in the
form of Exhibit I with respect to the assignment, duly
executed by the assignor and the assignee, shall have been
given to the Borrower, the Issuing Bank and the Agent, (D)
except in the case of an assignment by the Bank that is the
Agent, the Agent shall have been paid an assignment fee of
$3,500, (E) unless otherwise agreed to by each of
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the Banks, such assignment is made on or after the earlier of
the date that is 90 days following the Effective Date and the
date on which the general syndication of the credit facility
provided for herein is completed, as specified by the Agent
and (F) in the case of an assignment of any Revolving Loan,
Revolving Loan Commitment, Term Loan or Letter of Credit
Participation to any assignee, the assignment shall include a
pro rata portion of all of the Revolving Loans, Revolving Loan
Commitments, Term Loan and Letter of Credit Participations of
the assignor Bank. Upon any effective assignment, the assignor
shall be released from the obligations so assigned and, in the
case of an assignment of all of its Loans and Commitment,
shall cease to be a Bank. In the event of any effective
assignment by a Bank, the Borrower shall issue new Notes to
the assignee Bank (against, other than in the case of a
partial assignment, receipt of the existing Note of the
assignor Bank). Notwithstanding the foregoing, no Bank may
assign any of its rights and obligations under the Borrower
Loan Instruments prior to the date on which the general
syndication or the credit facility provided for herein is
completed, as specified by the Agent, other than in accordance
with the agreement of such Banks entered into prior to the
Effective Date with respect thereto. Nothing in this Section
8.13 shall limit the right of any Bank to assign its interest
in the Loans and its Notes to a Federal Reserve Bank as
collateral security under Regulation A of the Board of
Governors of the Federal Reserve System, but no such
assignment shall release such Bank from it obligations
hereunder.
(b) Participations. Each Bank may from time to time sell or
otherwise grant participations in any or all of its rights and
obligations under the Borrower Loan Instruments. In the event
of any such grant by a Bank of a participation, such Bank's
obligations under the Loan Instruments to the other parties
thereto shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, and the Borrower, the
Issuing Bank, the Agent and the other Banks may continue to
deal solely and directly with such Bank in connection with
such Bank's rights and obligations thereunder. A Bank may not
grant to any holder of a participation the right to require
such Bank to take or omit to take any action under the Loan
Documents, except that a Bank may grant to any such holder the
right to require such holder's consent to (i) reduce the
principal of or the rate of interest on such Bank's Loans,
Note or the amount of such Bank's Letter of Credit
Participations or any fees payable to
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such Bank hereunder, (ii) postpone any date fixed for any
reduction of the Revolving Loan Commitments or any payment of
principal of or interest on such Bank's Loans, Note or the
amount of such Bank's Letter of Credit Participations or any
fees payable to such Bank hereunder, (iii) permit any Loan
Party to assign any of its obligations under the Loan
Instruments to any other Person or (iv) release any Collateral
from the Security Interest except as required or contemplated
by the Loan Instruments. Each holder of a participation in any
rights under the Borrower Loan Instruments, if and to the
extent the applicable participation agreement so provides,
shall, with respect to such participation, be entitled to all
of the rights of a Bank as fully as though it were a Bank
under Sections 2.10, 2.12, 8.1 and 8.7 (subject to any
conditions imposed on a Bank hereunder with respect thereto)
and may exercise any and all rights of set-off with respect to
such participation as fully as though the Borrower were
directly indebted to the holder of such participation for
Loans in the amount of such participation; provided, however,
that no holder of a participation shall be entitled to any
amounts that would otherwise be payable to it with respect to
its participation under Section 2.10 or 2.12 unless (x) such
amounts are payable in respect of Regulatory Changes that are
enacted, adopted or issued after the date the applicable
participation agreement was executed or (y) such amounts would
have been payable to the Bank that granted such participation
if such participation had not been granted.
SECTION 8.14 Survival of Representations and Warranties. All
representations and warranties of the Borrower contained in this Agreement or of
any of its subsidiaries contained in any other Loan Instrument shall survive
delivery of the Notes and the making of the Loans and the issuance of the
Letters of Credit.
SECTION 8.15 Counterparts. This Agreement and any amendment hereof may
be executed in several counterparts and by each party on a separate counterpart,
each of which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving the Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers, as of the
date first above written.
EFTC CORPORATION
By: /s/
Stuart W. Fuhlendorf
Vice President and CFO
BANK ONE, COLORADO, N.A.
as Agent and as a Bank
By: /s/
David L. Ericson
Vice President
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PLEDGE AND SECURITY AGREEMENT
EFTC CORPORATION
THIS PLEDGE AND SECURITY AGREEMENT, dated as of September 30,
1997, is by EFTC CORPORATION, a Colorado corporation ("Pledgor") to BANK ONE,
COLORADO, N.A., ("Agent") for the ratable benefit of the Banks under that
certain Credit Agreement dated as of September 30, 1997, by and among Pledgor
(as Borrower thereunder), Agent, and the Banks, with such Credit Agreement, as
hereafter amended, modified or extended by the parties thereto referred to as
the "Credit Agreement".
Recitals
A. The Banks are willing to extend credit facilities to
Pledgor subject to the terms and conditions of the Credit Agreement. One of the
terms of the Credit Agreement is the requirement for execution and delivery of
this Pledge Agreement by Pledgor.
B. In order to induce the Banks to enter into the Credit
Agreement, Pledgor is willing to enter into this Pledge Agreement to secure the
due and punctual performance of the obligations of Pledgor under the Credit
Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms. (a) As used herein, the following terms shall have the
following meanings:
"Pledge Agreement" shall mean this Pledge and
Security Agreement, as the same may be further amended,
supplemented or otherwise modified from time to time.
"Pledged Collateral" shall mean the Pledged Stock and all
Proceeds.
"Pledged Stock" shall mean the shares of capital
stock or limited liability company membership interests of
each Subsidiary Issuer listed in Schedule I hereto, in each
case together with all stock certificates, options, warrants
or rights of any nature whatsoever that may be issued or
granted by any Subsidiary Issuer to the Pledgor in respect of
the Pledged Stock while this Pledge Agreement is in effect.
"Proceeds" shall have the meaning given thereto by
C.R.S. 4-9-306.
"Subsidiary Issuer" shall mean each of the companies
listed on Schedule 1 hereto, each of which is a wholly-owned
Subsidiary of Pledgor except that Pledgor
<PAGE>
owns a 51% membership interest in of Circuit Test
International, L.C. and Airhub Services Group, LLC.
(b) Unless otherwise defined herein, the capitalized
terms used herein which are defined in, or by reference in,
the Credit Agreement shall have the meanings specified
therein.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import shall refer to this Pledge Agreement as a whole and not to any particular
provision of this Pledge Agreement, and section, subsection, exhibit and
schedule references are to this Pledge Agreement unless otherwise specified.
2. Pledge and Grant of Security Interest. For value received
and to induce the Banks to make the Loans and otherwise to extend credit to
Borrower, Pledgor, for the ratable benefit of the Banks, hereby pledges,
charges, assigns, transfers and delivers, by way of a first lien, security
interest and assignment, to Agent, and grants a security interest to Agent in,
all of its right, title and interest in and to the Pledged Collateral as
security for all present and future obligations and liabilities of all kinds of
Pledgor to the Banks under the Loan Instruments or hereunder, whether incurred
by Pledgor as maker, endorser, drawer, acceptor, guarantor, accommodation party
or otherwise, and whether due or to become due, secured or unsecured, absolute
or contingent, joint or several, and howsoever or whensoever incurred by Pledgor
or acquired by any Bank (collectively referred to as the "Obligations").
3. Delivery; Stock Powers; Endorsements. All certificates or
instruments representing or evidencing the Pledged Stock pledged pursuant to
Section 2 hereof have previously been delivered or are being delivered to and
held by Agent concurrently with the execution of this Pledge Agreement and are
in suitable form for transfer by delivery, endorsed in blank or accompanied by
duly executed undated instruments of transfer or assignments in blank, having
attached thereto or to such certificates all requisite federal, state or
provincial stock transfer tax stamps, all in form and substance satisfactory to
Agent. UCC-1 financing statements pertaining to uncertificated membership
interests in limited liability Subsidiary Issuers are being delivered to Agent
concurrently with the execution of this Pledge Agreement and are in suitable
form so that when filed will perfect the first priority security interest of the
Agent in such securities.
4. Warranties, Covenants and Agreements of Pledgor.
Pledgor warrants, covenants and agrees that:
(a) the Subsidiary Issuers are all of the directly-owned
Subsidiaries of the Pledgor, and the Pledged Stock, consisting of the shares of
the Subsidiary Issuers listed on Schedule 1 hereto, is all of the issued and
outstanding common stock or other equity interests in the Subsidiary Issuers,
except that the membership interest of Pledgor in each of Circuit Test
International, L.C. and Airhub Services Group, LLC listed on Schedule 1 and
pledged hereby represents 51% of the issued and outstanding of each of those
companies.
(b) except for the security interests granted hereby,
<PAGE>
(i) Pledgor is, and as to Pledged Collateral
acquired after the date hereof, Pledgor shall and will be at
the time of acquisition, the owner and holder of the Pledged
Collateral free from any adverse claim, security interest,
encumbrance, lien, charge, or other right, title or interest
of any person other than Agent and covenants that at all times
the Pledged Collateral will be and remain free of all such
adverse claims, security interests, or other liens or
encumbrances;
(ii) Pledgor has full power and lawful authority to
enter into this Pledge and Security Agreement and to sell,
assign and transfer the Pledged Collateral to Agent and to
grant to Agent a first and prior security interest therein as
herein provided, all of which have been duly authorized by all
necessary corporate action;
(iii) the execution and delivery and the
performance hereof are not in contravention of any charter,
article of incorporation or by-law provision, or of any
indenture, agreement or undertaking to which Pledgor is a
party or by which Pledgor or its property is bound;
(iv) this Pledge and Security Agreement constitutes
the valid and legally binding obligation of Pledgor
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equity
principles; and
(v) Pledgor will defend the Pledged Collateral
against all claims and demands of all persons at any time
claiming the same or any interest therein. Any officer, agent
or representative acting for or on behalf of Pledgor in
connection with this Pledge and Security Agreement or any
aspect hereof, or entering into or executing this Pledge and
Security Agreement on behalf of Pledgor, has been duly
authorized to do so, and is fully empowered to act for and
represent Pledgor in connection with this Pledge and Security
Agreement and all matters related thereto or in connection
therewith.
(c) (i) Pledgor has not heretofore signed any
financing statement or security agreement which covers any of
the Pledged Collateral, and no such financing statement or
security agreement is now on file in any public office (other
than such financing statements and security agreements, if
any, which have been terminated or will be terminated as of
the Effective Date).
(ii) As long as any amount remains unpaid on any
of the Obligations or under any agreements entered into in
connection with the Obligations, except as expressly permitted
by any such agreements, (A) Pledgor will not enter into or
execute any security agreement or financing statement covering
the Pledged Collateral, other than those security agreements
and financing statements in favor of Agent hereunder, and
further (B) there will not be on file in any public office any
financing statement or statements (or any documents or papers
filed as such) covering the Pledged Collateral, other than
financing statements in favor of Agent
<PAGE>
hereunder, unless in any case the prior written consent of
Agent shall have been obtained.
(iii) At the request of Agent, Pledgor will join
Agent in executing such documents as Agent may determine from
time to time to be necessary or desirable under provisions of
any applicable laws in effect where the Pledged Collateral is
located or where Pledgor conducts business; without limiting
the generality of the foregoing, Pledgor agrees to join Agent,
at Agent's request, in executing one or more financing
statements or other instruments in form satisfactory to Agent,
and Pledgor will pay the costs of filing or recording the
same, or of filing or recording this Pledge Agreement, in all
public offices at any time and from time to time whenever
filing or recording of any such financing statement or of this
Pledge Agreement is deemed by Agent to be necessary or
desirable. In connection with the foregoing, it is agreed and
understood between the parties hereto (and Agent is hereby
authorized to carry out and implement this agreement and
understandings, and Pledgor hereby agrees to pay the costs
thereof) that Agent may, at any time or times, file as a
financing statement any counterpart, copy or reproduction of
this Pledge Agreement.
(d) In the event that Pledgor receives any promissory notes or
evidences of indebtedness of Borrower or any Subsidiary Issuer, Pledgor shall
hold the same in trust as property of the Banks and forthwith assign, pledge and
deliver the same to Agent for the ratable benefit of the Banks.
5. Rights of Agent and Pledgor Related to Pledged Collateral.
Agent may from time to time following the occurrence of an
Event of Default, as defined in Section 7 hereof:
(a) Transfer any of the Pledged Collateral into the name of
Agent or its nominee.
(b) Notify parties obligated on any of the Pledged Collateral to make
payment to Agent of any amounts due or to become due thereunder.
(c) Enforce collection of any of the Pledged Collateral by
suit or otherwise; surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any obligation of any nature of any party with respect thereto;
and exercise all other rights of Pledgor in any of the Pledged Collateral,
except as hereinafter provided with respect to income from or interest on the
Pledged Collateral and except that, prior to an Event of Default, Pledgor may
exercise its voting and consensual rights with respect to any Pledged Collateral
constituting voting securities.
(d) Take possession or control of any proceeds of the Pledged Collateral.
Until the occurrence of an Event of Default, Pledgor shall
have the right to receive all income from or interest on the Pledged Collateral,
and if Agent receives any such income or interest prior to the occurrence of an
Event of Default, Agent shall pay the same promptly to Pledgor, except that in
the case of securities or other property distributed by way of a dividend or
<PAGE>
otherwise with respect to the Pledged Collateral, such securities or other
property (other than cash) shall be promptly delivered to Agent to be held as
Pledged Stock or other Pledged Collateral hereunder. Upon the occurrence of an
Event of Default, Pledgor will not demand or receive any income from or interest
on the Pledged Collateral, and if Pledgor receives any such income or interest
without any demand by it, the same shall be held by Pledgor in trust for Agent
in the same medium in which received, shall not be commingled with any assets of
Pledgor and shall be delivered to Agent in the form received, properly endorsed
to permit collection, not later than the next business day following the day of
its receipt. Agent shall promptly apply the net cash received from such income
or interest to payment of any of the Obligations, provided that Agent shall
account for and pay over to Pledgor any such income or interest remaining after
payment in full of the Obligations then outstanding.
So long as no Event of Default or event which, with the giving
of notice or the lapse of time, or both, would become an Event of Default shall
have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement or the
Credit Agreement; provided, however, that Pledgor shall not
exercise or refrain from exercising any such right if, in
Agent's judgment, such action would have a material adverse
effect on the value of the Pledged Collateral or any part
thereof; and, provided, further, that upon the request of
Agent, Pledgor shall give Agent at least five days' written
notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such rights; and
(ii) Agent shall execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies and other
instruments as Pledgor may reasonably request for the purpose
of enabling Pledgor to exercise the voting and other rights
which it is entitled to exercise pursuant to paragraph (i)
above.
Agent shall never be under any obligation to collect, attempt
to collect, protect or enforce the Pledged Collateral or any security therefor,
which Pledgor agrees and undertakes to do at Pledgor's expense, but Agent may do
so in its discretion at any time after the occurrence of an Event of Default and
at such time Agent shall have the right to take any steps by judicial process or
otherwise as it may deem proper to effect the collection of all or any portion
of the Pledged Collateral or to protect or to enforce the Pledged Collateral or
any security therefor. All expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred or paid by Agent in connection with any
such collection or attempt to collect the Pledged Collateral or actions to
protect or enforce the Pledged Collateral or any security therefor shall be
borne by Pledgor or reimbursed by Pledgor to Agent upon demand. The proceeds
received by Agent as a result of any such actions in collecting or enforcing or
protecting the Pledged Collateral shall be held by Agent without liability for
interest thereon and shall be promptly applied by Agent as Agent may deem
appropriate toward payment of any of the Obligations secured hereby in such
order or manner as Agent may elect.
In the event Agent shall pay any taxes, assessments,
interests, costs, penalties or expenses incident to or in connection with the
collection of the Pledged Collateral or protection or
<PAGE>
enforcement of the Pledged Collateral or any security therefor, Pledgor, upon
demand of Agent, shall pay to Agent the full amount thereof with interest at a
rate per annum (based on a 360-day year for the actual number of days involved)
from the date expended by Agent until repaid equal to the sum of three percent
(3%) plus the Prime Rate in effect under and defined by the Credit Agreement. So
long as Agent shall be entitled to any such payment, this Pledge Agreement shall
operate as security therefor as fully and to the same extent as it operates as
security for payment of the other Obligations secured hereunder, and for the
enforcement of such repayment, Agent shall have every right and remedy provided
hereunder for enforcement of payment of the Obligations.
6. Further Assurances; Agent as Agent.
Pledgor agrees to take such actions and to execute such stock
or bond powers and such other or different writings as Agent may request (and
irrevocably authorizes Agent to execute such writings as Pledgor's agent and
attorney-in-fact) further to perfect, confirm and assure Agent's security
interest in the Pledged Collateral and to assist Agent's realization thereon
including, without limitation, the right to receive, indorse, and collect all
instruments made payable to Pledgor representing any dividend, interest payment
or other distribution in respect of the Pledged Collateral or any part thereof
except to the extent Pledgor is entitled to receive any cash dividend pursuant
to Section 5.
7. Event of Default.
The occurrence of any of the following shall constitute an
"Event of Default" hereunder:
(a) Failure of Pledgor to pay any Obligation (including any
installment of principal or interest thereon) when due and payable (after the
expiration of any grace period provided by the applicable Loan Instruments),
whether at maturity, by notice of intention to prepay or otherwise;
(b) Default in the timely performance by Pledgor of any
obligation or covenant contained herein or an Event of Default under the Credit
Agreement or any other Collateral Document to which Pledgor is a party;
(c) Any representation or warranty made by Pledgor herein or
in any other agreement with or instrument delivered to Agent, or any statement
or representation made in any certificate, report or opinion delivered in
connection herewith or in connection with any such other agreement or instrument
that proves to be false or misleading in any material respect when made; or
(d) The insolvency of Pledgor, the admission by Pledgor of its
inability to pay its debts as they become due, the commencement of any case by
or against Pledgor under any bank ruptcy or insolvency law (and, in the event
such case is not instituted by Pledgor, it shall remain undismissed or unstayed
for a period 30 days or any of the actions sought in such proceeding shall
occur), or the making by Pledgor of any assignment for the benefit of creditors.
8. Rights and Remedies of Agent Upon Default.
<PAGE>
If an Event of Default shall have occurred:
(a) Agent shall have and may exercise with reference to the
Pledged Collateral and the Obligations any or all of the rights and remedies of
a secured party under the Uniform Commercial Code ("UCC"), as applicable, and as
otherwise granted herein or under any other applicable law or under any other
agreement now or hereafter in effect executed by Pledgor, including, without
limitation, the right and power to sell, at public or private sale or sales, or
otherwise dispose of, or otherwise utilize the Pledged Collateral and any part
or parts thereof in any manner authorized or permitted under said UCC after
default by a debtor, and to apply the proceeds thereof toward payment of any
costs and expenses and attorneys' fees and expenses thereby incurred by Agent
and toward payment of the Obligations in such order or manner as Agent may
elect. Specifically and without limiting the foregoing, Agent shall have the
right to take possession of all or any part of the Pledged Collateral or any
security thereof and of all books, records, papers and documents of Pledgor or
in Pledgor's possession or control relating to the Pledged Collateral which are
not already in Agent's possession, and for such purpose may enter upon any
premises upon which any of the Pledged Collateral or any security therefor or
any of said books, records, papers and documents are situated and remove the
same therefrom without any liability for trespass or damages thereby occasioned.
To the extent permitted by law, Pledgor expressly waives any notice of sale or
other disposition of the Pledged Collateral and all other rights or remedies of
Pledgor or formalities prescribed by law relative to sale or disposition of the
Pledged Collateral or exercise of any other right or remedy of Agent existing
after default hereunder; and to the extent any such notice is required and
cannot be waived, Pledgor agrees that if such notice is given in the manner
provided in Section 14 hereof at least ten days before the time of the sale or
disposition, such notice shall be deemed reasonable and shall fully satisfy any
requirement for giving of said notice. Agent shall not be obligated to make any
sale of Pledged Collateral regardless of notice of sale having been given. Agent
may adjourn any public or private sale from time to time by announcement at the
time and place fixed thereof, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
(b) Upon notice by Agent to Pledgor, Agent or its nominee or
nominees shall have the sole and exclusive right to exercise all voting and
consensual powers pertaining to the Pledged Collateral or any part thereof and
may exercise such powers in such manner as Agent may elect.
(c) All dividends, payments of interest and other
distributions of every character made upon or in respect of the Pledged
Collateral or any part thereof shall be deemed to be Pledged Collateral and
shall be paid directly to and shall be held by Agent as additional Pledged
Collateral pledged under and subject to this Pledge Agreement.
(d) All rights to marshaling of assets of Pledgor, including
any such right with respect to the Pledged Collateral, are hereby waived by
Pledgor.
(e) All recitals in any instrument of assignment or any other
instrument executed by Agent incident to sale, lease, transfer, assignment or
other disposition, lease or utilization of the Pledged Collateral or any part
thereof hereunder shall be full proof of the matters stated therein and no other
proof shall be requisite to establish full legal propriety of the sale or other
action taken by Agent or of any fact, condition or thing incident thereto, and
all requisites of such sale or other
<PAGE>
action or of any fact, condition or thing incident thereto shall be presumed
conclusively to have been performed or to have occurred.
9. Special Provisions for Pledged Stock.
Pledgor hereby acknowledges that the sale by Agent of any of
the Pledged Stock pursuant to the terms hereof in compliance with applicable
federal or state securities laws (as now in effect or as hereafter amended, or
any similar statute hereafter adopted with similar purpose or effect, the
"Securities Laws") may require strict limitations as to the manner in which
Agent or any subsequent transferee of the Pledged Stock may dispose of such
securities. Pledgor understands that in order to protect Agent's interest it may
be necessary to sell the Pledged Stock at a price less than the maximum price
attainable if a sale were delayed or were made in another manner, such as a
public offering requested under the Securities Laws. Pledgor has no objection to
a sale in such a manner.
10. Application of Proceeds by Agent.
In the event Agent sells or otherwise disposes of the Pledged
Collateral in the course of exercising the remedies provided for in Section 8
hereof, any amounts held, realized or received by Agent pursuant to the
provisions hereof, including the proceeds of the sale of any of the Pledged
Collateral or any part thereof, shall be applied by Agent first toward the
payment of any costs and expenses incurred by Agent in enforcing this Pledge
Agreement, in realizing on or protecting any Pledged Collateral and in enforcing
or collecting any Obligations or any guaranty thereof, including, without
limitation, the reasonable, actual attorneys' fees and expenses incurred by
Agent (all of which costs and expenses are secured by the Pledged Collateral),
all of which costs and expenses Pledgor agrees to pay, and then as provided in
the Credit Agreement. Any amounts and any Pledged Collateral remaining after
such application and after payment to the Banks of all of the Obligations in
full shall be paid or delivered to Pledgor, its successor or assigns, or as a
court of competent jurisdiction may direct.
Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which Agent
accords its own property, it being understood that Agent shall not have any
responsibility for (x) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not Agent has or is deemed to have knowledge of
such matters or (y) taking any necessary steps to preserve rights against any
parties with respect to any Pledged Collateral.
11. Absolute Interest.
(a) So long as any Obligations are unsatisfied, all rights of
Agent hereunder, and all obligations of Pledgor hereunder, shall be absolute and
unconditional irrespective of (i) any lack of validity or enforceability of any
provision of the Credit Agreement, any agreement with respect to the Obligations
or any other agreement or instrument relating to any of the foregoing, (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Credit Agreement or any other agreement or instrument,
(iii) any exchange, release or non-perfection of
<PAGE>
any Pledged Collateral, or any release or amendment or waiver of or any consent
to or departure from any guarantee, for all or any of the Obligations or (iv)
any other circumstance which might constitute a defense available to, or a
discharge of, Pledgor in respect of the Obligations or this Pledge Agreement.
(b) This Pledge Agreement shall not be construed as relieving
Pledgor from full liability on the Obligations and any and all future and other
indebtedness secured hereby and for any deficiency thereon.
(c) Agent is hereby subrogated to all of Pledgor's interests,
rights and remedies in respect to the Pledged Collateral and all security now or
hereafter existing with respect thereto and all guaranties and endorsements
thereof and with respect thereto.
12. Termination.
This Pledge Agreement and the security interests created
hereunder shall terminate when all the Obligations have been indefeasibly paid
in full and when Agent has no further obligation to extend credit under the
Credit Agreement, at which time Agent shall execute and deliver to Pledgor all
documents which Pledgor shall reasonably request to evidence termination of such
security interest and shall return physical possession of any Pledged Collateral
then held by Agent to Pledgor; provided, however, that all indemnities of
Pledgor contained in this Pledge Agreement shall survive, and remain in full
force and effect regardless of the termination of the security interest of this
Pledge Agreement.
13. Additional Information.
Pledgor agrees to furnish Agent from time to time such
additional information and copies of such documents relating to this Pledge
Agreement, the Pledged Collateral, the Obligations and Pledgor's financial
condition to the extent and at such times as provided under Section 5.1(h) of
the Credit Agreement as Agent may reasonably request.
14. Notices.
Any communication, notice or demand to be given hereunder
shall be in writing (including telex and facsimile communication) and mailed,
sent by facsimile, or delivered,
if to Pledgor,
EFTC Corporation
9351 Grant Street
Horizon Terrace, 6th Floor
Denver, Colorado 80229
Attention: Stuart Fuhlendorf
Vice President and
Chief Financial Officer
Facsimile: (303) 451-8210
<PAGE>
and if to Agent,
Bank One, Colorado, N.A.
1125 Seventeenth Street, 3rd Floor
Denver, Colorado 80202
Attention: David L. Ericson
Vice President
Facsimile: (303) 297-4435
as to each party, at such other address or numbers as shall be designated by
either party hereto to the other party in a written notice. All such notices and
communications shall be effective (a) when received, if mailed by registered or
certified mail or physically delivered, (b) five (5) days after being sent by
mail, if sent by ordinary mail, and (c) upon confirmation of transmission, if
sent by telex or telecopier, addressed in each case as aforesaid.
15. Indemnity and Expenses.
The Pledgor agrees to indemnify Agent from and against any and
all claims, losses and liabilities growing out of or resulting from this Pledge
Agreement (including, without limitation, enforcement of this Pledge Agreement
and other Collateral Documents, and all claims and demands of all persons at any
time claiming the Pledged Collateral or any interest therein), except claims,
losses or liabilities resulting from Agent's gross negligence or willful
misconduct. Pledgor agrees to pay on demand all out-of-pocket expenses of the
Agent (including the reasonable fees and expenses of Agent's attorneys, experts
and agents) in any way relating to the enforcement or protection of the rights
of the Banks hereunder and further agrees that the Pledged Collateral secures
such payment.
16. No Waiver; Cumulative Rights.
No failure on the part of Agent to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Agent of any right, remedy
or power hereunder preclude any other or future exercise of any other right,
remedy or power. Each and every right, remedy and power hereby granted to Agent
or allowed it by law or other agreement shall be cumulative and not exclusive of
any other and may be exercised by Agent from time to time.
17. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF COLORADO, WITHOUT, HOWEVER, GIVING EFFECT TO THE CONFLICTS OF LAW
PROVISIONS THEREOF. PLEDGOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY
IRREVOCABLY (a) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING
AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF MAY BE INSTITUTED IN ANY COURT
OF APPROPRIATE JURISDICTION IN THE CITY AND COUNTY OF DENVER, COLORADO;
<PAGE>
(b) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF SUCH
ACTION, SUIT OR PROCEEDING OR ANY CLAIM OF FORUM NON CONVENIENS; (c) SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, FOR THE PURPOSES OF
SUCH ACTION, SUIT OR PROCEEDING; (d) WAIVES ANY IMMUNITY FROM JURISDICTION TO
WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING
WHICH MAY BE INSTITUTED IN ANY SUCH COURT, AND WAIVES ANY IMMUNITY FROM THE
MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE IN ANY SUCH COURT, ANY JUDGMENT
FOR MONEY OBTAINED IN SUCH ACTION, SUIT OR PROCEEDING AND, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY IMMUNITY FROM EXECUTION; AND (e) AGREES THAT
ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING BROUGHT BY PLEDGOR AGAINST
AGENT OR OTHER LENDING PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF SHALL BE
INSTITUTED IN SUCH COURTS.
18. JURY TRIAL.
PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE SUBJECT
MATTER HEREOF. THE PROVISIONS OF THIS SECTION 18 ARE A MATERIAL INDUCEMENT FOR
AGENT AND THE BANKS TO ENTER INTO THIS PLEDGE AGREEMENT AND THE CREDIT AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN. PLEDGOR HEREBY
ACKNOWLEDGES THAT IT HAS REVIEWED THE PROVISIONS OF THIS SECTION 18 WITH ITS
INDEPENDENT COUNSEL.
19. Inconsistency of Agreements.
In case of any inconsistency between this Pledge Agreement and
the Credit Agreement, the provisions of the Credit Agreement shall be
controlling except with respect to Sections 1 and 2 hereof as to which the terms
of this Pledge Agreement shall be controlling.
20. Execution in Counterparts.
This Pledge Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Pledge
Agreement to be duly executed as of the date first above written.
EFTC CORPORATION
By:/s/
Name: Stuart W. Fuhlendorf
Title: Vice President and
Chief Financial Officer
BANK ONE, COLORADO, N.A.
By: /s/
Name: David L. Ericson
Title: Vice President
<PAGE>
SCHEDULE I
Pledge and Security Agreement
EFTC CORPORATION
DESCRIPTION OF PLEDGED STOCK
OF SUBSIDIARY ISSUERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Stock % Shares
ISSUER Class of Stock Certificate No. of Shares Outstanding
No. by Pledgor
</TABLE>
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned, CURRENT ELECTRONICS, INC. (the "Issuer"),
hereby (i) acknowledges receipt of the attached Pledge and Security Agreement,
dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION
("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the
"Agent") for the Banks under that certain Credit Agreement (as defined in the
Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement
of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I
thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in
writing of the breach of any warrant or covenant or the occurrence of any of the
events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees
that, if an Event of Default has occurred, (a) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in such order as provided in the Credit
Agreement, and (b) all shares of the Pledged Stock shall be registered in the
name of the Agent or its nominee and the Agent or its nominee may thereafter
exercise all voting, corporate and other rights pertaining to such shares of the
Pledged Stock at any meeting of shareholders or otherwise, and any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options existing at such time and pertaining to such shares of the Pledged Stock
as if it were the absolute owner thereof (including, without limitation, the
right to exchange at its discretion any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of the Issuer, or upon the exercise by the
Pledgor or the Agent of any right, privilege or option pertaining to such share
of the Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions (as it may determine to be appropriate), all without liability to the
Agent except to account for property actually received by it, but the Agent
shall have no duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing).
Capitalized terms used herein but not defined have the
meanings specified in the Pledge Agreement.
This Acknowledgment and Consent when executed by the Issuer
and accepted by the Agent by executing the acceptance at the foot hereof, shall
be deemed to be a contract under the laws of Colorado and for all purposes,
shall be construed in accordance with the laws of said jurisdiction.
CURRENT ELECTRONICS, INC.
By: /s/
Name:Stuart W. Fuhlendorf
Title:
ACCEPTED:
BANK ONE, COLORADO, N.A.,
as Agent for the Banks
By: /s/
Name: David L. Ericson
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned, CIRCUIT TEST, INC. (the "Issuer"), hereby (i)
acknowledges receipt of the attached Pledge and Security Agreement, dated as of
September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION ("Pledgor")
with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the
Banks under that certain Credit Agreement (as defined in the Pledge Agreement),
(ii) consents to the pledge pursuant to the Pledge Agreement of the shares of
stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the
"Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the
breach of any warrant or covenant or the occurrence of any of the events
described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees that, if an
Event of Default has occurred, (a) the Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Obligations in such order as provided in the Credit Agreement,
and (b) all shares of the Pledged Stock shall be registered in the name of the
Agent or its nominee and the Agent or its nominee may thereafter exercise all
voting, corporate and other rights pertaining to such shares of the Pledged
Stock at any meeting of shareholders or otherwise, and any and all rights of
conversion, exchange, subscription or any other rights, privileges or options
existing at such time and pertaining to such shares of the Pledged Stock as if
it were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of the Issuer, or upon the exercise by the Pledgor or
the Agent of any right, privilege or option pertaining to such share of the
Pledged Stock, and in connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions (as it may
determine to be appropriate), all without liability to the Agent except to
account for property actually received by it, but the Agent shall have no duty
to the Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing).
Capitalized terms used herein but not defined have the
meanings specified in the Pledge Agreement.
This Acknowledgment and Consent when executed by the Issuer
and accepted by the Agent by executing the acceptance at the foot hereof, shall
be deemed to be a contract under the laws of Colorado and for all purposes,
shall be construed in accordance with the laws of said jurisdiction.
CIRCUIT TEST, INC.
By: /s/
Name:Stuart W. Fuhlendorf
Title:
ACCEPTED:
BANK ONE, COLORADO, N.A.,
as Agent for the Banks
By: /s/
Name: David L. Ericson
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned, CTLLC ACQUISTION CORP. (the "Issuer"), hereby
(i) acknowledges receipt of the attached Pledge and Security Agreement, dated as
of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION
("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the
"Agent") for the Banks under that certain Credit Agreement (as defined in the
Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement
of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I
thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in
writing of the breach of any warrant or covenant or the occurrence of any of the
events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees
that, if an Event of Default has occurred, (a) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in such order as provided in the Credit
Agreement, and (b) all shares of the Pledged Stock shall be registered in the
name of the Agent or its nominee and the Agent or its nominee may thereafter
exercise all voting, corporate and other rights pertaining to such shares of the
Pledged Stock at any meeting of shareholders or otherwise, and any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options existing at such time and pertaining to such shares of the Pledged Stock
as if it were the absolute owner thereof (including, without limitation, the
right to exchange at its discretion any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of the Issuer, or upon the exercise by the
Pledgor or the Agent of any right, privilege or option pertaining to such share
of the Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions (as it may determine to be appropriate), all without liability to the
Agent except to account for property actually received by it, but the Agent
shall have no duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing).
Capitalized terms used herein but not defined have the
meanings specified in the Pledge Agreement.
This Acknowledgment and Consent when executed by the Issuer
and accepted by the Agent by executing the acceptance at the foot hereof, shall
be deemed to be a contract under the laws of Colorado and for all purposes,
shall be construed in accordance with the laws of said jurisdiction.
CTLLC ACQUISITION CORP.
By: /s/
Name:Stuart W. Fuhlendorf
Title:
ACCEPTED:
BANK ONE, COLORADO, N.A.,
as Agent for the Banks
By: /s/
Name: David L. Ericson
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned, CIRCUIT TEST INTERNATIONAL, LC (the
"Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security
Agreement, dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC
CORPORATION ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent
(the "Agent") for the Banks under that certain Credit Agreement (as defined in
the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge
Agreement of the shares of stock of the Issuer owned by Pledgor and listed in
Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent
promptly in writing of the breach of any warrant or covenant or the occurrence
of any of the events described in Sections 4 or 7 of the Pledge Agreement and
(iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have
the right to receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Obligations in such order as provided
in the Credit Agreement, and (b) all shares of the Pledged Stock shall be
registered in the name of the Agent or its nominee and the Agent or its nominee
may thereafter exercise all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders or otherwise,
and any and all rights of conversion, exchange, subscription or any other
rights, privileges or options existing at such time and pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of the Issuer, or upon
the exercise by the Pledgor or the Agent of any right, privilege or option
pertaining to such share of the Pledged Stock, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Stock with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions (as it may determine to be appropriate), all without
liability to the Agent except to account for property actually received by it,
but the Agent shall have no duty to the Pledgor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing).
Capitalized terms used herein but not defined have the
meanings specified in the Pledge Agreement.
This Acknowledgment and Consent when executed by the Issuer
and accepted by the Agent by executing the acceptance at the foot hereof, shall
be deemed to be a contract under the laws of Colorado and for all purposes,
shall be construed in accordance with the laws of said jurisdiction.
CIRCUIT TEST INTERNATIONAL, LC
By: /s/
Name: Stuart W. Fuhlendorf
ACCEPTED:
BANK ONE, COLORADO, N.A.,
as Agent for the Banks
By: /s/
Name: David L. Ericson
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned, AIRHUB SERVICES GROUP, LLC (the "Issuer"),
hereby (i) acknowledges receipt of the attached Pledge and Security Agreement,
dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION
("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the
"Agent") for the Banks under that certain Credit Agreement (as defined in the
Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement
of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I
thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in
writing of the breach of any warrant or covenant or the occurrence of any of the
events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees
that, if an Event of Default has occurred, (a) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in such order as provided in the Credit
Agreement, and (b) all shares of the Pledged Stock shall be registered in the
name of the Agent or its nominee and the Agent or its nominee may thereafter
exercise all voting, corporate and other rights pertaining to such shares of the
Pledged Stock at any meeting of shareholders or otherwise, and any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options existing at such time and pertaining to such shares of the Pledged Stock
as if it were the absolute owner thereof (including, without limitation, the
right to exchange at its discretion any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of the Issuer, or upon the exercise by the
Pledgor or the Agent of any right, privilege or option pertaining to such share
of the Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions (as it may determine to be appropriate), all without liability to the
Agent except to account for property actually received by it, but the Agent
shall have no duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing).
Capitalized terms used herein but not defined have the
meanings specified in the Pledge Agreement.
This Acknowledgment and Consent when executed by the Issuer
and accepted by the Agent by executing the acceptance at the foot hereof, shall
be deemed to be a contract under the laws of Colorado and for all purposes,
shall be construed in accordance with the laws of said jurisdiction.
AIRHUB SERVICES GROUP, LLC
By: /s/
Name:Stuart W. Fuhlendorf
Title:
ACCEPTED:
BANK ONE, COLORADO, N.A.,
as Agent for the Banks
By: /s/
Name: David L. Ericson
Title: Vice President
<PAGE>
SECURITY AGREEMENT AND ASSIGNMENT
THIS SECURITY AGREEMENT AND ASSIGNMENT is entered into as of September
30, 1997 by and between EFTC CORPORATION, a Colorado corporation (the "Debtor")
and BANK ONE, COLORADO, N.A., a national banking association (the "Agent"), for
the ratable benefit of the Banks under that certain Credit Agreement dated as of
September 30, 1997, by and among the Debtor (as Borrower thereunder), Agent and
the Banks, with such Credit Agreement, as hereafter amended, modified or
extended by the parties thereto referred to as the "Credit Agreement."
Section 1
DEFINITIONS
Section 1.1 Specific Definitions. The following definitions shall apply:
(a) "Account Debtors" means Debtor's customers and all other persons
who are obligated or indebted to Debtor in any manner, whether directly or
indirectly, primarily or secondarily, contingently or otherwise, with respect to
Accounts or General Intangibles.
(b) "Accounts" shall have the meaning set forth at Section 2.1(a).
(c) "Agent" shall have the meaning assigned to it in the Recitals hereto.
(d) "Banks" shall have the meaning assigned to it in the Recitals hereto. (e)
"Code" shall mean the Uniform Commercial Code of the State of Colorado. (f)
"Credit Agreement" shall have the meaning assigned to it in the Recitals hereto,
and pursuant to which this Security Agreement and Assignment is given. (g)
"Debtor" shall have the meaning assigned to it in the Recitals hereto. (h)
"Debtor's Notes" shall mean any promissory notes made by Debtor in favor of
Agent, including, without limitation: a. Debtor's Promissory Note (Revolving
Loan) dated September 30, 1997, in the original principal amount of
$25,000,000.00; b. Debtor's Promissory Note (Term Loan) dated September 30,
1997, in the original principal amount of $20,000,000.00; c. Debtor's Promissory
Note (Swing Loan) dated September 30, 1997, in the original principal amount of
$2,500,000.00; and
<PAGE>
d. Any and all modifications, extensions and renewals of any of the
foregoing and any and all future advances or readvances to Debtor whether
pursuant to any of the foregoing promissory notes or otherwise;
(i) "Debtor's Obligations" shall mean the full and prompt payment and
performance of all of the indebtedness, obligations, covenants, agreements and
liabilities of Debtor to Agent, together with all interest and other charges
thereon, whether direct or indirect, existing, future, contingent or otherwise,
due or to become due, under or arising out of or in connection with (i) Debtor's
Notes; (ii) any pledge or guaranty; (iii) any overdraft; (iv) any Loan Document
and (v) any and all modifications, extensions and renewals of any of the
foregoing.
(j) "Debtor's Books" means all of Debtor's books and records including,
but not limited to: minute books; ledgers; records indicating, summarizing, or
evidencing Debtor's assets, liabilities, and the Accounts; all information
relating to Debtor's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, and other
computer-prepared information.
(k) "Equipment" shall have the meaning set forth at Section 2.1(c).
(l) "Event of Default" shall have the meaning set forth in
Section 9.
(m) "General Intangibles" shall have the meaning set forth at
Section 2.1(d).
(n) "Guarantor" and "Guarantors" shall mean, respectively, any one or
more of CIRCUIT TEST INTERNATIONAL, L.C., a Florida limited liability company
("CT International"); CURRENT ELECTRONICS, INC., an Oregon corporation ("Current
Electronics"); CTLLC ACQUISITION CORP., a Florida corporation ("CTLLC
Acquisition"); CIRCUIT TEST, INC., a Florida corporation ("Circuit Test"); and
AIR HUB SERVICES GROUP, LLC, a Kentucky limited liability company ("Air Hub
Services").
(o) "Inventory" shall have the meaning set forth at Section 2.1(b).
(p) "Lien" means any security interest, mortgage, pledge, assignment,
lien, or other encumbrance of any kind, including any interest of a vendor under
a conditional sale contract or consignment and any interest of a lessor under a
capital lease.
(q) "Loan Documents" shall mean the Credit Agreement, Debtor's Notes,
this Security Agreement and Assignment, and any other instrument now or
hereafter given to evidence, secure or guaranty Debtor's Obligations.
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<PAGE>
(r) "Permitted Lien" means: (i) Liens imposed by any governmental
authority for taxes, assignments or charges not yet due or which are being
contested in good faith and with due diligence and with respect to which
adequate reserves have been established; (ii) carriers' warehousemen's,
mechanics', materialmen's, repairmen's, or other like Liens arising in the
ordinary course of business not yet delinquent or which are being contested in
good faith and with due diligence and with respect to which adequate reserves
have been established; (iii) pledges or deposits under workers' compensation,
unemployment insurance and other social security legislation; (iv) purchase
money Liens securing payment by the Debtor of a portion of the purchase price of
any asset; and (v) any attachment or judgment Lien either in existence less than
30 calendar days after the entry thereof, or with respect to which execution has
been stayed, or with respect to which payment in full above any deductible is
covered by insurance.
(s) "Proceeds" shall have the meaning set forth in Section 2.1(g).
(t) "Secured Obligations" shall mean Debtor's Notes, Debtor's Obligations
and "Secured Party Expenses."
(u) "Secured Party Expenses" means: (i) all costs and expenses
(including, without limitation, taxes and insurance premiums) required to be
paid by Debtor under this Security Agreement and Assignment or under any of the
other Loan Documents that are paid or advanced by Agent; (ii) filing, recording,
publication, and search fees paid or incurred by Agent in connection with
Agent's transactions with Debtor, (iii) costs and expenses incurred by Agent to
correct any default or enforce any provision of the Loan Documents or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
and preparing for sale and/or advertising to sell the Collateral, whether or not
a sale is consummated (including reasonable counsel, consultant and appraiser
fees and expenses); (iv) costs and expenses of suit incurred by Agent as Agent
in enforcing or defending the Loan Documents or any portion thereof, and (v)
Agent's reasonable attorney fees and expenses incurred (before or after
execution of this Security Agreement and Assignment) in advising Agent with
respect to, or in structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending, or otherwise concerning, the Loan Documents
or any portion thereof, irrespective of whether suit is brought.
Section 1.2 Uniform Commercial Code Terms.
Terms used in this Security Agreement and Assignment, other than those
defined in this Section 1.1, have the meanings accorded to them in the Uniform
Commercial Code of the State of Colorado.
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<PAGE>
Section 1.3 Construction.
(a) Unless the context of this Security Agreement and Assignment
clearly requires otherwise, the plural includes the singular, the singular
includes the plural, the part includes the whole, "including" is not limited,
and "or" has the inclusive meaning of the phrase "and/or." The words "hereof,"
"herein," "hereunder," and other similar terms in this Security Agreement and
Assignment refer to this Security Agreement and Assignment as a whole and not
exclusively to any particular provision of this Security Agreement and
Assignment.
(b) It is intended that the Credit Agreement expresses the primary
understandings and agreements of the parties. In the event of any inconsistency
or conflict between the terms of this document and the terms of the Credit
Agreement, the provisions of the Credit Agreement shall control. Any schedule
required by this document which duplicates the requirement of a schedule
attached to the Credit Agreement shall be deemed to be fulfilled by the schedule
to the Credit Agreement. Capitalized terms used but not defined herein, and
defined in the Credit Agreement, shall have the meaning given thereto in the
Credit Agreement.
Section 2
SECURITY INTEREST
Section 2.1 Grant of Security Interest. In order to secure prompt
payment and performance of Debtor's Obligations, Debtor hereby grants to Agent a
continuing first-priority pledge and security interest in the following property
of Debtor (the "Collateral"), whether now owned or existing or hereafter
acquired or arising and regardless of where located:
(a) All Accounts, which shall mean all accounts, contract rights,
notes, drafts, instruments, documents, chattel paper, and obligations in any
form owing to Debtor arising out of the sale or lease of goods or the rendition
of services by Debtor whether or not earned by performance; all credit
insurance, guaranties, letters of credit, advices of credit, and other security
for any of the above; all merchandise returned to or reclaimed by Debtor; and
Debtor's Books relating to any of the foregoing.
(b) All Inventory, which shall mean any and all goods, supplies, wares,
merchandise, and other tangible personal property, including raw materials, work
in process, supplies and components, and finished goods, whether held for sale
or lease or to be furnished under any contract for service or so leased or
furnished, or used or consumed in Debtor's business, and also including products
of and accessions to inventory, packing and shipping materials, and all
documents of title, whether negotiable or nonnegotiable, representing any of the
foregoing.
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<PAGE>
(c) All Equipment, which shall mean all equipment, fixtures, machinery,
machine tools, office equipment, furniture, furnishings, motors, motor vehicles,
tractors, trailers, non-titled vehicles, tools, dies, parts, jigs, goods, all
attachments, accessories, accessions, parts, replacements, substitutions,
additions, and improvements thereto, and all supplies used or to be used in
connection therewith, including without limitation those items of Equipment set
forth on Schedule 2.1(c) attached.
(d) All General Intangibles, which shall mean all general intangibles,
choses in action, causes of action, and all other personal property of every
kind and nature (other than goods and Accounts), including, without limitation:
(i) all tax refunds, (ii) all inventions, processes, production methods,
proprietary information, know-how and trade secrets used or useful in the
business of Debtor, (iii) all trade names, trademarks, and service marks; all
trademark and service mark registrations (other than intent to use applications
for trademarks and service marks, if any) and applications for trademark and
service mark registrations and all renewals of trademark and service mark
registrations, all rights relating thereto, including without limitation, the
right to recover for all past, present and future infringements thereof, and all
other rights of any kind whatsoever accruing thereunder or pertaining thereto,
together with the goodwill of the business connected with the use of, and
symbolized by, each such trade name, trademark, and service mark, (iv) all
logos, copyrights, patents and applications for patents, (v) all licenses or
other agreements relating to any of the foregoing, (vi) all information,
customer lists, identifications of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software and
programs, and the like pertaining to any present or future operations by Debtor,
(vii) all field repair data, sales data and other information relating to sales
or service of all present or future products, (viii) all accounting information
and all media in which or on which any of the information or knowledge or data
or records which pertain to any present or future operations of Debtor may be
recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data, (ix) all licenses,
consents, permits, variances, certifications and approvals of any governmental
authority or any other person pertaining to any operations now or hereafter
conducted by Debtor (including, without limitation, all franchises, licenses,
consents, permits, variances, certifications and approvals specifically
described on Schedule 2.1(d)(ix) attached), (x) all licenses, franchises,
permits or other rights to use any processes, production methods, proprietary
information, know-how, trade secrets and software in connection with Debtor's
business (including, without limitation, any of the foregoing described on
Schedule 2.1(d)(x), attached), (xi) all causes of action, claims and warranties
relating to any of the foregoing, (xii) all certificates of deposits evidencing
a deposit by Debtor with Agent or any other financial institution, (xiii) all
promissory notes payable to Debtor which are determined not to be instruments,
(xiv) all Debtor's interest as lessee under all leases of real and personal
property (including, without limitation, the leases set forth on Schedule 4.1(o)
to the Credit Agreement or any other schedule that is either now or hereafter
delivered by Debtor to Agent and incorporated herein by reference) and (xv) all
Debtor's interest in contracts and agreements
-5-
<PAGE>
(including, without limitation, the contracts set forth on Schedule 4.1(n) of
the Credit Agreement or any other schedule that is either now or hereafter
delivered by Debtor to Agent and incorporated herein by reference).
(e) Investment Property, which shall mean all certificated or
uncertificated securities, security entitlements, security accounts, commodity
contracts or commodity accounts.
(f) Possessory Collateral, which shall mean notes, drafts, instruments,
documents, securities, money, letters of credit, advices of credit, or other
assets, properties or indebtedness owned by Debtor or in which Debtor has an
interest that now or thereafter are at any time in the possession or control of
Agent, Agent's affiliates, custodians, participants and designees or in transit
by mail or carrier to Agent, Agent's affiliates, custodians, participants and
designees or in the possession of any other third party acting on behalf of
Agent, without regard to whether Agent received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise, or whether
Agent had conditionally released the same, and all deposit accounts of Debtor
with Agent, Agent's affiliates, custodians, participants and designees,
including all demand, time, savings, passbook, or other accounts.
(g) Proceeds, which shall mean all proceeds and products of Collateral
and all additions and accessions to, replacements of, insurance or condemnation
proceeds of, and documents covering Collateral; all property received wholly or
partly in trade or exchange for Collateral; all claims against third parties
arising out of damage, destruction, or decrease in value of the Collateral; all
leases of Collateral; and all rents, revenues, issues, profits, and proceeds,
arising from the sale, lease, license, encumbrance, collection, or any other
temporary or permanent disposition of the Collateral or any interest therein.
(h) Notwithstanding the foregoing, no security interest shall be
granted in the AlliedSignal Acquisition Agreements until the Consent to
Assignment of Contracts with respect to the AlliedSignal Acquisition Agreements
has been furnished to the Borrower or the requirement for such consent has been
waived pursuant to Section 5.1(o) of the Credit Agreement.
Section 3
PROVISIONS CONCERNING ACCOUNTS
Section 3.1 Office and Records of Debtor. Debtor's chief executive
office is located at: 9351 Grant Street, Horizon Terrace, Sixth Floor, Denver,
Colorado 80202. Debtor maintains all of its records with respect to its Accounts
in Colorado. Debtor shall not maintain its chief executive office or its records
with respect to its Accounts at any other location except after thirty (30) days
prior written notice to the Agent.
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<PAGE>
Section 3.2 Representations. Debtor represents and warrants that each
Eligible Account Receivable of the Debtor at the time of its assignment to Agent
(a) will be owned solely by Debtor; (b) will be for a liquidated amount maturing
as stated in Debtor's Books; (c) will be a bona fide existing obligation created
by the final sale and delivery of goods or the rendition of services to Account
Debtors by Debtor in the ordinary course of its business; and (d) will not be
subject to any known deduction, offset, counterclaim, return privilege, or other
condition, except as reflected on Debtor's Books.
Section 3.3 Shipment Arrangements. After two (2) weeks notice, unless
an Event of Default has occurred then promptly upon the request of the Agent,
Debtor shall deliver to Agent, as Agent may request no more often than annually,
so long as an Event of Default has not occurred, original delivery receipts,
customer purchase orders, shipping instructions, bills of lading, and other
documentation respecting shipment arrangements. Absent such a request by Agent,
copies of all such documentation shall be held by Debtor as custodian for Agent.
Section 3.4 Agent's Rights. Upon and after the occurrence of an Event
of Default and at any time Agent reasonably believes an Event of Default has
occurred or is likely to occur with the passage of time, any officer, employee,
or agent of Agent shall have the right, at any time or times hereafter, in the
name of Agent or its nominee (including Debtor), to verify the validity, amount,
or any other matter relating to any Accounts by mail, telephone, or otherwise;
and all reasonable costs thereof shall be payable by Debtor to Agent. At such
time, Agent or its designee may at any time notify customers or Account Debtors
that Accounts have been assigned to Agent or of Agent's security interest
therein and collect the same directly and charge all collection costs and
expenses to Debtor's account.
Section 3.5 Post Default Rights. After a declared Event of Default
hereunder, no discount, credit, or allowance shall be granted by Debtor to any
Account Debtor and no return of merchandise shall be accepted by Debtor without
Agent's consent. Agent may thereafter settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms that Agent considers
advisable, and in such cases, Agent will credit Debtor's account with only the
net amounts received by Agent in payment of such disputed Accounts, after
deducting all Agent Expenses incurred in connection therewith.
Section 4
PROVISIONS CONCERNING INVENTORY
Section 4.1 Locations. Schedule 4.1(o) of the Credit Agreement is a
true and correct list showing all states where inventory is located (except for
Inventory in transit), including, without limitation, facilities leased and
operated by Debtor and locations neither owned nor leased by Debtor, and showing
all such places where Inventory of Debtor has been located in the past four
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<PAGE>
months. Such list indicates whether the premises are those of a warehouseman or
other party. No Inventory will be removed from states set forth in such Schedule
except for the purpose of sale in the ordinary course of Debtor's business
provided that inventory may be moved from one location set forth in such
Schedule to another in the ordinary course of Debtor's business. Debtor will
promptly notify Agent of any new inventory location.
Section 4.2 Inventory, Books and Records. Debtor shall keep all
Inventory in good order and condition and shall maintain full, accurate, and
complete books and records with respect to Inventory at all times.
Section 4.3 Inspection of Collateral. Agent may, during Debtor's usual
business hours and consistent with Section 5.1(m) of the Credit Agreement,
inspect and examine the Inventory and check and test the same as to quality,
quantity, value, and condition.
Section 4.4 Sales of Inventory. Subject to the rights of Agent upon the
occurrence of an Event of Default, Debtor may sell Inventory in the ordinary
course of its business (which does not include a transfer in full or partial
satisfaction of indebtedness or a transfer for less than fair equivalent value).
Section 4.5 Warehouses and Landlords. Except as set forth on Schedule
4.1(o) of the Credit Agreement, Inventory is not now and shall not at any time
hereafter be stored with a bailee, warehouse, or similar party without Agent's
prior written consent.
Section 5
PROVISIONS CONCERNING EQUIPMENT
Section 5.1 Maintenance and Repair. Debtor shall keep and maintain
Equipment material to its business in good operating condition and repair and
make all necessary repairs thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Debtor shall immediately
notify Agent of any material loss or damage to the Equipment.
Section 5.2 Fixtures. Debtor shall not permit any item of Equipment
that is not a fixture to become a fixture to real estate or an accession to
other property without the prior written consent of Agent, and the Equipment is
now and shall at all times remain personal property except with Agent's prior
written consent. If any of the Collateral is or will be attached to real estate
in such a manner as to become a fixture under applicable state law and if such
real estate is encumbered and such encumbrance attaches to such Collateral,
Debtor will obtain from the holder of each Lien or encumbrance a written consent
and subordination to the security interest hereby granted, or a written
disclaimer of any interest in the Collateral, in a form acceptable to Agent in
its reasonable judgment.
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<PAGE>
Section 5.3 Additional Acquisitions. Debtor shall promptly notify Agent
in writing of its acquisition, by purchase, lease, or otherwise, of any material
after-acquired Equipment, including a description of the Equipment and of its
present locations and (if different) its intended permanent locations.
Section 6
PROVISIONS CONCERNING GENERAL INTANGIBLES
Section 6.1 Title to General Intangibles. Debtor represents and
warrants that all of the General Intangibles assigned to Agent or in which
Debtor grants Agent a Lien are owned by Debtor.
Section 6.2 Intellectual Property.
(a) A true and complete schedule setting forth all patents, federal
and/or state trademarks, service marks, trade name or brand name registrations
and copyright registrations, and all pending applications and applications
(other than intent to use applications) to be filed therefore, owned or
controlled by Debtor or licensed to Debtor is contained in Schedule 2.1(d)(x)
hereto. No licenses, sublicenses, covenants, or agreements have been entered
into by Debtor in respect of any of such items, and each such item is in full
force and effect, free and clear of all Liens and encumbrances of every nature,
is not currently being challenged in any way, and is not involved in any pending
(or, to the knowledge of Debtor, threatened) interference proceeding.
(b) Concurrently with its execution and delivery of this Security
Agreement and Assignment, Debtor shall execute and deliver to Agent collateral
assignments of all registered patents, trademarks, trade names, copyrights, and
applications (other than intent to use applications) for any of them, in a form
satisfactory to Agent and suitable for recording in the records of the
registering authority.
Section 6.3 Contracts and Leases.
(a) Schedule 4.1(o) and Schedule 4.1(n) of the Credit Agreement are,
respectively, true and complete lists (i) of all leases of real property and
(ii) of all Material Agreements to which Debtor is a party. Debtor represents
and warrants that each of the leases, contracts, and other agreements listed on
such Schedules is in full force and effect; that neither Debtor nor, to Debtor's
knowledge, any other party thereto is in default under or in breach of the terms
or conditions of any such lease, contract, or other agreement; and that there
has not occurred any event of default or event that, after the giving of notice
or the lapse of time or both, would constitute a default under or breach of any
such lease.
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(b) Debtor shall not amend, modify or supplement any Material Agreement
or waive any provision thereof other than in the ordinary course of business,
without the prior written consent of the Agent, which consent will not be
unreasonably withheld.
(c) Debtor shall remain liable to perform all of its duties and
obligations under any leases, contracts, and agreements included in the
Collateral to the same extent as if this Security Agreement and Assignment had
not been executed, and Agent shall not have any obligation or liability under
such leases, contracts, and agreements by reason of this Security Agreement and
Assignment or otherwise.
Section 7
OTHER PROVISIONS CONCERNING COLLATERAL
Section 7.1 Title. Debtor has good title to the Collateral, and the
Liens granted to Agent pursuant to this Security Agreement and Assignment are
fully perfected first priority Liens in and to the Collateral with priority over
the rights of every person in the Collateral other than the rights of Debtor and
other than Permitted Liens, and the Collateral is free, clear, and unencumbered
by any Liens in favor of any person other than Agent except for Permitted Liens.
Section 7.2 Further Assurances. Debtor shall execute and deliver to
Agent, concurrent with Debtor's execution of this Security Agreement and
Assignment and at any time or times hereafter at the request of Agent, all
financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, assignments, endorsements of
certificates of title, applications for titles, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents Agent may
reasonably request, in form satisfactory to Agent, to perfect and maintain
perfected Agent's Liens in the Collateral and in order to consummate fully all
of the transactions contemplated under the Loan Documents. Debtor hereby
irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers,
employees, or agents designated by Agent) as Debtor's true and lawful attorney
with power to sign the name of Debtor on any of the above-described documents or
on any other similar documents that need to be executed, recorded, and/or filed
in order to perfect or continue perfected Agent's Liens in the Collateral. The
appointment of Agent as Debtor's attorney is irrevocable as long as any Secured
Obligations are outstanding. Any person dealing with Agent shall be entitled to
rely conclusively on any written or oral statement of Agent that this power of
attorney is in effect.
Section 7.3 Transfer of Collateral. Debtor shall not sell, lease,
license, transfer, or otherwise dispose of any interest in any Collateral except
for sales of Inventory in the ordinary course of its business (sales of
Inventory in full or partial satisfaction of existing obligations of Debtor are
not considered to be sales in the ordinary course of business) and except for
sales, transfers or other dispositions permitted by Section 5.2(g) of the Credit
Agreement.
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Section 7.4 Agent's Duty of Care. Agent shall have no duty of care with
respect to the Collateral except that Agent shall exercise reasonable care with
respect to the Collateral in Agent's custody. Agent shall be deemed to have
exercised reasonable care if such property is accorded treatment substantially
equal to that which Agent accords its own property or if Agent takes such action
with respect to the Collateral as the Debtor shall request or agree to in
writing, provided that no failure to comply with any such request nor any
omission to do any such act requested by the Debtor shall be deemed a failure to
exercise reasonable care. Agent's failure to take steps to preserve rights
against any parties or property shall not be deemed to be failure to exercise
reasonable care with respect to the Collateral in Agent's custody. All risk of
loss, damage, or destruction of the Collateral shall be borne by Debtor.
Section 7.5 Debtor's Contracts. Debtor shall remain liable to perform
its obligations under any contracts and agreements included in the Collateral to
the same extent as though this Security Agreement and Assignment had not been
entered into, and Agent shall not have any obligation or liability under such
contracts and agreements by reason of this Security Agreement and Assignment or
otherwise.
Section 7.6 Reinstatement of Liens. If at any time after payment in
full of all Secured Obligations and termination of Agent's Liens, any payment on
Secured Obligations previously made must be disgorged by Agent for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy, or
reorganization of Debtor or any Guarantor), this Security Agreement and
Assignment and Agent's Liens granted hereunder shall be reinstated as to all
disgorged payments as though such payments had not been made, and Debtor shall
sign and deliver to Agent all documents and things necessary to reperfect all
terminated Liens.
Section 7.7 Agent Expenses. If Debtor fails to pay any moneys (whether
taxes, assessments, insurance premiums, or otherwise) due to third persons or
entities, fails to make any deposits or furnish any required proof of payment or
deposit, or fails to discharge any Lien prohibited hereby, all as required under
the terms of this Security Agreement and Assignment, then Agent may, to the
extent that it determines that such failure by Debtor could have a material
adverse effect on Agent's interests in the Collateral, in its discretion and
with three (3) days prior notice to Debtor, make payment of the same or any part
thereof. Any amounts paid or deposited by Agent shall constitute Agent Expenses,
shall become part of the Secured Obligations and shall be secured by the
Collateral. Any payments made by Agent shall not constitute (a) an agreement by
Agent to make similar payments in the future or (b) a waiver by Agent of any
Event of Default under this Security Agreement and Assignment. Agent need not
inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance, or Line, and the receipt of the usual official notice for
the payment of moneys to a governmental entity shall be conclusive evidence that
the same was validly due and owing.
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Debtor shall immediately and without demand reimburse Agent for all
sums expended by Agent that constitute Agent Expenses, and Debtor hereby
authorizes and approves all advances and payments by Agent for items
constituting Agent Expenses.
Section 7.8 Inspection of Collateral and Records. Subject to and
consistent with the provisions of Sections 5.1(h) and 5.1(m) of the Credit
Agreement, during Debtor's usual business hours, Agent may inspect and examine
the Collateral and check and test the same as to quality, quantity, value and
condition. Agent shall also have the right at any time or times hereafter,
during Debtor's usual business hours or during the usual business hours of any
third party having control over the records of Debtor, to inspect and verify
Debtor's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral and Debtor's financial condition and to copy
and make extracts therefrom. Debtor waives the right to assert a confidential
relationship. If any, it may have with any accounting firm and/or service bureau
in connection with any information requested by Agent pursuant to this Security
Agreement and Assignment and agrees that Agent may directly contact any such
accounting firm and/or service bureau in order to obtain such information.
Section 8
COVENANTS
Section 8.1 Encumbrance of Assets. Debtor shall not create, incur,
assume, or permit to exist any Lien on any asset now owned or hereafter acquired
by Debtor, except for Liens to Agent and Permitted Liens or as otherwise
provided by Section 5.2(c).
Section 8.2 Condition and Repair. Debtor shall maintain in good repair
and working order all properties used in its business and from time to time
shall make all appropriate repairs and replacements thereof.
Section 8.3 Insurance. Debtor shall maintain, with financially sound
and reputable insurers, insurance with respect to the Collateral against loss or
damage of the kinds and in the amounts customarily insured against by
corporations of established reputation engaged in the same or similar
businesses. Each such policy shall name Agent as an additional insured and,
where applicable, as loss payee under a lender loss payable endorsement
satisfactory to Agent and shall provide for thirty (30) days' written notice to
Agent before such policy is altered or canceled. Debtor shall provide evidence
satisfactory to Agent that all such coverages are in full force and effect.
Section 9
EVENTS OF DEFAULT
Any of the following events shall be deemed an Event of Default or a
default hereunder:
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(a) if default shall be made in payment or performance of any Secured
Obligations as and when the same shall become due and payable after the
expiration of the applicable grace period, if any; or
(b) if Debtor fails to perform or observe any other term, provision,
covenant or agreement of this Security Agreement and Assignment (within 15 days
of Debtor's receipt of written notice or actual knowledge thereof) or in any of
the Loan Instruments to which it is a party, and Debtor shall not cure such
failure within the applicable grace period, if any; or
(c) if there occurs an event of default under the Credit Agreement
or any other Loan Instrument; or
(d) if any warranty, representation, certification, financial statement
or other information made or furnished at any time pursuant to the terms of this
Security Agreement and Assignment, by Debtor or any Guarantor, shall prove to be
materially false as of the date made.
Section 10
REMEDIES
Section 10.1 General Remedies. Upon the occurrence of any Event of
Default, in addition to all other rights, powers and remedies conferred herein,
in the Credit Agreement or by law, the Agent may declare the Secured Obligations
immediately due, payable and performable, including all principal and interest
remaining unpaid on the Notes and all other amounts secured hereby, all without
demand, presentment or notice, all of which are expressly waived. The Agent
shall also have, in addition to all other rights provided herein, in the Credit
Agreement, or by law, the rights and remedies of a Agent under the Code and
applicable common law (regardless of whether the Code is the law of the
jurisdiction where the rights or remedies are asserted and regardless of whether
the Code applies to the affected Collateral), and further, but not by way of
limitation, the Agent may take (and/or may cause one or more of its designees to
take) any or all of the following actions upon the occurrence of any Event of
Default:
(a) Notify other parties with respect to or interested in any item of
the Collateral of the Agent's interest therein or of any action proposed to be
taken with respect thereto, and direct one or more of those parties to make all
payments, distributions and proceeds otherwise payable to the Debtor with
respect thereto directly to the Agent or its order until notified by the Agent
that all the Secured Obligations have been fully paid and satisfied.
(b) Require the Debtor to, and the Debtor hereby agrees that it shall
at its expense and upon request of the Agent forthwith, assemble all or part of
the Collateral as directed by the Agent
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and make it available to the Agent at a place to be designated by the Agent
reasonably convenient to both parties.
(c) Receive and retain all payments, distributions and proceeds of
any kind with respect to any and all of the Collateral.
(d) Enter any premises where any item of Collateral may be located,
with or without permission or process of law but without breach of the peace,
and seize and remove such Collateral or remain upon such premises and use or
dispose of such Collateral as contemplated under this Security Agreement and
Assignment.
(e) Request the judicial appointment of a receiver respecting the
Collateral or any portion thereof in any action, suit or proceeding in which
claims are asserted against the Collateral by the Agent or its designee,
irrespective of the solvency of the Debtor or any other person or the adequacy
of any Collateral, and without notice to or the approval of the Debtor, which
receiver shall have the power to manufacture, operate, sell, lease or rent such
items of Collateral pending the sale of all of the Collateral and to collect the
rent, issues and profits therefrom, together with such other powers as may have
been requested by the Agent and shall apply the amounts received (net of all
proper charges and expenses) to the Obligations as provided in this Security
Agreement and Assignment. Such a receiver may serve without bond or under such
minimal bond as may be required by applicable law.
(f) Reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available judicial
procedure.
(g) Take any action with respect to the offer, sale, lease or other
disposition, and delivery of the whole of, or from time to time any one or more
items of, the Collateral, including, without limitation: to sell, assign, lease
or otherwise dispose of the whole of, or from time to time any part of, the
Collateral, or offer or agree to do so, in any established market or at any
broker's board, private sale or public auction or sale (with or without demand
on the Debtor or any advertisement or other notice of the time, place or terms
of sale, except such reasonable notice of the time and place of any public sale
or the time after which a private sale or other disposition may be made as may
be required by the Code) for cash, credit or any other asset or property, for
immediate or future delivery, and for such consideration and upon such terms and
subject to such conditions as the Agent in its sole and absolute discretion may
determine. The requirements of reasonable notice shall be met if such notice is
mailed or delivered to the Debtor at the address designated at Section 12.4 at
least ten (10) days before the time of the sale or disposition. The Agent may
purchase (the consideration for which may consist in whole or in part of
cancellation of indebtedness) or any other person may purchase the whole or any
one or more items of the Collateral so sold free and clear of any and all
rights, powers, privileges, remedies and interests of the Debtor (which the
Debtor has expressly waived); to postpone or adjourn any such auction, sale or
other disposition or cause the
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same to be postponed or adjourned from time to time to a subsequent time and
place, or to abandon or cause the abandonment of the same, all without any
advertisement or other notice thereof; and to carry out any agreement to sell
any item or items of the Collateral in accordance with the terms and provisions
of such agreement, notwithstanding that, after the Agent shall have entered into
such an agreement, all the Obligations may have been paid and satisfied in full.
Agent may dispose of the Collateral in its then existing condition or, at its
election, may take such measures as it deems necessary or advisable to
refurbish, repair, improve, process, finish, operate, demonstrate, and prepare
for sale the Collateral and may store, ship, reclaim, recover, protect,
advertise for sale or lease, and insure the Collateral.
(h) Pay, purchase, contest, or compromise any encumbrance, charge, or
Lien that, in the opinion of Agent, appears to be prior or superior to its Lien
and pay all expenses incurred in connection therewith.
(i) Agent may (i) notify Account Debtors to make payment on Accounts,
and General Intangibles directly to Agent; (ii) settle, adjust, compromise,
extend, or renew Accounts, or General Intangibles, either before or after legal
proceedings to collect such Accounts, or General Intangibles have commenced;
(iii) prepare and file any bankruptcy proofs of claim or similar documents
against any Account Debtor; (iv) prepare and file any notice, assignment,
satisfaction, or release of Lien, UCC termination statement, or any similar
document; (v) sell or assign Accounts, and General Intangibles, individually or
in bulk, upon such terms, for such amounts, and at such time or times as Agent
deems advisable; and (vi) complete the performance required of Debtor under any
contract or agreement to which Debtor is a party and out of which Accounts, or
General Intangibles arise or may arise. Agent may use and operate Debtor's
Equipment for all such purposes.
(j) Agent may (i) endorse Debtor's name on all checks, notes, drafts,
money orders, or other forms of payment of or security for Accounts or other
Collateral; (ii) sign Debtor's name on drafts drawn on Account Debtors or
issuers of letters of credit; and (iii) notify the postal authorities in
Debtor's name to change the address for delivery of Debtor's mail to an address
designated by Agent, receive and open all Mail addressed to Debtor, copy all
mail, retain all mail relating to Collateral, and hold all other mail available
for pickup by Debtor.
(k) Exercise any voting, consent, enforcement or other right, power,
privilege, remedy or interest of the Debtor pertaining to any item of Collateral
to the same extent as if the Agent were the outright owner thereof.
(l) Take possession of and thereafter deal with or use from time to
time all or any part of the Collateral in all respects as if the Agent were the
outright owner thereof.
(m) At the Agent's sole and absolute discretion, retain the
Collateral or any part thereof in satisfaction of the Secured Obligations.
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(n) Transfer or cause the transfer of the ownership of all or any part
of the Collateral to its own name and have such transfer recorded in any
jurisdiction(s) and publicized in any manner deemed appropriate by the Agent.
Section 10.2 Non-Judicial Remedies. In granting to the Agent the power
to enforce its rights hereunder without prior judicial process or judicial
hearing, the Debtor expressly waives, renounces and knowingly relinquishes any
legal right which might otherwise require the Agent to enforce its rights by
judicial process. In so providing for non-judicial remedies, the Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended to prevent the Agent from resorting
to judicial process at its option.
Section 10.3 Proceeds. The Agent shall collect the cash and non-cash
proceeds received from any sale or other disposition or from any other source
contemplated by Section 10.1, and, after deducting all costs and expenses
incurred by the Agent and any person designated by the Agent to take any of the
action enumerated in this Security Agreement and Assignment in connection with
such collection and sale or disposition (including reasonable attorneys'
disbursements, expenses and reasonable fees and the reasonable fees and expenses
of any appraisers or consultants employed by Agent), the Agent in its discretion
may retain the same as additional or substitute Collateral or may apply the same
in accordance with the terms and provisions of this Security Agreement and
Assignment. In the event any funds remain after satisfaction in full of the
Secured Obligations, then the remainder shall be returned to the Debtor,
subject, however, to any other rights or interests the Agent may have therein
under any other instrument, agreement or document or applicable law.
Section 10.4 Application of Proceeds. Any funds received from or on
behalf of the Debtor (whether pursuant to the terms and provisions of this
Security Agreement and Assignment or otherwise) by the Agent shall be applied to
the following items in such manner and order as the Agent may determine in its
sole and absolute discretion.
(a) The payment to or reimbursement for any fees and expenses for which
the Agent is entitled to be paid or reimbursed pursuant to any of the provisions
of this Security Agreement and Assignment.
(b) The payment of accrued and unpaid interest on the Secured Obligations.
(c) The payment of the outstanding principal on the Secured Obligations. (d) The
payment in full of all other Obligations under this Security Agreement and
Assignment.
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All advances and payments made pursuant to this Security Agreement and
Assignment may be recorded by the Agent on its books and records, and such books
and records shall be conclusive absent manifest error as to the existence and
amounts thereof.
Section 10.5 Deficiency. If the amount of all proceeds received with
respect to and in liquidation of the Collateral that shall be applied to payment
of the Secured Obligations shall be insufficient to pay and satisfy all of the
Secured Obligations in full, the Debtor acknowledges that it shall remain liable
for any deficiency, together with interest thereon and costs of collection
thereof (including attorneys' disbursements, expenses and reasonable fees and
the reasonable fees of any appraisers or consultants employed by Agent), and in
accordance with the terms and provisions of this Security Agreement and
Assignment.
Section 10.6 Other Recourse. The Debtor waives any right to require the
Agent to proceed against any other person, exhaust or marshal any Collateral or
other security for the Secured Obligations, or pursue any other remedy in the
Agent's power. Until all of the Secured Obligations shall have been paid in
full, the Debtor shall have no right to subrogation and the Debtor waives the
right to enforce any remedy which the Agent has or may hereafter have against
any other party liable for the Secured Obligations, and waives any benefit of
and any right to participate in any other security whatsoever now or hereafter
held by the Agent.
Section 10.7 Remedies Not Exclusive. All rights, powers and remedies
conferred in this Section 10 are cumulative, and not exclusive, of: (i) any and
all other rights and remedies herein conferred or provided for; (ii) any and all
other rights, powers and remedies conferred or provided for in the Credit
Agreement or in any other Loan Document; and (iii) any and all rights, powers
and remedies conferred, provided for or existing at law or in equity, and the
Agent shall, in addition to the rights, powers and remedies herein conferred or
provided for, be entitled to avail itself of all such other rights, powers and
remedies as may now or hereafter exist at law or in equity for the collection of
and enforcement of the Secured Obligations and the enforcement of the
representations, warranties, agreements, covenants and indemnities contained in
this Security Agreement and Assignment, the Credit Agreement and in any other
Loan Document. The Agent, in its sole discretion, may proceed to exercise or
enforce any right, power, privilege, remedy or interest that the Agent may have
under this Security Agreement and Assignment, the Credit Agreement any other
Loan Document, or applicable law, without notice except as otherwise expressly
provided herein; without pursuing, exhausting or otherwise exercising or
enforcing any other right, power, privilege, remedy or interest that the Agent
may have against or in respect of the Debtor or the Collateral, or other person
or thing, and without regard to any act or omission of the Agent or any other
person. The Agent may institute separate proceedings with respect to this
Security Agreement and Assignment in such order and at such times as the Agent
may elect in its sole and absolute discretion. This Security Agreement and
Assignment may be enforced without possession of any Note or its production in
any action, suit or proceeding.
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Section 10.8 Equitable Relief. The Debtor acknowledges that it will be
impossible to measure in money the damage to the Agent in the event of a breach
of any of the terms and provisions of this Security Agreement and Assignment,
and the Debtor agrees that, in the event of any such breach, the Agent will not
have an adequate remedy at law, although the foregoing shall not constitute a
waiver of any of the Agent's rights, powers, privileges and remedies against or
in respect of a breaching party, any Collateral or any other person or thing
under this Security Agreement and Assignment or applicable law. It is therefore
agreed that the Agent, in addition to all other such rights, powers, privileges
and remedies that it may have, shall be entitled to injunctive relief, specific
performance or such other equitable relief as the Agent may request to exercise
or otherwise enforce any of the terms and provisions of this Security Agreement
and Assignment and to enjoin or otherwise restrain any act prohibited thereby,
and the Debtor will not urge and hereby waives any defense that there is an
adequate remedy of law.
Section 10.9 License. Agent is hereby granted a license or other right
to use, without charge, Debtor's patents, copyrights, trade secrets, technical
processes, rights of use of any name, trade names, trademarks, labels, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and Debtor's rights under all licenses and shall inure to Agent's
benefit.
Section 10.10 Power of Attorney. Debtor hereby appoints Agent (and any
of Agent's officers, employees, nominees, designees or agents designated by
Agent) as Debtor's attorney, with power after the occurrence of an Event of
Default and at any time Agent reasonably believes an Event of Default has
occurred or is likely to occur with the passage of time, with respect to the
various assets and properties included in the Collateral, and in addition to any
other powers of attorney contained herein: (a) to take possession of and endorse
(to Agent or otherwise) Debtor's name on any checks, bills of exchange, notes,
acceptances, money orders, drafts, or other documents, forms of payment or
security received in payment for or on account of those assets and properties;
(b) demand, collect and receive any monies due on account of those assets and
properties and give receipts and acquittances in connection therewith; (c)
negotiate and compromise any claim, and commence, prosecute, defense, settle or
withdraw and claims, suits or proceedings pertaining to or arising out of those
assets and properties; (d) pay any indebtedness or other liability or perform
any other Secured Obligation required to be paid or performed under this
Security Agreement and Assignment or the Credit Agreement by the Debtor; (e)
prepare and execute on behalf of the Debtor any mortgage, financing statement or
other evidence of a security interest contemplated by this Security Agreement
and Assignment, or any modification, refiling, continuation or extension
thereof; (f) to sign Debtor's name on drafts against Account Debtors, on
schedules and assignments of Accounts, on verifications of Accounts, and on
notices to Account Debtors; (g) to notify the post office authorities to change
the address for delivery of Debtor's mail to an address designated by Agent, to
receive and open all mail addressed to Debtor, and to retain all mail relating
to the Collateral and hold all other mail available for pick up by Debtor; (h)
to send requests for verification of Accounts; (i) take any other action
contemplated by this Security Agreement and
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Assignment or the Credit Agreement; (j) sign, execute, acknowledge, swear to,
verify, deliver, file, record and publish any one or more of the foregoing; and
(k) to do all things necessary to carry out this Security Agreement and
Assignment. The appointment of Agent as Debtor's attorney and each and every one
of Agent's rights and powers, being coupled with an interest, are irrevocable as
long as any Secured Obligations are outstanding. Any person dealing with Agent
shall be entitled to rely conclusively on any written or oral statement of Agent
that this power of attorney is in effect. This Power of Attorney shall survive
the dissolution, reorganization or bankruptcy of the Debtor and shall extend to
and be binding upon the Debtor's successors, assigns, heirs and legal
representatives. To the extent permitted by applicable law, the Debtor hereby
ratifies and approves all acts of any such attorney and agrees that neither the
Agent nor any such attorney will be liable for any acts or omissions nor for any
error of judgment or mistake of fact or law other than their gross negligence,
willful misconduct or unlawful misconduct. Agent may also use Debtor's
stationary in connection with exercising its rights and remedies and performing
the Obligations of Debtor.
Section 10.11 Expenses Secured. The Debtor agrees to pay on demand all
costs and expenses, if any (including reasonable counsel, consultant and
appraiser fees and expenses), in connection with the exercise and enforcement
(whether through negotiations, legal proceedings or otherwise) of Agent's rights
and remedies provided by this Security Agreement and Assignment, the Credit
Agreement or any other Loan Document, or which by law shall be payable by the
Debtor, expressly including all such costs and expenses incurred by the Agent in
connection with or during the pendency of any bankruptcy or insolvency
proceedings involving the Debtor or any Guarantor. All such expenses shall be
part of the Secured Obligations, and shall be secured by the Collateral.
Section 10.12 Miscellaneous. The Debtor acknowledges and agrees that
the rights, powers, privileges, remedies and interests conferred upon the Agent
in respect of the Collateral by this Security Agreement and Assignment and
applicable law are solely to enable the Agent to protect and preserve the
Collateral, as well as to realize upon it in accordance with this Security
Agreement and Assignment, all in such manner as the Agent in its discretion may
elect, and shall not impose upon the Agent any duty or other obligation to
exercise or enforce any such right, power, privilege, remedy or interest. Any
exercise or other enforcement of any such right, power, privilege, remedy or
interest, if undertaken by the Agent in its discretion, may be delayed,
discontinued or otherwise not pursued or exhausted for any reason whatsoever
(whether intentionally or otherwise). Without limiting the generality of the
foregoing, the Agent shall be under no duty or obligation to protect or preserve
any of the Collateral, perform any obligation or duty of the Debtor under any of
the Collateral, or take any action to mitigate or otherwise reduce any damage or
other loss or to otherwise collect, exercise or enforce any claim, right or
other interest arising under or with respect to the Collateral, except as
specifically provided in this Security Agreement and Assignment.
Section 11
RIGHT OF SET-OFF
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Section 11.1 Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Agent hereby is authorized at any time
and from time to time, without notice to the Debtor (any such notice being
hereby expressly waived by the Debtor), to set-off and apply, directly or
through any of its affiliates, custodians, participants and designees, any and
all deposits (whether general or special, time or demand, provisional or final,
or individual or joint) and other assets and properties at any time held in the
possession, custody or control of the Agent and any of its affiliates,
custodians, participants and designees, and any indebtedness or other amount at
any time held in the possession, custody or control of the Agent and any of its
affiliates, custodians, participants and designees, and any indebtedness or
other amount at any time owing by the Agent or any of its affiliates or
participants, to or for the credit, account or benefit of the Debtor against any
and all of the Secured Obligations now or hereafter existing, whether or not the
Agent shall have declared a default, accelerated the Secured Obligations or made
any demand or taken any other action under this Security Agreement and
Assignment, and although such Secured Obligations may be unmatured. The Debtor
acknowledges that pursuant to Section 2.1(f) hereof it granted to the Agent a
senior security interest in and to, among other things, all such deposits,
assets, properties and indebtedness in the possession of the Agent's affiliates,
custodians, participants and designees, and the Debtor hereby authorizes any
such person to so set-off and apply such amounts at such times and in such
manner as the Agent may direct pursuant to this Section 11.1. The Agent shall
notify the Debtor after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application. In debiting any such account, the Secured Obligations
shall be deemed to have been paid or repaid only to the extent of the funds
actually available in the account notwithstanding any internal procedure of the
Agent or any of its affiliates, custodians, participants and designees to the
contrary. The rights of the Agent under this Section are in addition to and
without limitation of any other rights, powers, privileges, remedies and other
interests (including, without limitation, other rights of set-off and security
interests) that the Agent may have under this Security Agreement and Assignment
and applicable law.
Section 12
MISCELLANEOUS PROVISIONS
Section 12.1 Delay and Waiver. No delay or omission to exercise any
right shall impair any such right or be a waiver thereof, but any such right may
be exercised from time to time and as often as may be deemed expedient. A waiver
on one occasion shall be limited to that particular occasion.
Section 12.2 Severability; Headings. If any part of this Security
Agreement and Assignment or the application thereof to any person or
circumstance is held invalid, the remainder of this Security Agreement and
Assignment shall not be affected thereby. The section headings herein are
included for convenience only and shall not be deemed to be a part of this
Security Agreement and Assignment.
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Section 12.3 Binding Effect. This Security Agreement and Assignment
shall be binding upon and inure to the benefit of the respective legal
representatives, successors, and assigns of the parties hereto; however, Debtor
may not assign any of its rights or delegate any of its obligations hereunder.
Agent (and any subsequent assignee) may transfer and assign this Security
Agreement and Assignment and deliver the Collateral to the assignee, who shall
thereupon have all of the rights of Agent; and Agent (or such subsequent
assignee who in turn assigns as aforesaid) shall then be relieved and discharged
of any responsibility or liability with respect to this Security Agreement and
Assignment and said Collateral.
Section 12.4 Notices. Any notices under or pursuant to this Security
Agreement and Assignment shall be deemed duly sent when delivered in hand or
when mailed by registered or certified mail, return receipt requested, or when
delivered by courier or when transmitted by facsimile, telecopy, or similar
electronic medium to the following addresses:
To Debtor: EFTC Corporation
9351 Grant Street
Horizon Terrace, 6th Floor
Denver, Colorado 80229
Attention: Brian O'D. White
Treasurer
Telecopy: (303) 451-8210
With a copy to: Martha Traudt Collins, Esq.
Holme Roberts & Owen LLP
1700 Lincoln Street,
Suite 4100
Denver, Colorado 80203
Telecopy: (303) 866-0200
To Agent: Bank One, Colorado, N.A.
1125 Seventeenth Street,
Third Floor
Denver, Colorado 80202
Attention: David L. Ericson
Vice President
Telecopy: (303) 297-4435
With a copy to: Ted R. Sikora, II, Esq.
Davis, Graham & Stubbs LLP
370 Seventeenth Street,
Suite 4700
Denver, Colorado 80202
Telecopy: (303) 893-1379
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Either party may change such address by sending notice of the change to the
other party; such change of address shall be effective only upon actual receipt
of the notice by the other party.
Section 12.5 Consent to Jurisdiction. Any legal action or other
proceeding with respect to this Security Agreement and Assignment or any other
Loan Documents may be brought in the courts of the State of Colorado or of the
United States located in the City and County of Denver (to the extent that such
courts would otherwise have subject matter jurisdiction), and by execution and
delivery of this Security Agreement and Assignment, each of the Debtor and the
Agent consents, for itself and in respect of its property, to the jurisdiction
of those courts. Each of the Debtor and the Agent irrevocably waives any
objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of this
Security Agreement and Assignment or any other Loan Documents. The Debtor and
the Agent each waive personal service of any summons, complaint or other process
which may be made by any other means permitted by Colorado law.
Section 12.6 Waiver of Jury Trial and Certain Damages. Each of the
Debtor and the Agent hereby waives, to the extent permitted by applicable law,
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Security Agreement and Assignment or any other Loan
Document or the validity, protection, interpretation, collection or enforcement
thereof; and the Debtor hereby waives, to the extent permitted by applicable
law, the right to interpose any setoff or counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such setoff,
counterclaim or cross-claim except to the extent that the failure so to assert
any such setoff, counterclaim or cross-claim would permanently preclude the
prosecution of or recovery upon the same. Notwithstanding anything contained in
this Security Agreement and Assignment or any other Loan Documents to the
contrary, no claim may be made by the Debtor against the Agent for any lost
profits or any special, indirect or consequential damages in respect of any
breach or wrongful conduct (other than willful misconduct constituting actual
fraud) in connection with, arising out of or in any way related to the
transactions contemplated hereunder or under any other Loan Documents, or any
act, omission or event occurring in connection therewith; and the Debtor hereby
waives, releases and agrees not to sue upon any such claim for any such damages.
The Debtor agrees that this Section 12.6 is a specific and material aspect of
this Security Agreement and Assignment and acknowledges that the Agent would not
extend to the Debtor any advances pursuant to the Credit Agreement if this
Section 12.6 were not part of this Security Agreement and Assignment.
Section 12.7 Governing Law. All acts and transactions hereunder and the
rights and obligations of the parties hereto shall be governed, construed, and
interpreted in accordance with the domestic laws of Colorado.
[Signatures on following page]
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IN WITNESS WHEREOF, the Debtor and the Agent have executed this
Security Agreement and Assignment by their duly authorized officers as of the
date first above written.
AGENT: DEBTOR:
BANK ONE, COLORADO, N.A. EFTC CORPORATION
By: /s/ By: /s/
David L. Ericson Stuart W. Fuhlendorf
Vice President Vice President and
Chief Financial Officer
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After Recording, Return To:
Davis, Graham & Stubbs LLP
370 Seventeenth Street, Suite 4700
Denver, CO 80202
Attn: Ted R. Sikora II
DEED OF TRUST AND SECURITY AGREEMENT
DEED OF TRUST,
SECURITY AGREEMENT
AND FIXTURE FILING
Dated as of September 30, 1997
EFTC CORPORATION, Grantor
BANK ONE, COLORADO, N.A., as Agent and Beneficiary
NORTHWEST TITLE COMPANY, Trustee
Maximum principal amount to be advanced pursuant to
the Credit Agreement and Promissory Notes secured by
this line of credit instrument (which amount may be
exceeded by advances to complete construction
pursuant to ORS 86.155(2)(c)): $45,000,000.
Maturity Date of the Credit Agreement (exclusive of
any option to renew or extend): September 30, 2000
(Revolving and Swing Loans )
and September 30, 2002. (Term Loan).
THIS INSTRUMENT IS GOVERNED BY THE PROVISIONS OF THE OREGON
REVISED STATUTES 86.705 ET SEQ.
THIS INSTRUMENT SECURES FUTURE ADVANCES
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THE REAL PROPERTY SUBJECT HERETO IS DESCRIBED IN EXHIBIT A.
THIS INSTRUMENT IS TO BE RECORDED AS A DEED OF TRUST IN YAMHILL
COUNTY OREGON
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C O N T E N T S
<TABLE>
<CAPTION>
<S> <C> <C>
Page
ARTICLE 1 PARTIES, PROPERTY AND DEFINITIONS.............................................................1
1.1 Grantor...................................................................1
1.2 Beneficiary...............................................................1
1.3 Trustee...................................................................1
1.4 Notes.....................................................................1
1.5 Property..................................................................2
1.6 Chattels..................................................................3
1.7 Intangible Personalty.....................................................3
1.8 Loan Documents............................................................3
1.9 Environmental Law.........................................................3
1.10 Regulated Substance.......................................................3
1.11 Person....................................................................4
1.12 Secured Obligations.......................................................4
1.13 Default Rate..............................................................4
ARTICLE 2 GRANTING CLAUSE...............................................................................4
2.1 Grant to Trustee..........................................................4
2.2 Security Interest to Beneficiary..........................................4
ARTICLE 3 GRANTOR'S WARRANTIES AND REPRESENTATIONS......................................................4
3.1 Warranty of Title.........................................................4
3.2 Organizational Status.....................................................5
3.3 Due Authorization.........................................................5
3.4 No Regulated Substances...................................................5
3.5 Non-Agricultural Property.................................................6
3.6 No Susceptibility to Forfeiture...........................................6
3.7 Compliance with Laws......................................................6
3.8 No Conflict with Other Agreements.........................................6
3.9 No Material Litigation....................................................6
3.10 Accurate Financial Information............................................6
ARTICLE 4 GRANTOR'S AFFIRMATIVE COVENANTS...............................................................7
4.1 Payment of Notes..........................................................7
4.2 Performance of Other Obligations..........................................7
4.3 Waiver of Homestead and Other Exemptions..................................7
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4.4 Payment of Taxes..........................................................7
4.5 Other Encumbrances........................................................7
4.6 Maintenance of Insurance..................................................7
4.7 Payment of Utilities......................................................8
4.8 Maintenance and Repair of Property........................................8
4.9 Compliance with Laws......................................................9
4.10 Performance of Lease Obligations..........................................9
4.11 Eminent Domain; Private Damage............................................9
4.12 Mechanics' Liens.........................................................10
4.13 Environmental Claims.....................................................10
4.14 Defense of Actions.......................................................10
4.15 Expenses of Enforcement..................................................10
4.16 Book and Records; Financial Reports......................................11
4.17 Priority of Leases. ....................................................11
4.18 Further Assurances; Estoppel Certificates................................11
ARTICLE 5 GRANTOR'S NEGATIVE COVENANTS.................................................................11
5.1 Waste and Alterations....................................................11
5.2 Zoning and Private Covenants.............................................12
5.3 Additional Tax Burden....................................................12
5.4 Interference with Leases.................................................12
5.5 Transfer of Property.....................................................12
5.6 Further Encumbrance of Property..........................................12
5.7 Use of Regulated Substances..............................................13
5.8 Change of Name...........................................................13
5.9 Improper Use of Property.................................................13
ARTICLE 6 EVENTS OF DEFAULT............................................................................13
6.1 Failure to Pay Notes.....................................................13
6.2 Violation of Other Covenants.............................................13
6.3 Misrepresentation or Breach of Warranty..................................14
6.4 Acts Threatening Forfeiture. ...........................................14
6.5 Assertion of Priority....................................................14
6.6 Event of Default Under Credit Agreement. ...............................14
ARTICLE 7 BENEFICIARY'S REMEDIES.......................................................................14
7.1 Performance of Defaulted Obligations.....................................14
7.2 Specific Performance and Injunctive Relief...............................15
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7.3 Acceleration of Secured Obligations......................................15
7.4 Suit for Monetary Relief.................................................15
7.5 Possession of Property...................................................15
7.6 Enforcement of Security Interests........................................15
7.7 Foreclosure Against Property.............................................15
7.8 Appointment of Receiver..................................................16
ARTICLE 8 MISCELLANEOUS PROVISIONS.....................................................................17
8.1 Replacement of Trustee...................................................17
8.2 Time of the Essence......................................................18
8.3 Joint and Several Obligations............................................18
8.4 Rights and Remedies Cumulative...........................................18
8.5 No Implied Waivers.......................................................18
8.6 Dealings with Successor Owners...........................................18
8.7 No Third Party Rights....................................................18
8.8 Preservation of Liability and Priority...................................19
8.9 Subrogation of Beneficiary...............................................19
8.10 Notices..................................................................19
8.11 Fixture Filing...........................................................19
8.12 Defeasance...............................................................19
8.13 Severability.............................................................19
8.14 Reconveyance by Trustee..................................................20
8.15 Attorney's Fees..........................................................20
8.16 UNDER OREGON LAW.........................................................21
8.17 Acceptance by Trustee....................................................21
</TABLE>
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DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") is given
as of September 30, 1997, by the Grantor named below to the Trustee named below,
for the use and benefit of the Beneficiary named below.
ARTICLE 1
PARTIES, PROPERTY AND DEFINITIONS
The following terms and references shall have the meanings indicated:
1.1 Grantor: EFTC CORPORATION, a Colorado corporation, whose legal
address is 9351 Grant Street, Horizon Terrace, Sixth Floor, Denver, Colorado
80229.
1.2 Beneficiary: BANK ONE, COLORADO, N.A., a national banking
association, whose legal address is 1125 Seventeenth Street, Third Floor,
Denver, Colorado 80202, Attention: David L. Ericson, Vice President, as Agent
for the Banks under that certain Credit Agreement (the "Credit Agreement") dated
September 30, 1997, by and among Grantor, the Banks listed therein, together
with any future holder of a Note. Capitalized terms used and not otherwise
defined herein shall have the meanings given to them in the Credit Agreement.
1.3 Trustee: NORTHWEST TITLE COMPANY, with an office located at
601 E. Hancock, Newberg, Oregon 97132.
1.4 Notes: Any promissory notes made by Grantor in favor of
Beneficiary, including, without limitation:
(i) Grantor's Promissory Note (Revolving Loan) dated September 30, 1997, in
the original principal amount of $25,000,000.00;
(ii) Grantor's Promissory Note (Term Loan) dated September 30, 1997, in the
original principal amount of $20,000,000.00; (iii) Grantor's Promissory Note
(Swing Loan) dated September 30, 1997, in the original principal amount of
$2,500,000.00; and
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(iv) Any and all modifications, extensions and
renewals of any of the foregoing and any and
all future advances or readvances to Grantor
whether pursuant to any of the foregoing
promissory notes or otherwise.
All terms and provisions of the Notes and the Guaranty are incorporated by this
reference in this Deed of Trust.
1.5 Property: The land described in Exhibit A attached,
together with the following:
(a) All buildings, structures and improvements now or
hereafter located thereon, as well as all rights of way, easements, trackage
rights and other appurtenances to such land;
(b) All of Grantor's right, title and interest in any land
lying between the boundaries of the land described on Exhibit A and the center
line of any adjacent street, road, avenue or alley, whether opened or proposed;
(c) All of Grantor's right, title and interest in all water
rights and conditional water rights that are appurtenant to or that have been
used or are intended for use in connection with such land, including but not
limited to (i) ditch, well, pipeline, spring and reservoir rights, whether or
not adjudicated or evidenced by any well or other permit, (ii) all rights with
respect to nontributary groundwater (and other groundwater) underlying said
land, (iii) any permit to construct any water well, water from which is intended
to be used in connection with such land, and (iv) all of Grantor's right, title
and interest under any decreed or pending plan of augmentation or water exchange
plan;
(d) All of Grantor's right, title and interest in all
minerals, crops, timber, trees, shrubs, flowers and landscaping features now or
hereafter located on, under or above such land;
(e) With the exception of items that are owned by tenants
and that such tenants are entitled, under the terms of applicable lease
agreements, to remove from the leased premises , and except for items leased by
Grantor from third parties or held by Grantor on consignment, all machinery,
apparatus, equipment, fittings, fixtures (whether actually or constructively
attached, and including all trade, domestic and ornamental fixtures) now or
hereafter located in, on or under such land or improvements and used or usable
in connection with any present or future operation thereof, including but not
limited to all heating, air-conditioning, freezing,
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lighting, laundry, incinerating and power equipment; engines; pipes; pumps;
tanks; motors; conduits; switchboards; plumbing, lifting, cleaning, fire
prevention, fire extinguishing, refrigerating, ventilating, cooking and
communications apparatus; boilers, water heaters, ranges, furnaces and burners;
appliances; vacuum cleaning systems; elevators; escalators; shades; awnings;
screens; storm doors and windows; stoves; refrigerators; attached cabinets;
partitions; ducts and compressors; rugs and carpets; draperies; and all
additions thereto and replacements therefor;
(f) All development rights associated with such land,
whether previously or subsequently transferred to such land from other real
property or now or hereafter susceptible of transfer from such land to other
real property;
(g) All awards and payments, including interest thereon,
resulting from the exercise of any right of eminent domain or any other public
or private taking of, injury to, or decrease in the value of, any of such
property; and
(h) All other or greater rights and interests of every
nature in any of the above-described property and in the possession or use
thereof and income therefrom, whether now owned or subsequently acquired by
Grantor.
1.6 Chattels: All goods, fixtures, building and other materials,
supplies and other tangible personal property of every nature now owned or
hereafter acquired by Grantor and used, intended for use, or usable in the
operation and any future construction of improvements or development of the
Property, together with all accessions thereto, replacements and substitutions
therefor and proceeds thereof.
1.7 Intangible Personalty: All accounts and all plans,
specifications, licenses, permits and other general intangibles (whether now
owned or hereafter acquired, and including proceeds thereof) relating to or
arising from Grantor's ownership, use, operation, leasing or sale of all or any
part of the Property, specifically including but in no way limited to any right
that Grantor may have or acquire to transfer any development rights from the
Property to other real property, and any development rights that may be so
transferred.
1.8 Loan Documents: The Notes, this Deed of Trust and any financing
statements executed in connection herewith, the Assignment of Leases and Rents
and Other Income of even date herewith that also secures the Notes, the Credit
Agreement and each other document executed or delivered by Grantor as security
for the Notes or in connection with the transaction pursuant to which the Notes
have been executed and delivered. The term "Loan Documents" also
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includes all modifications, extensions, renewals and replacements of each
document referred to above.
1.9 Environmental Law: Any federal, state or local enactment relating to
protection of public health or the environment, including (by way of
illustration rather than limitation) the Clean Water Act, 33 U.S.C. ss. 1251, et
seq., the Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601, et seq.,
the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq., and the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 135, et seq., as well
as applicable state counterparts to such federal legislation and any
regulations, guidelines, directives or other interpretations of any such
enactment, all as amended from time to time.
1.10 Regulated Substance: Any substance, the manufacture, storage,
transport, generation, use, treatment, recycling, disposal or other disposition
of which is prohibited or regulated (including, without limitation, being
subjected to notice, reporting, record-keeping or clean-up requirements) by any
Environmental Law.
1.11 Person: An individual, corporation, association, partnership, trust or
other legal entity.
1.12 Secured Obligations: All present and future obligations of
Grantor to Beneficiary evidenced by or contained in the Loan Documents, whether
stated in the form of promises, covenants, representations, warranties,
conditions or prohibitions or in any other form.
1.13 Default Rate: A rate of interest equal to the Prime Rate
plus 3% per annum.
ARTICLE 2
GRANTING CLAUSE
2.1 Grant to Trustee. As security for the Secured Obligations,
Grantor grants, bargains, sells and conveys the Property to Trustee, in trust,
with the power of sale, for the use and benefit of Beneficiary and subject to
all provisions of this Deed of Trust.
2.2 Security Interest to Beneficiary. As additional security for the
Secured Obligations, Grantor hereby grants to Beneficiary a security interest in
the Chattels and in the Intangible Personalty. To the extent any of the Chattels
or the Intangible Personalty may be or have been acquired with funds advanced by
Beneficiary under the Loan Documents, this security
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interest is a purchase money security interest. The security interest granted in
this section shall survive any judicial or nonjudicial foreclosure of this Deed
of Trust as against the Property and, notwithstanding any purported cancellation
of this Deed of Trust in connection with any such foreclosure, shall continue in
force as against the Chattels and the Intangible Personalty until all of the
Secured Obligations have been satisfied and discharged in full. Any complete
release of this Deed of Trust shall, however, unless otherwise expressly
provided in the release document, constitute a release of such security interest
as well. Grantor agrees that a carbon, photographic or other reproduction of
this Deed of Trust, or of any financing statement signed in connection with this
Deed of Trust, may be filed or recorded to perfect the security interests
granted in this section. After an event of default has occurred and continues
beyond the applicable grace period thereafter, Grantor appoints Beneficiary
attorney-in-fact for Grantor, to sign on Grantor's behalf any financing
statement or amendment of financing statement that Beneficiary may at any time
consider necessary or appropriate after an Event of Default has occurred and
continues beyond the applicable grace period therefor.
ARTICLE 3
GRANTOR'S WARRANTIES AND REPRESENTATIONS
3.1 Warranty of Title. Grantor represents and warrants to Beneficiary
that Grantor has good, marketable and insurable title to the Property, subject
only to the lien of general taxes for the current year, payable the following
year, and those additional matters, if any, set forth in Exhibit B attached.
Grantor further represents and warrants to Beneficiary that Grantor has good
title to the Chattels and the Intangible Personalty, free of any liens,
encumbrances, security interests and other claims whatever, except insofar as
the Chattels may be encumbered by the lien of general taxes for the current
year, payable in the following year, or by any encumbrance listed in Exhibit B.
The warranties contained in this section shall survive foreclosure of this Deed
of Trust, and shall inure to the benefit of and be enforceable by any Person who
may acquire title to the Property, the Chattels or the Intangible Personalty
pursuant to any such foreclosure.
3.2 Organizational Status. Grantor represents and warrants to
Beneficiary that Grantor is a profit corporation properly organized, validly
existing and in good standing under the laws of the State of Colorado, with all
necessary power and authority to execute, deliver and perform Grantor's
obligations under the Loan Documents, and is qualified to transact business in,
and is in good standing in, the State of Oregon.
3.3 Due Authorization. If Grantor is other than a natural person, then each
individual who executes this document on behalf of Grantor represents and
warrants to
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Beneficiary that such execution has been authorized by all necessary corporate,
partnership or other action on the part of Grantor.
3.4 No Regulated Substances. Grantor represents and warrants to
Beneficiary that:
(a) No Regulated Substance is currently being generated,
used, treated, stored or disposed of on, in or under the Property that is in
material noncompliance with Environmental Laws;
(b) Neither Grantor nor, to the best of Grantor's knowledge
after due investigation, any other Person has ever caused or permitted any
Regulated Substance to be generated, placed, held, located or disposed of on,
under or in the Property that is in material noncompliance with Environmental
Laws;
(c) Neither Grantor nor, to the best of Grantor's knowledge
after due investigation, any other Person has ever used the Property as a dump
site, permanent or temporary storage site or transfer station for any Regulated
Substance that is in material noncompliance with Environmental Laws;
(d) Grantor has received no notice of, and is not aware of,
any actual or alleged violation of any Environmental Law materially affecting
the Property or any activity conducted on the Property; and
(e) No action or proceeding is pending or, to Grantor's
knowledge after due investigation, before or appealable from any court,
quasi-judicial body or administrative agency relating to the enforcement of any
Environmental Law affecting the Property or any activity conducted on the
Property.
Grantor will indemnify Beneficiary against and hold Beneficiary harmless from
any loss, claim, damage or expense, including reasonable attorneys' fees and
other out of pocket litigation expenses, incurred by Beneficiary in connection
with any claim that any of the matters represented and warranted by Grantor in
this section are inaccurate or untrue. The indemnity provided for in the
preceding sentence is a part of the Secured Obligations but will survive payment
or performance of the other Secured Obligations and the release, foreclosure or
other discharge of this Deed of Trust.
3.5 Non-Agricultural Property. Grantor represents and warrants
to Beneficiary that the Property is not used principally for agricultural or
farming purposes.
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3.6 No Susceptibility to Forfeiture. Grantor represents and warrants
to Beneficiary that Grantor is not engaged, and has not at any time since
Grantor's acquisition of the Property been engaged, in a "pattern of
racketeering activity" within the meaning of 18 U.S.C. ss. 1961, as amended, or
within the meaning of any similar state or federal law, nor has Grantor
committed any other act or engaged in any other pattern of actions, the
potential results of which might include forfeiture of Grantor's interest in the
Property.
3.7 Compliance with Laws. Grantor represents and warrants to
Beneficiary that the Property and Grantor's present and proposed use of the
Property are in compliance in all material respects with all applicable laws,
ordinances and other governmental requirements.
3.8 No Conflict with Other Agreements. Grantor represents and
warrants to Beneficiary that Grantor's execution and delivery of the Loan
Documents does not conflict with, violate or constitute a default under any
other agreement by which Grantor or any part of the Property, the Chattels or
the Intangible Personalty are bound.
3.9 No Material Litigation. Grantor hereby represents and warrants
that, except as disclosed in the Credit Agreement, there is no pending, or to
the Grantor's knowledge, threatened action or proceeding affecting the Grantor
or any of its properties or business activities before any court, governmental
agency or arbitrator, in which there is a reasonable possibility of a Material
Adverse Effect or which purports to affect the legality, validity or
enforceability of this Deed of Trust.
3.10 Accurate Financial Information. Grantor hereby represents and
warrants that the unaudited pro forma consolidated balance sheets of the Grantor
(and others) as at December 31, 1996, and the related consolidated statements of
income and retained earnings of the Grantor (and others) for the fiscal year
then ended, as disclosed in the proxy statement mailed to the Grantor's
shareholders in connection with the Circuit Test Acquisition, and the unaudited
balance sheets of the Grantor (and others) as at June 30, 1997, and the related
consolidated statements of income and retained earnings of the Grantor (and
others) for the fiscal quarter then ended, copies of which have been furnished
to the Banks, fairly present the financial condition of the Grantor (and others)
as at such date and the results of the operations of the Grantor (and others)
for the period ended on such date, all in accordance with Regulation S-X
promulgated under the Securities Exchange Act of 1934, and since December 31,
1996, there has been no material adverse change in such condition or operations
except as disclosed in the Credit Agreement.
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ARTICLE 4
GRANTOR'S AFFIRMATIVE COVENANTS
4.1 Payment of Notes. Pursuant to the terms of the Loan Documents,
Grantor will cause all principal, interest and other sums payable under the
Notes to be paid (on or before the expiration of any applicable grace period) as
set forth under the terms of the Loan Documents.
4.2 Performance of Other Obligations. Grantor will promptly and
strictly perform and comply with (or cause to be performed and complied with)
all other covenants, conditions and prohibitions required by Grantor by the
terms of the Loan Documents.
4.3 Waiver of Homestead and Other Exemptions. Grantor hereby waives
all rights to any homestead or other exemption to which Grantor would otherwise
be entitled under any present or future constitutional, statutory or other
provision of Oregon or other state or federal law.
4.4 Payment of Taxes. Grantor hereby covenants to pay its Debt in
excess of $1,000,000 and other obligations in accordance with their terms and
pay and discharge promptly all Federal and material State and local taxes, and
all material governmental assessments and charges or levies imposed upon any
such Person or upon such Person's income or profits or in respect of its assets
or business, or in any event before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might give rise to a Lien upon such properties or
any part thereof; provided, however, that such payment and discharge shall not
be required so long as the validity or amount thereof shall be contested in good
faith by appropriate proceedings and the Grantor shall have set aside on its
books adequate reserves in accordance with GAAP with respect thereto.
4.5 Other Encumbrances. Grantor will promptly and strictly perform
and comply with all covenants, conditions and prohibitions required of Grantor
in connection with any other encumbrance affecting the Property, or any part
thereof, regardless of whether such other encumbrance is superior or subordinate
to the lien hereof.
4.6 Maintenance of Insurance.
(a) Grantor shall maintain the third-party insurance
required by the Credit Agreement, provided, however, that in no event shall such
insurance be for an amount less than the the replacement cost of the assets so
insured, including the Property.
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(b) Renewal Policies. Not less than 30 days prior to the
expiration date of each insurance policy required pursuant to paragraph (a)
above, Grantor will deliver to Beneficiary an appropriate renewal policy (or a
certified copy thereof), together with evidence satisfactory to Beneficiary that
the applicable premium has been prepaid. Without limiting the obligations of the
Grantor under this Section 4.6, in the event the Grantor fails to maintain the
insurance required by the foregoing provisions of this Section 4.6, then the
Beneficiary may, but shall have no obligation to, procure insurance covering the
interests of the Banks, in such amounts and against such risks as the
Beneficiary shall deem appropriate, and the Grantor will reimburse the
Beneficiary in respect of any premiums paid by the Beneficiary as provided in
the Credit Agreement.
(c) Any insurance proceeds received by Beneficiary with
respect to an insured casualty may, in accordance with the terms of the Credit
Agreement, either (i) be retained and applied by Beneficiary toward payment of
the Secured Obligations, or (ii) be paid over, in whole or in part to the
Grantor to pay for repairs or replacements necessitated by the casualty;
provided, that if all of the Secured Obligations have been performed or are
discharged by the application of less than all of such insurance proceeds, then
any remaining proceeds will be paid over to Grantor. The Beneficiary will have
no obligation to see to the proper application of any insurance proceeds paid
over to Grantor nor will any such proceeds received by Beneficiary bear interest
or be subject to any other charge for the benefit of Grantor. Beneficiary may,
prior to the application of insurance proceeds, commingle them with
Beneficiary's own funds and otherwise act with regard to such proceeds as
Beneficiary may determine in Beneficiary's sole discretion.
(d) Successor's Rights. Any Person who acquires title to the
Property through foreclosure of this Deed of Trust will succeed to all of
Grantor's rights under all policies of insurance maintained pursuant to this
section.
(e) WARNING. UNLESS YOU PROVIDE US WITH EVIDENCE OF THE
INSURANCE COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY
PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY,
BUT NEED NOT, ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE
COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST
YOU. YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE
OBTAINED PROPERTY COVERAGE ELSEWHERE.
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4.7 Payment of Utilities. Grantor will pay before delinquency all charges
for water, sewer, electricity, natural gas and other utilities serving the
Property.
4.8 Maintenance and Repair of Property. Grantor will at all times
maintain the Property in good condition and repair, ordinary wear and tear
excepted, will diligently prosecute the completion of any building or other
improvement that is at any time in the process of construction on the Property,
and will promptly repair, restore, replace or rebuild any material part of the
Property that may be affected by any casualty or any public or private taking of
or injury to the Property. Beneficiary and any Person authorized by Beneficiary
may enter and inspect the Property at all reasonable times.
4.9 Compliance with Laws. Grantor will comply in all material
respects with all statutes, ordinances and other governmental or
quasi-governmental requirements and private covenants relating to the ownership,
construction, use or operation of the Property, including but not limited to all
material Environmental Laws; provided, that so long as Grantor is not otherwise
in default hereunder, Grantor may upon providing Beneficiary with security
reasonably satisfactory to Beneficiary ,proceed diligently and in good faith to
contest the validity or applicability of any such statute, ordinance,
requirement or covenant. Whether or not Grantor elects to contest such validity
or applicability, Grantor will notify Beneficiary promptly of any apparent or
alleged violation of any material statute, ordinance, requirement or covenant,
and will provide Beneficiary promptly with copies of all notices, pleadings and
other communications relating to any such violation.
4.10 Performance of Lease Obligations. Grantor will perform promptly
all of Grantor's obligations under or in connection with each present and future
lease of all or any part of the Property. If Grantor receives at any time any
written communication from the tenant under any such lease asserting a default
by Grantor under such lease, or purporting to terminate or cancel such lease,
Grantor will promptly forward a copy of such communication (and any subsequent
communications relating thereto) to Beneficiary.
4.11 Eminent Domain; Private Damage. If all or any part of any
property encumbered by this Deed of Trust is taken or damaged by eminent domain
or any other public or private action, Grantor will notify Beneficiary promptly
of the time and place of all meetings, hearings, trials and other proceedings
relating to such action. Beneficiary may participate in all negotiations and
appear and participate in all judicial or arbitration proceedings concerning any
award or payment that may be due as a result of such taking or damaging, and
may, after an event of default has occurred, in Beneficiary's sole discretion,
compromise or settle, in the names of both Beneficiary and Grantor, any claim
for any such award or payment. Any such award or
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payment is to be paid to Beneficiary and will be applied first to reimburse
Beneficiary for all costs and expenses, including attorneys' fees, incurred by
Beneficiary in connection with the ascertainment and collection of such award or
payment. The balance, if any, of such award or payment may, in Beneficiary's
sole discretion, either (a) be retained by Beneficiary and applied toward the
Secured Obligations, but only if any Event of Default has occurred, or (b) be
paid over, in whole or in part and subject to such conditions as Beneficiary may
impose, to Grantor for the purpose of restoring, repairing or rebuilding any
part of the encumbered property affected by the taking or damaging. Beneficiary
will have no duty to see to the application of any part of any award or payment
released to Grantor. Grantor's duty to pay the Notes in accordance with the
terms of the Loan Documents and to perform the other Secured Obligations will
not be suspended by the pendency or discharged by the conclusion of any
proceedings for the collection of any such award or payment, and any reduction
in the Secured Obligations resulting from Beneficiary's application for any such
award or payment will take effect only when Beneficiary receives such award or
payment. If this Deed of Trust has been foreclosed prior to Beneficiary's
receipt of such award or payment, Beneficiary may nonetheless retain such award
or payment to the extent required to reimburse Beneficiary for all out of pocket
costs and expenses, including reasonable attorneys' fees, incurred in connection
therewith, and to discharge any deficiency remaining with respect to the Secured
Obligations.
4.12 Mechanics' Liens. Grantor will keep the Property free and clear
of all liens and claims of liens by contractors, subcontractors, mechanics,
laborers, materialmen and other such Persons, and will cause any recorded
statement of any such lien to be released of record within 30 days after the
recording thereof. Notwithstanding the preceding sentence, however, Grantor will
not be deemed to be in default under this section if and so long as Grantor (a)
contests in good faith the validity or amount of any asserted lien and
diligently prosecutes or defends an action appropriate to obtain a binding
determination of the disputed matter, and (b) provides Beneficiary with such
security as Beneficiary may reasonably require to protect Beneficiary against
all out-of-pocket loss, damage and expense, including reasonable attorneys'
fees, that Beneficiary might incur if the asserted lien is determined to be
valid. Grantor will indemnify Beneficiary against and hold Beneficiary harmless
from any out-of-pocket loss, damage or expense, including reasonable attorneys'
fees and other out-of-pocket litigation expenses, incurred by Beneficiary as a
result of any default by Grantor under this section, and Grantor's obligations
under this sentence shall survive foreclosure of this Deed of Trust.
4.13 Environmental Claims. Grantor will indemnify Beneficiary against
and hold Beneficiary harmless from any out-of-pocket loss, damage or expense,
including reasonable attorneys' fees and other expenses, incurred by Beneficiary
in connection with the investigation, defense or settlement of any claim,
whether or not valid and whether asserted by a governmental
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agency or a private party, that (a) any part of the Property is contaminated or
otherwise affected by the presence of any Regulated Substance, or (b) the
Property or any activity conducted at any time on the Property is wholly or
partly responsible for the presence elsewhere of any Regulated Substance, or in
connection with any cleanup or other remediation actions that may be imposed on
or agreed to by Beneficiary in connection with any such claim. The indemnity
provided for in this section is a part of the Secured Obligations but will
survive payment or performance of the other Secured Obligations and the release,
foreclosure or other discharge of this Deed of Trust.
4.14 Defense of Actions. Grantor will defend, at Grantor's expense,
any action, proceeding or claim that affects any property encumbered hereby or
any interest of Beneficiary in such property or in the Secured Obligations, and
will indemnify and hold Beneficiary harmless from all out-of-pocket loss,
damage, cost or expense, including reasonable attorneys' fees, that Beneficiary
may incur in connection therewith.
4.15 Expenses of Enforcement. Grantor will pay on demand all
out-of-pocket costs and expenses, including but not limited to reasonable
attorneys' fees, appraisal costs and expenses for title insurance and title
searches and certificates, that Beneficiary may incur in connection with any
effort or action (whether or not litigation or foreclosure is involved) to
enforce or defend Beneficiary's rights and remedies under any of the Loan
Documents, or to secure title to or possession of, or to realize on, any
security for the Secured Obligations.
4.16 Book and Records; Financial Reports. Grantor shall maintain all
financial records in accordance with GAAP and permit, after two weeks notice
unless an Event of Default has occurred, any Beneficiary employees or other
representatives approved by the Beneficiary (which approval shall not be
unreasonably withheld) that is designated by the Beneficiary or the Required
Banks to visit and inspect the properties of the Grantor, and to inspect
Grantor's financial and business records and make extracts there from and copies
thereof, all at reasonable times and in a manner so as not to unreasonably
disrupt the operations of the Grantor and as often as reasonably requested, and
permit any such employees or representatives to discuss the affairs, finances
and condition of the Grantor with the officers and other representatives
thereof, including the Grantor's independent accountants if a representative of
the Grantor is present and if the Beneficiary has notified the Grantor not less
than 24 hours prior to such meeting of the issues that will be discussed.
Grantor shall deliver those financial statements required to be delivered by it
under the Credit Agreement.
4.17 Priority of Leases. To the extent Grantor has the right, under the
terms of any existing lease of all or any part of the Property, to make such
lease subordinate to the lien of this
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Deed of Trust, Grantor will, at Beneficiary's request and expense, take such
action as may be required to effect such subordination. Conversely, Grantor
will, at Beneficiary"s request and Grantor's expense, take such action as may be
necessary to subordinate the lien hereof to any future lease of all or any part
of the Property designated by Beneficiary.
4.18 Further Assurances; Estoppel Certificates. Grantor will execute
and deliver to Beneficiary on demand, and pay the out-of-pocket costs of
preparation and recording thereof, any further documents that Beneficiary may
reasonably request to confirm or perfect the liens and security interests
created or intended to be created hereby, or to confirm or perfect any evidence
of the Secured Obligations. Grantor will also within ten days after any request
by Beneficiary, deliver to Beneficiary a signed and acknowledged statement
certifying to Beneficiary, or to any proposed transferee of the Secured
Obligations, (a) the balance of principal, interest and other sums then
outstanding under the Notes, and (b) whether Grantor claims to have any offsets
or defenses with respect to the Secured Obligations and, if so, the nature of
such offsets or defenses. Grantor's failure to provide such a statement within
such ten-day period will result in Grantor being conclusively bound by any
representation that Beneficiary may make as to those matters.
ARTICLE 5
GRANTOR'S NEGATIVE COVENANTS
5.1 Waste and Alterations. Grantor will not commit or permit any
waste with respect to the Property, nor will Grantor cause or permit any
material part of the Property, including but not limited to any building,
structure, parking lot, driveway, landscape scheme, timber, or other ground
improvement, to be removed, demolished or materially altered without the prior
written consent of Beneficiary, other than such items which are either (i)
obsolete and no longer necessary for the conduct of Grantor's business, or (ii)
promptly replaced with a similar item of equal or greater value.
5.2 Zoning and Private Covenants. Grantor will not initiate, join in
or consent to any change in any zoning ordinance or classification, any change
in the "zone lot" or "zone lots" (or similar zoning unit or units) presently
comprising the Property, any transfer of development rights, any change in any
private restrictive covenant, or any change in any other public or private
restriction limiting or defining the uses that may be made of the Property or
any part thereof, without the express written consent of Beneficiary. If under
applicable zoning provisions the use of all or any part of the Property is or
becomes a nonconforming use, Grantor will not cause or permit such use to be
discontinued or abandoned without the express written consent of Beneficiary.
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5.3 Additional Tax Burden. Except with the prior written consent of
Beneficiary, Grantor will not initiate, join in or consent to any action or
proposal to include all or any part of the Property in any special improvement
district or other special district or taxing authority that does not include the
Property on the date of this Deed of Trust.
5.4 Interference with Leases. Grantor will neither do nor neglect to
do anything that may cause or permit the termination of any lease of all or any
part of the Property, or cause or permit the withholding or abatement of any
rent payable under any such lease. Except with the prior written consent of
Beneficiary, Grantor will not (a) collect rent from all or any part of the
Property for more than one month in advance, (b) modify any lease of all or any
part of the Property, (c) assign the rents from the Property or any part
thereof, or (d) consent to the cancellation or surrender of all or any part of
any such lease, except that Grantor may in good faith terminate any such lease
for nonpayment of rent or other material breach by the tenant.
5.5 Transfer of Property. Grantor will not convey, lease or otherwise
transfer, either voluntarily or involuntarily, the Property or any part thereof
or interest therein, without the prior written consent of Beneficiary. If
Beneficiary consents to any transfer otherwise prohibited by this section,
Beneficiary may condition such consent on changes in the terms for payment of
the Secured Obligations, including but not limited to an increase in the
interest rate borne by the Notes, a reduction in the term of the Notes, or both.
5.6 Further Encumbrance of Property. Except for Permitted Liens, Grantor
will neither create nor permit any junior lien or encumbrance against the
Property, other than a mortgage or deed of trust in which the mortgagee or
beneficiary
i. expressly acknowledges the priority of this Deed of Trust, as to all
amounts then or at any time thereafter advanced hereunder or secured hereby,
over any lien or security interest created by such junior mortgage or deed of
trust, and
ii. expressly agrees that no foreclosure or other enforcement proceeding
under such mortgage or deed of trust will be effective to terminate any lease of
all or any part of the Property, regardless of the relative priorities of such
junior mortgage or deed of trust and such lease.
Any Person who acquires or records any lien or encumbrance against the Property
after the recording of this Deed of Trust will be deemed to have agreed to, and
will be bound by, the foregoing requirements, whether or not the document or
documents relating to such lien or encumbrance reflect that agreement.
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5.7 Use of Regulated Substances. Grantor will not cause or permit all
or any part of the Property to be used to manufacture, generate, store,
transfer, treat, recycle or dispose of any Regulated Substance, except in
compliance with any Environmental Law, nor will Grantor cause or permit, as a
result of any intentional or unintentional act on the part of Grantor or any
tenant, subtenant or other user or occupant of the Property, any release of any
Regulated Substance onto the Property or from the Property onto other property.
Grantor will indemnify Beneficiary against, and hold Beneficiary harmless from,
any out-of-pocket loss, claim, damage or expense, including reasonable
attorneys' fees and other litigation expenses, incurred by Beneficiary in
connection with any actual or alleged violation of the preceding sentence. Such
indemnity is a part of the Secured Obligations but will survive payment or
performance of the other Secured Obligations and the release, foreclosure or
other discharge of this Deed of Trust.
5.8 Change of Name. Grantor shall not, except upon not less than 30
days prior written notice to the Beneficiary, change the address at which the
Grantor maintains its chief executive offices and principal place of business;
nor conduct its business activities under any names other than those set forth
in the Credit Agreement unless the Grantor notifies the Beneficiary of any such
new name not less than 30 days prior to beginning use of such new name, except
that no more than seven days notice shall be required in the case of a new name
resulting from an acquisition of a business or assets by the Grantor.
5.9 Improper Use of Property. Grantor will not use the Property for
any purpose or in any manner that violates any applicable law, ordinance or
other governmental requirement, the requirements or conditions of any insurance
policy, or any private covenant.
ARTICLE 6
EVENTS OF DEFAULT
Each of the following events will constitute a default under this
Deed of Trust and under each of the other Loan Documents:
6.1 Failure to Pay Notes. Pursuant to the terms of the Loan Documents, the
occurrence of any failure to make any payment when due under the terms of the
respective Notes pursuant to the terms of the Loan Documents.
6.2 Violation of Other Covenants. The occurrence of any failure to
perform or observe any other covenant, condition or prohibition contained in any
of the Loan Documents which failure is not cured within fifteen (15) days after
Grantor's receipt of written notice thereof from Grantor;
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6.3 Misrepresentation or Breach of Warranty. Beneficiary's determination
that any statement or warranty contained in any of the Loan Documents is untrue
or misleading in any material respect as of the date made;
6.4 Acts Threatening Forfeiture. Beneficiary's reasonable
determination that Grantor has committed any act or engaged in any pattern of
actions that may lead to a claim for forfeiture of Grantor's interest in the
Property, it being agreed that the issuance of any criminal complaint or
indictment charging Grantor with any such act or pattern of actions would be a
sufficient basis for such a determination by Beneficiary if one of the penalties
for such complaint or indictment is forfeiture of property;
6.5 Assertion of Priority. The assertion (except by the owner of an
encumbrance expressly excepted from Grantor's warranty of title herein) of any
claim of priority over this Deed of Trust by title, lien or otherwise, unless
Grantor within 30 days after such assertion either causes the assertion to be
withdrawn or provides Beneficiary with such security as Beneficiary may require
to protect Beneficiary against all loss, damage or expense, including attorneys,
fees, that Beneficiary may incur in the event such assertion is upheld; or
6.6 Event of Default Under Credit Agreement. An "Event of Default" (as such
term is defined in the Credit Agreement) has occurred and is continuing.
ARTICLE 7
BENEFICIARY'S REMEDIES
Immediately upon or at any time after the occurrence of any event of
default hereunder, Beneficiary may exercise any remedy available at law or in
equity, including but not limited to those listed below and those listed in the
other Loan Documents, in such sequence or combination as Beneficiary may
determine in Beneficiary's sole discretion:
7.1 Performance of Defaulted Obligations. Beneficiary may make any
payment or perform any other obligation under the Loan Documents that Grantor
has failed to make or perform, and Grantor hereby irrevocably appoints
Beneficiary as the true and lawful attorney-in-fact for Grantor to make any such
payment and perform any such obligation in the name of Grantor. All out of
pocket payments made and expenses (including reasonable attorneys' fees)
incurred by Beneficiary in this connection, together with interest thereon at
the Default Rate from the date paid or incurred until repaid, will be part of
the Secured Obligations and will be
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immediately due and payable by Grantor to Beneficiary. In lieu of advancing
Beneficiary's own funds for such purposes, Beneficiary may use any funds of
Grantor that may be in Beneficiary's possession, including but not limited to
insurance or condemnation proceeds and amounts deposited for taxes, insurance
premiums or other purposes.
7.2 Specific Performance and Injunctive Relief. Notwithstanding the
availability of legal remedies, Beneficiary will be entitled to obtain specific
performance, mandatory or prohibitory injunctive relief or other equitable
relief requiring Grantor to cure or refrain from repeating any default.
7.3 Acceleration of Secured Obligations. Beneficiary may, upon notice to
Grantor, declare all of the Secured Obligations immediately due and payable in
full.
7.4 Suit for Monetary Relief. With or without accelerating the
maturity of the Secured Obligations, Beneficiary may sue from time to time for
any payment due under any of the Loan Documents, or for money damages resulting
from Grantor's default under any of the Loan Documents.
7.5 Possession of Property. To the extent permitted by applicable
law, Beneficiary may enter and take possession of the Property without seeking
or obtaining the appointment of a receiver, may employ a managing agent for the
Property and may lease or rent all or any part of the Property, either in
Beneficiary's name or in the name of Grantor, and may collect the rents, issues
and profits of the Property. Any revenues collected by Beneficiary under this
section will be applied first toward payment of all out of pocket expenses
(including reasonable attorneys' fees) incurred by Beneficiary, together with
interest thereon at the Default Rate from the date incurred until repaid, and
the balance, if any, will be applied against the Secured Obligations.
7.6 Enforcement of Security Interests. Beneficiary may exercise all
rights of a secured party under the Oregon Uniform Commercial Code with respect
to the Chattels and the Intangible Personalty, including but not limited to
taking possession of, holding and selling the Chattels and enforcing or
otherwise realizing on any accounts and general intangibles. Any requirement for
reasonable notice of the time and place of any public sale, or of the time after
which any private sale or other disposition is to be made, will be satisfied by
Beneficiary's giving of such notice to Grantor at least ten days prior to the
time of any public sale or the time after which any private sale or other
intended disposition is to be made. To the extent permitted by applicable law,
Beneficiary may, at Beneficiary's option, cause Trustee to sell any or all of
the Chattels, the Intangible Personalty or other personal property as part of
the sale of the Property, without making any distinction between real and
personal property.
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7.7 Foreclosure Against Property. Upon the occurrence of any event of
default, Beneficiary shall have the right to have Trustee sell the Property in
accordance with the Oregon Revised Statutes 86.705 et seq. at public auction to
the highest bidder. Any person except Trustee may bid at the Trustee's sale. The
power of sale is conferred by this Deed of Trust and the law shall not be an
exclusive remedy. When such power of sale is not exercised, Beneficiary may
foreclose this Deed of Trust as a mortgage. Trustee is not obligated to notify
any party hereto of a pending sale under any other deed of trust or of any
action or proceeding in which Grantor, Trustee, or Beneficiary shall be a party,
unless such action or proceeding is brought by Trustee. Should Beneficiary elect
to foreclose by exercise of the power of sale herein contained, Beneficiary
shall notify Trustee and shall deposit with Trustee this Deed of Trust and the
Notes and such receipts and evidence of expenditures made and secured hereby as
Trustee may require.
(a) Upon receipt of such notice from Beneficiary, Trustee
shall cause to be given such Notice of Default as then required by law. Trustee
shall, without demand on Grantor, after lapse of such time as may then be
required by law and after Notice of Sale and Notice of Foreclosure having been
given as required by law, sell the Property at the time and place of sale fixed
by it in such Notice of Sale and Notice of Foreclosure, either as a whole, or in
separate lots or parcels or items as Trustee shall deem expedient, and in such
order as it may determine, at public auction to the highest bidder for cash in
lawful money of the United States payable at the time of sale. Trustee shall
deliver to such purchaser or purchasers thereof its good and sufficient deed or
deeds conveying the property so sold, but without any covenant or warranty,
express or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof.
(b) After deducting all costs, fees and expenses of Trustee
and of this Trust, including costs of evidence of title and reasonable counsel
fees in connection with sale, Trustee shall apply the proceeds of sale to
payment of all sums expended under the terms hereof, not then repaid, with
accrued interest, all other sums then secured hereby and the remainder, if any,
shall be paid into court in the manner provided by law.
7.8 Appointment of Receiver. To the extent permitted by applicable
law, Beneficiary shall be entitled, as a matter of absolute right and without
regard to the value of any security for the Secured Obligations or the solvency
of any Person liable therefor, to the appointment of a receiver for the Property
as set forth in this Section 7.8. Beneficiary shall be entitled to such
appointment on ex parte application to any court of competent jurisdiction.
Grantor waives any right to any hearing or notice of hearing prior to the
appointment of a receiver. Such receiver and his agents shall be empowered (a)
to take possession of the Property
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and any businesses conducted by Grantor or any other Person thereon and any
business assets used in connection therewith, (b) to exclude Grantor and
Grantor's agents, servants and employees from the Property, or, at the option of
the receiver, in lieu of such exclusion, to collect a fair market rental from
any such Persons occupying any part of the Property, (c) to collect the rents,
issues, profits and income therefrom, (d) to complete any construction that may
be in progress, (e) to do such maintenance and make such repairs and alterations
as the receiver deems necessary, (f) to use all stores of materials, supplies
and maintenance equipment on the Property and replace such items at the expense
of the receivership estate, (g) to pay all taxes and assessments against the
Property and the Chattels, all premiums for insurance thereon, all utility and
other operating expenses, and all sums due under any prior or subsequent
encumbrance, (h) to borrow from Beneficiary such funds as may reasonably be
necessary to the effective exercise of the receiver's powers, on such terms as
may be agreed upon by the receiver and Beneficiary, and (i) generally to do
anything that Grantor could legally do if Grantor were in possession of the
Property. All out of pocket expenses incurred by the receiver or his agents,
including obligations to repay funds borrowed by the receiver, shall constitute
a part of the Secured Obligations. Any revenues collected by the receiver shall
be applied first to the expenses of the receivership, including reasonable
attorneys' fees incurred by the receiver and by Beneficiary, together with
interest thereon at the Default Rate from the date incurred until repaid, and
the balance shall be applied toward the Secured Obligations or in such other
manner as the court may direct. Unless sooner terminated with the express
consent of Beneficiary, any such receivership will continue until the Secured
Obligations have been discharged in full, or until title to the Property has
passed after foreclosure sale and all applicable periods of redemption have
expired.
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 Replacement of Trustee. Beneficiary may at any time, with or
without cause, elect to replace the Trustee named at the beginning of this Deed
of Trust. Beneficiary may exercise such election by notifying Trustee of such
replacement, signing and acknowledging an instrument appointing a successor
Trustee and recording such instrument in the real property records of the County
in which the Property is located. Any such successor Trustee may be replaced by
Beneficiary in the same manner. If (and only if) Beneficiary exercises the right
to replace the Trustee originally named, the following provisions shall become
applicable:
(a) Trustee will not be liable for any error in judgment or
for any act done in good faith by Trustee, nor will Trustee be otherwise
accountable or responsible, except for Trustee's own bad faith or willful
misconduct, under any circumstances whatever. Trustee will
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not be personally liable, in the event Trustee or any other Person acting under
the powers granted Trustee under this Deed of Trust enters or takes possession
of the Property, for debts contracted or for liability or damages incurred in
the management or operation of the Property. Trustee may rely absolutely on any
document, instrument or signature purporting to authorize or support any action
by Trustee under this Deed of Trust which Trustee believes in good faith to be
genuine. Grantor will from time to time pay Trustee all compensation due Trustee
under this Deed of Trust, will reimburse Trustee for all expenses, including
attorneys' fees, incurred by Trustee in the performance of Trustee's duties
under this Deed of Trust, and will indemnify Trustee and hold Trustee harmless
against any loss, claim, damage or expense incurred by Trustee in connection
with the performance of such duties.
(b) Any funds received by Trustee shall, until used or
applied as provided in this Deed of Trust, be held in trust for the purposes for
which they were received. Except to the extent required by law, such funds need
not be segregated from other funds held in trust by Trustee. In no event shall
Trustee or Beneficiary be liable to pay interest on any funds held by Trustee.
(c) Trustee may resign by giving 30 days' notice of
resignation in writing to
Beneficiary.
(d) Any successor Trustee appointed pursuant to this section
will, without further act, deed or conveyance, automatically become vested with
all of the rights, powers, interests and trusts which had been held by such
successor Trustee's predecessor, with the same effect as though the successor
Trustee had originally been named Trustee in this Deed of Trust. Nevertheless,
at the request of Beneficiary or of the successor Trustee, the former Trustee
shall execute and deliver to the successor Trustee an instrument in recordable
form, transferring to the successor Trustee all of the former Trustee's rights,
powers, interests and trusts under this Deed of Trust, and shall also transfer
and deliver to the successor Trustee any property or funds held by the former
Trustee in the former Trustee's capacity as trustee under this Deed of Trust.
(e) Trustee may authorize one or more Persons to act on
Trustee's behalf in the performance of ministerial acts under this Deed of
Trust, including but not limited to the transmittal and posting of notices.
8.2 Time of the Essence. Time is of the essence with respect to
all provisions of the Loan Documents.
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8.3 Joint and Several Obligations. If Grantor is more than one
Person, then all Persons comprising Grantor are jointly and severally liable for
all of the Secured Obligations.
8.4 Rights and Remedies Cumulative. Beneficiary's rights and remedies
under each of the Loan Documents are cumulative of the rights and remedies
available to Beneficiary under each of the other Loan Documents and those
otherwise available to Beneficiary at law or in equity. No act of Beneficiary
shall be construed as an election to proceed under any particular provision of
any Loan Document to the exclusion of any other provision in the same or any
other Loan Document, or as an election of remedies to the exclusion of any other
remedy that may then or thereafter be available to Beneficiary.
8.5 No Implied Waivers. Beneficiary shall not be deemed to have
waived any provision of any Loan Document unless such waiver is in writing and
is signed by Beneficiary. Without limiting the generality of the preceding
sentence, neither Beneficiary's acceptance of any payment with knowledge of a
default by Grantor, nor any failure by Beneficiary to exercise any remedy
following a default by Grantor, shall be deemed a waiver of such default, and no
waiver by Beneficiary of any particular default on the part of Grantor shall be
deemed a waiver of any other default or of any similar default in the future.
8.6 Dealings with Successor Owners. If the Property or any interest
in the Property is transferred to any Person other than Grantor, whether
voluntarily or involuntarily and whether or not Beneficiary has consented to
such transfer, then Beneficiary may deal with such successor owner in all
matters relating to the Secured Obligations, and no such dealings, including but
not limited to any change in the terms of the Secured Obligations, will be
deemed to discharge or impair the obligations of Grantor to Beneficiary under
the Loan Documents.
8.7 No Third Party Rights. No Person shall be a third party
beneficiary of any provision of any of the Loan Documents. All provisions of the
Loan Documents favoring Beneficiary are intended solely for the benefit of
Beneficiary, and no third party shall be entitled to assume or expect that
Beneficiary will not waive or consent to modification of any such provision in
Beneficiary's sole discretion.
8.8 Preservation of Liability and Priority. Without affecting the
liability of Grantor or of any other Person (except a Person expressly released
in writing) for payment and performance of all of the Secured Obligations, and
without affecting the rights of Beneficiary with respect to any security not
expressly released in writing, and without impairing in any way the priority of
this Deed of Trust over the interests of any Person acquired or first evidenced
by recording subsequent to the recording hereof, Beneficiary may, either before
or after the maturity
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of the Note, and without notice or consent: (a) release any Person liable for
payment or performance of all or any part of the Secured Obligations; (b) make
any agreement altering the terms of payment or performance of all or any of the
Secured Obligations; (c) exercise or refrain from exercising, or waive, any
right or remedy that Beneficiary may have under any of the Loan Documents; (d)
accept additional security of any kind for any of the Secured Obligations; or
(e) release or otherwise deal with any real or personal property securing the
Secured Obligations. Any Person acquiring or recording evidence of any interest
of any nature in the Property, the Chattels or the Intangible Personalty shall
be deemed, by acquiring such interest or recording any evidence thereof, to have
agreed and consented to any or all such actions by Beneficiary.
8.9 Subrogation of Beneficiary. Beneficiary shall be subrogated to
the lien of any previous encumbrance discharged with funds advanced by
Beneficiary under the Loan Documents, regardless of whether such previous
encumbrance has been released of record.
8.10 Notices. Any notice required or permitted to be given by Grantor
or Beneficiary under any of the Loan Documents must be in writing and will be
deemed given on personal delivery or on the third business day after the mailing
thereof, by registered or certified United States mail, postage prepaid, to the
appropriate party at its address shown on the first page of this Deed of Trust.
Either party may change such party's address for notices by giving notice to the
other party in accordance with this section, but no such change of address will
be effective as against any Person without actual knowledge of the change.
8.11 Fixture Filing. This Deed of Trust is intended to serve as a
financing statement under the Oregon Uniform Commercial Code with respect to any
fixtures that may at any time be part of the Property or the Chattels, and the
recording of this Deed of Trust is intended to constitute a "fixture filing" for
purposes of such Uniform Commercial Code.
8.12 Defeasance. Upon payment and performance in full of all of the
Secured Obligations, Beneficiary will execute and deliver to Grantor such
documents as may be required to release this Deed of Trust of record.
8.13 Severability. Wherever possible, each provision of the Loan
Documents is to be interpreted so as to be effective and valid under applicable
law. If any provision of any Loan Document is, for any reason and to any extent,
invalid or unenforceable, then neither the remainder of the Loan Document in
which such provision appears, nor any other Loan Document, nor the application
of the provision to other Persons or in other circumstances, shall be affected
by such invalidity or unenforceability.
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8.14 Reconveyance by Trustee. Upon written request of Beneficiary
stating that all sums secured hereby have been paid, and upon surrender of the
Notes to Trustee for cancellation and retention and upon payment by Grantor of
Trustee's fees, Trustee shall reconvey to Grantor, or the person or persons
legally entitled thereto, without warranty, any portion of the Property then
held hereunder. The recitals in such reconveyance of any matters or facts shall
be conclusive proof of the truthfulness thereof. The grantee in any reconveyance
may be described as "the person or persons legally entitled thereto."
8.15 Attorney's Fees. Wherever this Deed of Trust provides for
payment of attorney fees to the Beneficiary, such provision of attorneys fees
shall include, without limitation, the reasonable fees and disbursements of
attorneys in connection with proceedings in any trial court, appellate court, as
well as in any bankruptcy proceedings.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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8.16 UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY LENDER AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY THE LENDER TO BE ENFORCEABLE.
8.17 Acceptance by Trustee. Trustee accepts this trust when this Deed
of Trust, duly executed and acknowledged, is made a public record as provided by
law.
Signed and delivered as of the date first mentioned above.
EFTC CORPORATION
an Colorado corporation
By /s/
Name: Stuart W. Fuhlendorf
Title: Vice President
STATE OF COLORADO )
CITY AND) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 30th day of
September, 1997, by Stuart W. Fuhlendorf, as Vice President of EFTC CORPORATION,
a Colorado corporation..
My commission expires: August 18, 2001
Witness my hand and official seal.
/s/
Deborah J. Thomas
Notary Public
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EXHIBIT A
to
DEED OF TRUST AND SECURITY AGREEMENT
(Legal Description)
Parcel 2 of Partition Plat 97-52 in the City of Newberg,
recorded July 24, 1997 in Film 4, Pages 452-453, in Plat Records of Yamhill
County, Oregon.
A-1
<PAGE>
EXHIBIT B
TO
DEED OF TRUST AND SECURITY AGREEMENT
(Permitted Exceptions)
1. Ten foot public utility easement along the West line as shown on
Partition Plat 97- 52.
B-1
<PAGE>
DEED OF TRUST AND SECURITY AGREEMENT
AND FINANCING STATEMENT
From
EFTC CORPORATION
To
THE PUBLIC TRUSTEE OF WELD COUNTY
for
BANK ONE, COLORADO, N.A.
Dated as of September 30, 1997
THIS INSTRUMENT IS GOVERNED BY THE PROVISIONS OF COLORADO
STATUTES ss.ss. 38-37-101 ET SEQ.
THIS INSTRUMENT SECURES FUTURE ADVANCES.
THE MAXIMUM AMOUNT OF PRINCIPAL SECURED BY THIS INSTRUMENT IS
$45,000,000.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THE REAL PROPERTY SUBJECT HERETO IS DESCRIBED IN EXHIBIT A.
THIS INSTRUMENT IS TO BE RECORDED AS A DEED OF TRUST IN WELD COUNTY .
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<PAGE>
THIS DOCUMENT WAS Ted R. Sikora II
PREPARED BY AND WHEN Davis, Graham & Stubbs LLP
RECORDED AND/OR FILED 370 Seventeenth Street
SHOULD BE RETURNED Suite 4700
TO: Denver, CO 80202
- ------------------------------- -----------------------------------------
FOR RECORDER'S USE ONLY
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page
ARTICLE 1 PARTIES, PROPERTY AND DEFINITIONS...............................................................1
1.1 Grantor..............................................................................1
1.2 Beneficiary..........................................................................1
1.3 Trustee..............................................................................1
1.4 Notes................................................................................1
1.5 Property.............................................................................2
1.6 Chattels.............................................................................3
1.7 Intangible Personalty................................................................3
1.8 Loan Documents.......................................................................3
1.9 Environmental Law....................................................................3
1.10 Regulated Substance..................................................................4
1.11 Person...............................................................................4
1.12 Secured Obligations..................................................................4
1.13 Default Rate.........................................................................4
ARTICLE 2 GRANTING CLAUSE.................................................................................4
2.1 Grant to Trustee.....................................................................4
2.2 Security Interest to Beneficiary.....................................................4
ARTICLE 3 GRANTOR'S WARRANTIES AND REPRESENTATIONS........................................................5
3.1 Warranty of Title....................................................................5
3.2 Organizational Status................................................................5
3.3 Due Authorization....................................................................5
3.4 No Regulated Substances..............................................................5
3.5 Non-Agricultural Property............................................................6
3.6 No Susceptibility to Forfeiture......................................................6
3.7 Compliance with Laws.................................................................6
3.8 No Conflict with Other Agreements....................................................7
3.9 No Material Litigation...............................................................7
3.10 Accurate Financial Information.......................................................7
ARTICLE 4 GRANTOR'S AFFIRMATIVE COVENANTS.................................................................7
4.1 Payment of Notes.....................................................................7
4.2 Performance of Other Obligations.....................................................7
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4.3 Waiver of Homestead and Other Exemptions.............................................7
4.4 Payment of Taxes.....................................................................8
4.5 Other Encumbrances...................................................................8
4.6 Maintenance of Insurance.............................................................8
4.7 Payment of Utilities.................................................................9
4.8 Maintenance and Repair of Property and Chattels......................................9
4.9 Compliance with Laws.................................................................9
4.10 Performance of Lease Obligations....................................................10
4.11 Eminent Domain; Private Damage......................................................10
4.12 Mechanics' Liens....................................................................10
4.13 Environmental Claims................................................................11
4.14 Defense of Actions..................................................................11
4.15 Expenses of Enforcement.............................................................11
4.16 Book and Records; Financial Reports.................................................11
4.17 Priority of Leases..................................................................12
4.18 Further Assurances; Estoppel Certificates...........................................12
ARTICLE 5 GRANTOR'S NEGATIVE COVENANTS...................................................................12
5.1 Waste and Alterations...............................................................12
5.2 Zoning and Private Covenants........................................................13
5.3 Additional Tax Burden...............................................................13
5.4 Interference with Leases............................................................13
5.5 Transfer of Property................................................................13
5.6 Further Encumbrance of Property.....................................................13
5.7 Use of Regulated Substances.........................................................14
5.8 Change of Name......................................................................14
5.9 Improper Use of Property............................................................14
ARTICLE 6 EVENTS OF DEFAULT..............................................................................15
6.1 Failure to Pay Notes................................................................15
6.2 Violation of Other Covenants........................................................15
6.3 Misrepresentation or Breach of Warranty.............................................15
6.4 Acts Threatening Forfeiture.........................................................15
6.5 Assertion of Priority...............................................................15
6.6 Event of Default Under Credit Agreement.............................................15
ARTICLE 7 BENEFICIARY'S REMEDIES.........................................................................16
7.1 Performance of Defaulted Obligations................................................16
7.2 Specific Performance and Injunctive Relief..........................................16
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7.3 Acceleration of Secured Obligations.................................................16
7.4 Suit for Monetary Relief............................................................16
7.5 Possession of Property..............................................................16
7.6 Enforcement of Security Interests...................................................17
7.7 Foreclosure Against Property........................................................17
7.8 Appointment of Receiver.............................................................18
ARTICLE 8 MISCELLANEOUS PROVISIONS.......................................................................19
8.1 Time of the Essence.................................................................19
8.2 Joint and Several Obligations.......................................................19
8.3 Rights and Remedies Cumulative......................................................19
8.4 No Implied Waivers..................................................................19
8.5 Dealings with Successor Owners......................................................19
8.6 No Third Party Rights...............................................................19
8.7 Preservation of Liability and Priority..............................................20
8.8 Subrogation of Beneficiary..........................................................20
8.9 Notices.............................................................................20
8.10 Fixture Filing......................................................................20
8.11 Defeasance..........................................................................20
8.12 Reconveyance by Trustee.............................................................20
8.13 Acceptance by Trustee...............................................................21
8.14 Severability........................................................................22
</TABLE>
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<PAGE>
DEED OF TRUST AND SECURITY AGREEMENT
AND FINANCING STATEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT
("Deed of Trust") is given as of September 30, 1997, by the Grantor named below
to the Trustee named below, for the use and benefit of the Beneficiary named
below.
ARTICLE 1
PARTIES, PROPERTY AND DEFINITIONS
The following terms and references shall have the meanings indicated:
1.1 Grantor: EFTC CORPORATION, a Colorado corporation, whose legal
address is 9351 Grant Street, Horizon Terrace, Sixth Floor, Denver, Colorado
80229, together with any future owner of the Property or any part thereof or
interest therein.
1.2 Beneficiary: BANK ONE, COLORADO, N.A., a national banking
association, whose legal address is 1125 Seventeenth Street, Third Floor,
Denver, Colorado 80202, Attention: David L. Ericson, Vice President, as Agent
for the Banks under that certain Credit Agreement (the "Credit Agreement") dated
September 30, 1997, by and among Grantor, the Banks listed therein, and
Beneficiary, as Agent for the Banks, together with any future holder of a Note.
Capitalized terms used and not otherwise defined herein shall have the meanings
given to them in the Credit Agreement.
1.3 Trustee:The Public Trustee of Weld County, Colorado.
1.4 Notes: Grantor's Notes shall mean any promissory notes made
by Grantor in favor of Beneficiary, including, without limitation:
(i) Grantor's Promissory Note (Revolving Loan) dated
September 30, 1997, in the original principal amount
of $25,000,000.00;
(ii) Grantor's Promissory Note (Term Loan) dated September
30, 1997, in the original principal amount of
$20,000,000.00; and
(iii) Grantor's Promissory Note (Swing Loan) dated
September 30, 1997, in the original principal amount
of $2,500,000.00; and
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(iv) Any and all modifications, extensions and renewals of
any of the foregoing and any and all future advances
or readvances to Grantor whether pursuant to any of
the foregoing promissory notes or otherwise.
All terms and provisions of the Notes are incorporated by this reference in this
Deed of Trust.
1.5 Property: The land described in Exhibit A attached, commonly
referred to as 233 Dundee Avenue, Greeley, Colorado 80634, together with the
following:
(a) All buildings, structures and improvements now or
hereafter located thereon, as well as all rights of way, easements, trackage
rights and other appurtenances to such land;
(b) All of Grantor's right, title and interest in any land
lying between the boundaries of the land described on Exhibit A and the center
line of any adjacent street, road, avenue or alley, whether opened or proposed;
(c) All of Grantor's right, title and interest in all water
rights and conditional water rights that are appurtenant to or that have been
used or are intended for use in connection with such land, including but not
limited to (i) ditch, well, pipeline, spring and reservoir rights, whether or
not adjudicated or evidenced by any well or other permit, (ii) all rights with
respect to nontributary groundwater (and other groundwater that is subject to
the provisions of Colorado Revised Statutes Section 37-90-137(4) or the
corresponding provisions of any successor statute) underlying said land, (iii)
any permit to construct any water well, water from which is intended to be used
in connection with such land, and (iv) all of Grantor's right, title and
interest under any decreed or pending plan of augmentation or water exchange
plan;
(d) All of Grantor's right, title and interest in all
minerals, crops, timber, trees, shrubs, flowers and landscaping features now or
hereafter located on, under or above such land;
(e) With the exception of items that are owned by tenants and
that such tenants are entitled, under the terms of applicable lease agreements,
to remove from the leased premises, and except for items leased by Grantor from
third parties or held by Grantor on consignment, all machinery, apparatus,
equipment, fittings, fixtures (whether actually or constructively attached, and
including all trade, domestic and ornamental fixtures) now or hereafter located
in, on or under such land or improvements and used or usable in connection with
any present or future operation thereof, including but not limited to all
heating, air-conditioning, freezing, lighting, laundry, incinerating and power
equipment; engines; pipes; pumps; tanks; motors; conduits; switchboards;
plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating,
ventilating, cooking and communications apparatus; boilers, water heaters,
ranges, furnaces and burners; appliances; vacuum cleaning systems;
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<PAGE>
elevators; escalators; shades; awnings; screens; storm doors and windows;
stoves; refrigerators; attached cabinets; partitions; ducts and compressors;
rugs and carpets; draperies; and all additions thereto and replacements
therefor;
(f) All development rights associated with such land, whether
previously or subsequently transferred to such land from other real property or
now or hereafter susceptible of transfer from such land to other real property;
(g) All awards and payments, including interest thereon,
resulting from the exercise of any right of eminent domain or any other public
or private taking of, injury to, or decrease in the value of, any of such
property; and
(h) All other or greater rights and interests of every nature
in any of the above-described property and in the possession or use thereof and
income therefrom, whether now owned or subsequently acquired by Grantor.
1.6 Chattels: All goods, fixtures, building and other materials,
supplies and other tangible personal property of every nature now owned or
hereafter acquired by Grantor and used, intended for use, or usable in the
operation and any future construction of improvements or development of the
Property, together with all accessions thereto, replacements and substitutions
therefor and proceeds thereof.
1.7 Intangible Personalty: All accounts and all plans, specifications,
licenses, permits and other general intangibles (whether now owned or hereafter
acquired, and including proceeds thereof) relating to or arising from Grantor's
ownership, use, operation, leasing or sale of all or any part of the Property,
specifically including but in no way limited to any right that Grantor may have
or acquire to transfer any development rights from the Property to other real
property, and any development rights that may be so transferred.
1.8 Loan Documents: The Notes, this Deed of Trust and any financing
statements executed in connection herewith, the Assignment of Leases and Rents
and Other Income of even date herewith that also secures the Notes, the Credit
Agreement, and each other document executed or delivered by Grantor as security
for the Notes or in connection with the transaction pursuant to which the Notes
have been executed and delivered. The term "Loan Documents" also includes all
modifications, extensions, renewals and replacements of each document referred
to above.
1.9 Environmental Law: Any federal, state or local enactment relating to
protection of public health or the environment, including (by way of
illustration rather than limitation) the Clean Water Act, 33 U.S.C. ss. 1251, et
seq., the Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Resource
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<PAGE>
Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.
ss. 9601, et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et
seq., and the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
ss. 135, et seq., as well as applicable state counterparts to such federal
legislation and any regulations, guidelines, directives or other
interpretations of any such enactment, all as amended from time to time.
1.10 Regulated Substance: Any substance, the manufacture, storage,
transport, generation, use, treatment, recycling, disposal or other disposition
of which is prohibited or regulated (including, without limitation, being
subjected to notice, reporting, record-keeping or clean-up requirements) by any
Environmental Law.
1.11 Person: An individual, corporation, association, partnership,
trust or other legal entity.
1.12 Secured Obligations: All present and future obligations of Grantor
to Beneficiary evidenced by or contained in the Loan Documents, whether stated
in the form of promises, covenants, representations, warranties, conditions or
prohibitions or in any other form.
1.13 Default Rate: A rate of interest equal to the Prime Rate plus
3% per annum.
ARTICLE 2
GRANTING CLAUSE
2.1 Grant to Trustee. As security for the Secured Obligations, Grantor
grants, bargains, sells and conveys the Property to Trustee, in trust, with the
power of sale, for the use and benefit of Beneficiary and subject to all
provisions of this Deed of Trust.
2.2 Security Interest to Beneficiary. As additional security for the
Secured Obligations, Grantor hereby grants to Beneficiary a security interest in
the Chattels and in the Intangible Personalty. To the extent any of the Chattels
or the Intangible Personalty may be or have been acquired with funds advanced by
Beneficiary under the Loan Documents, this security interest is a purchase money
security interest. The security interest granted in this section shall survive
any judicial or nonjudicial foreclosure of this Deed of Trust as against the
Property and, notwithstanding any purported cancellation of this Deed of Trust
in connection with any such foreclosure, shall continue in force as against the
Chattels and the Intangible Personalty until all of the Secured Obligations have
been satisfied and discharged in full. Any complete release of this Deed of
Trust shall, however, unless otherwise expressly provided in the release
document, constitute a release of
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<PAGE>
such security interest as well. Grantor agrees that a carbon, photographic or
other reproduction of this Deed of Trust, or of any financing statement signed
in connection with this Deed of Trust, may be filed or recorded to perfect the
security interests granted in this section. After an Event of Default has
occurred and continues beyond the applicable grace period thereafter, Grantor
appoints Beneficiary attorney-in-fact for Grantor, to sign on Grantor's behalf
any financing statement or amendment of financing statement that Beneficiary may
at any time consider necessary or appropriate after an Event of Default has
occurred and continues beyond the applicable grace period therefor.
ARTICLE 3
GRANTOR'S WARRANTIES AND REPRESENTATIONS
3.1 Warranty of Title. Grantor represents and warrants to Beneficiary
that Grantor has good, marketable and insurable title to the Property, subject
only to the lien of general taxes for the current year, payable the following
year, and those additional matters, if any, set forth in Exhibit B attached.
Grantor further represents and warrants to Beneficiary that Grantor has good
title to the Chattels and the Intangible Personalty, free of any liens,
encumbrances, security interests and other claims whatever, except insofar as
the Chattels may be encumbered by the lien of general taxes for the current
year, payable in the following year, or by any encumbrance listed in Exhibit B.
The warranties contained in this section shall survive foreclosure of this Deed
of Trust, and shall inure to the benefit of and be enforceable by any Person who
may acquire title to the Property, the Chattels or the Intangible Personalty
pursuant to any such foreclosure.
3.2 Organizational Status. Grantor represents and warrants to
Beneficiary that Grantor is a profit corporation properly organized, validly
existing and in good standing under the laws of the State of Colorado, with all
necessary power and authority to execute, deliver and perform Grantor's
obligations under the Loan Documents, and is qualified to transact business in,
and is in good standing in, the State of Colorado.
3.3 Due Authorization. If Grantor is other than a natural person, then
each individual who executes this document on behalf of Grantor represents and
warrants to Beneficiary that such execution has been authorized by all necessary
corporate, partnership or other action on the part of Grantor.
3.4 No Regulated Substances. Grantor represents and warrants to
Beneficiary that:
(a) No Regulated Substance is currently being generated, used,
treated, stored or disposed of on, in or under the Property that is in material
noncompliance with Environmental Laws;
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(b) Neither Grantor nor, to the best of Grantor's knowledge
after due investigation, any other Person has ever caused or permitted any
Regulated Substance to be generated, placed, held, located or disposed of on,
under or in the Property that is in material noncompliance with Environmental
Laws;
(c) Neither Grantor nor, to the best of Grantor's knowledge
after due investigation, any other Person has ever used the Property as a dump
site, permanent or temporary storage site or transfer station for any Regulated
Substance that is in material noncompliance with Environmental Laws;
(d) Grantor has received no notice of, and is not aware of,
any actual or alleged violation of any Environmental Law materially affecting
the Property or any activity conducted on the Property; that is in material
noncompliance with Environmental Laws; and
(e) No action or proceeding is pending or, to Grantor's
knowledge after due investigation, before or appealable from any court,
quasi-judicial body or administrative agency relating to the enforcement of any
Environmental Law affecting the Property or any activity conducted on the
Property.
Grantor will indemnify Beneficiary against and hold Beneficiary harmless from
any loss, claim, damage or expense, including reasonable attorneys' fees and
other out of pocket litigation expenses, incurred by Beneficiary in connection
with any claim that any of the matters represented and warranted by Grantor in
this section are inaccurate or untrue. The indemnity provided for in the
preceding sentence is a part of the Secured Obligations but will survive payment
or performance of the other Secured Obligations and the release, foreclosure or
other discharge of this Deed of Trust.
3.5 Non-Agricultural Property. Grantor represents and warrants to
Beneficiary that the Property is not used principally for agricultural or
farming purposes.
3.6 No Susceptibility to Forfeiture. Grantor represents and warrants to
Beneficiary that Grantor is not engaged, and has not at any time since Grantor's
acquisition of the Property been engaged, in a "pattern of racketeering
activity" within the meaning of 18 U.S.C. ss. 1961, as amended, or within the
meaning of any similar state or federal law, nor has Grantor committed any other
act or engaged in any other pattern of actions, the potential results of which
might include forfeiture of Grantor's interest in the Property.
3.7 Compliance with Laws. Grantor represents and warrants to
Beneficiary that the Property and Grantor's present and proposed use of the
Property are in compliance in all material respects with all applicable laws,
ordinances and other governmental requirements.
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3.8 No Conflict with Other Agreements. Grantor represents and warrants
to Beneficiary that Grantor's execution and delivery of the Loan Documents does
not conflict with, violate or constitute a default under any other agreement by
which Grantor or any part of the Property, the Chattels or the Intangible
Personalty are bound.
3.9 No Material Litigation. Grantor hereby represents and warrants
that, except as disclosed in the Credit Agreement, there is no pending, or to
the Grantor's knowledge, threatened action or proceeding affecting the Grantor
or any of its properties or business activities before any court, governmental
agency or arbitrator, in which there is a reasonable possibility of a Material
Adverse Effect or which purports to affect the legality, validity or
enforceability of this Deed of Trust.
3.10 Accurate Financial Information. Grantor hereby represents and
warrants that the unaudited pro forma consolidated balance sheets of the Grantor
(and others) as at December 31, 1996, and the related consolidated statements of
income and retained earnings of the Grantor (and others) for the fiscal year
then ended, as disclosed in the proxy statement mailed to the Grantor's
shareholders in connection with the Circuit Test Acquisition, and the unaudited
balance sheets of the Grantor (and others) as at June 30, 1997, and the related
consolidated statements of income and retained earnings of the Grantor (and
others) for the fiscal quarter then ended, copies of which have been furnished
to the Banks, fairly present the financial condition of the Grantor (and others)
as at such date and the results of the operations of the Grantor (and others)
for the period ended on such date, all in accordance with Regulation S-X
promulgated under the Securities Exchange Act of 1934, and since December 31,
1996, there has been no material adverse change in such condition or operations
except as disclosed in the Credit Agreement.
ARTICLE 4
GRANTOR'S AFFIRMATIVE COVENANTS
4.1 Payment of Notes. Pursuant to the terms of the Loan Documents,
Grantor will cause all principal, interest and other sums payable under the
Notes to be paid (on or before the expiration of any applicable grace period) as
set forth under the terms of the Loan Documents.
4.2 Performance of Other Obligations. Grantor will promptly and
strictly perform and comply with (or cause to be performed and complied with)
all other covenants, conditions and prohibitions required by Grantor by the
terms of the Loan Documents.
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4.3 Waiver of Homestead and Other Exemptions. Grantor hereby waives all
rights to any homestead or other exemption to which Grantor would otherwise be
entitled under any present or future constitutional, statutory or other
provision of Colorado or other state or federal law.
4.4 Payment of Taxes. Grantor hereby covenants to pay its Debt in
excess of $1,000,000 and other obligations in accordance with their terms and
pay and discharge promptly all Federal and material State and local taxes, and
all material governmental assessments and charges or levies imposed upon any
such Person or upon such Person's income or profits or in respect of its assets
or business, or in any event before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might give rise to a Lien upon such properties or
any part thereof; provided, however, that such payment and discharge shall not
be required so long as the validity or amount thereof shall be contested in good
faith by appropriate proceedings and the Grantor shall have set aside on its
books adequate reserves in accordance with GAAP with respect thereto.
4.5 Other Encumbrances. Grantor will promptly and strictly perform and
comply with all covenants, conditions and prohibitions required of Grantor in
connection with any other encumbrance affecting the Property, the Chattels or
the Intangible Personalty, or any part thereof, regardless of whether such other
encumbrance is superior or subordinate to the lien hereof.
4.6 Maintenance of Insurance.
(a) Grantor shall maintain the third-party insurance required
by the Credit Agreement, provided, however, that in no event shall such
insurance be for an amount less than the the replacement cost of the assets so
insured, including the Property.
(b) Renewal Policies. Not less than 30 days prior to the
expiration date of each insurance policy required pursuant to paragraph (a)
above, Grantor will deliver to Beneficiary an appropriate renewal policy (or a
certified copy thereof), together with evidence satisfactory to Beneficiary that
the applicable premium has been prepaid.
Without limiting the obligations of the Grantor under this
Section 4.6, in the event the Grantor fails to maintain the insurance required
by the foregoing provisions of this Section 4.6, then the Beneficiary may, but
shall have no obligation to, procure insurance covering the interests of the
Banks, in such amounts and against such risks as the Beneficiary shall deem
appropriate, and the Grantor will reimburse the Beneficiary in respect of any
premiums paid by the Beneficiary as provided in the Credit Agreement.
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(c) Any insurance proceeds received by Beneficiary with
respect to an insured casualty may, in accordance with the terms of the Credit
Agreement, either (i) be retained and applied by Beneficiary toward payment of
the Secured Obligations, or (ii) be paid over, in whole or in part to the
Grantor to pay for repairs or replacements necessitated by the casualty;
provided, that if all of the Secured Obligations have been performed or are
discharged by the application of less than all of such insurance proceeds, then
any remaining proceeds will be paid over to Grantor. The Beneficiary will have
no obligation to see to the proper application of any insurance proceeds paid
over to Grantor, nor will any such proceeds received by Beneficiary bear
interest or be subject to any other charge for the benefit of Grantor.
Beneficiary may, prior to the application of insurance proceeds, commingle them
with Beneficiary's own funds and otherwise act with regard to such proceeds as
Beneficiary may determine in Beneficiary's sole discretion.
(d) Successor's Rights. Any Person who acquires title to the
Property or the Chattels through foreclosure of this Deed of Trust will succeed
to all of Grantor's rights under all policies of insurance maintained pursuant
to this section.
4.7 Payment of Utilities. Grantor will pay before delinquency when due
all charges for water, sewer, electricity, natural gas and other utilities
serving the Property.
4.8 Maintenance and Repair of Property and Chattels. Grantor will at
all times maintain the Property and the Chattels in good condition and repair,
ordinary wear and tear excepted, will diligently prosecute the completion of any
building or other improvement that is at any time in the process of construction
on the Property, and will promptly repair, restore, replace or rebuild any
material part of the Property or the Chattels that may be affected by any
casualty or any public or private taking of or injury to the Property or the
Chattels. Beneficiary and any Person authorized by Beneficiary may enter and
inspect the Property at all reasonable times, and may inspect the Chattels,
wherever located, at all reasonable times.
4.9 Compliance with Laws. Grantor will comply in all material respects
with all statutes, ordinances and other governmental or quasi-governmental
requirements and private covenants relating to the ownership, construction, use
or operation of the Property, including but not limited to all material
Environmental Laws; provided, that so long as Grantor is not otherwise in
default hereunder, Grantor may, upon providing Beneficiary with security
reasonably satisfactory to Beneficiary, proceed diligently and in good faith to
contest the validity or applicability of any such statute, ordinance,
requirement or covenant. Whether or not Grantor elects to contest such validity
or applicability, Grantor will notify Beneficiary promptly of any apparent or
alleged violation of any material statute, ordinance, requirement or covenant,
and will provide Beneficiary promptly with copies of all notices, pleadings and
other communications relating to any such violation.
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4.10 Performance of Lease Obligations. Grantor will perform promptly
all of Grantor's obligations under or in connection with each present and future
lease of all or any part of the Property. If Grantor receives at any time any
written communication from the tenant under any such lease asserting a default
by Grantor under such lease, or purporting to terminate or cancel such lease,
Grantor will promptly forward a copy of such communication (and any subsequent
communications relating thereto) to Beneficiary.
4.11 Eminent Domain; Private Damage. If all or any part of any property
encumbered by this Deed of Trust is taken or damaged by eminent domain or any
other public or private action, Grantor will notify Beneficiary promptly of the
time and place of all meetings, hearings, trials and other proceedings relating
to such action. Beneficiary may participate in all negotiations and appear and
participate in all judicial or arbitration proceedings concerning any award or
payment that may be due as a result of such taking or damaging, and may, after
an event of default has occurred, in Beneficiary's sole discretion, compromise
or settle, in the names of both Beneficiary and Grantor, any claim for any such
award or payment. Any such award or payment is to be paid to Beneficiary and
will be applied first to reimburse Beneficiary for all costs and expenses,
including attorneys' fees, incurred by Beneficiary in connection with the
ascertainment and collection of such award or payment. The balance, if any, of
such award or payment may, in Beneficiary's sole discretion, either (a) be
retained by Beneficiary and applied toward the Secured Obligations, but only if
any Event of Default has occurred, or (b) be paid over, in whole or in part and
subject to such conditions as Beneficiary may impose, to Grantor for the purpose
of restoring, repairing or rebuilding any part of the encumbered property
affected by the taking or damaging. Beneficiary will have no duty to see to the
application of any part of any award or payment released to Grantor. Grantor's
duty to pay the Notes in accordance with the terms of the Loan Documents and to
perform the other Secured Obligations will not be suspended by the pendency or
discharged by the conclusion of any proceedings for the collection of any such
award or payment, and any reduction in the Secured Obligations resulting from
Beneficiary's application for any such award or payment will take effect only
when Beneficiary receives such award or payment. If this Deed of Trust has been
foreclosed prior to Beneficiary's receipt of such award or payment, Beneficiary
may nonetheless retain such award or payment to the extent required to reimburse
Beneficiary for all out of pocket costs and expenses, including reasonable
attorneys' fees, incurred in connection therewith, and to discharge any
deficiency remaining with respect to the Secured Obligations.
4.12 Mechanics' Liens. Grantor will keep the Property free and clear of
all liens and claims of liens by contractors, subcontractors, mechanics,
laborers, materialmen and other such Persons, and will cause any recorded
statement of any such lien to be released of record within 30 days after the
recording thereof. Notwithstanding the preceding sentence, however, Grantor will
not be deemed to be in default under this section if and so long as Grantor (a)
contests in good faith the validity or amount of any asserted lien and
diligently prosecutes or defends an action appropriate to
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obtain a binding determination of the disputed matter, and (b) provides
Beneficiary with such security as Beneficiary may reasonably require to protect
Beneficiary against all out-of-pocket loss, damage and expense, including
reasonable attorneys' fees, that Beneficiary might incur if the asserted lien is
determined to be valid. Grantor will indemnify Beneficiary against and hold
Beneficiary harmless from any out-of-pocket loss, damage or expense, including
reasonable attorneys' fees and other out-of-pocket litigation expenses, incurred
by Beneficiary as a result of any default by Grantor under this section, and
Grantor's obligations under this sentence shall survive foreclosure of this Deed
of Trust.
4.13 Environmental Claims. Grantor will indemnify Beneficiary against
and hold Beneficiary harmless from any out-of-pocket loss, damage or expense,
including reasonable attorneys' fees and other expenses, incurred by Beneficiary
in connection with the investigation, defense or settlement of any claim,
whether or not valid and whether asserted by a governmental agency or a private
party, that (a) any part of the Property is contaminated or otherwise affected
by the presence of any Regulated Substance, or (b) the Property or any activity
conducted at any time on the Property is wholly or partly responsible for the
presence elsewhere of any Regulated Substance, or in connection with any cleanup
or other remediation actions that may be imposed on or agreed to by Beneficiary
in connection with any such claim. The indemnity provided for in this section is
a part of the Secured Obligations but will survive payment or performance of the
other Secured Obligations and the release, foreclosure or other discharge of
this Deed of Trust.
4.14 Defense of Actions. Grantor will defend, at Grantor's expense, any
action, proceeding or claim that affects any property encumbered hereby or any
interest of Beneficiary in such property or in the Secured Obligations, and will
indemnify and hold Beneficiary harmless from all out-of-pocket loss, damage,
cost or expense, including reasonable attorneys' fees, that Beneficiary may
incur in connection therewith.
4.15 Expenses of Enforcement. Grantor will pay on demand all
out-of-pocket costs and expenses, including but not limited to reasonable
attorneys' fees, appraisal costs and expenses for title insurance and title
searches and certificates, that Beneficiary may incur in connection with any
effort or action (whether or not litigation or foreclosure is involved) to
enforce or defend Beneficiary's rights and remedies under any of the Loan
Documents, or to secure title to or possession of, or to realize on, any
security for the Secured Obligations.
4.16 Book and Records; Financial Reports. Grantor shall maintain all
financial records in accordance with GAAP and permit, after two weeks notice
unless an Event of Default has occurred, any Beneficiary employees or other
representatives approved by the Beneficiary (which approval shall not be
unreasonably withheld) that is designated by the Beneficiary or the Required
Banks to visit and inspect the properties of the Grantor, and to inspect
Grantor's financial and
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business records and make extracts there from and copies thereof, all at
reasonable times and in a manner so as not to unreasonably disrupt the
operations of the Grantor and as often as reasonably requested, and permit any
such employees or representatives to discuss the affairs, finances and condition
of the Grantor with the officers and other representatives thereof, including
the Grantor's independent accountants if a representative of the Grantor is
present and if the Beneficiary has notified the Grantor not less than 24 hours
prior to such meeting of the issues that will be discussed. Grantor shall
deliver those financial statements required to be delivered by it under the
Credit Agreement.
4.17 Priority of Leases. To the extent Grantor has the right, under the
terms of any existing lease of all or any part of the Property, to make such
lease subordinate to the lien of this Deed of Trust, Grantor will, at
Beneficiary's request and Grantor's expense, take such action as may be required
to effect such subordination. Conversely, Grantor will, at Beneficiary's request
and Grantor's expense, take such action as may be necessary to subordinate the
lien hereof to any future lease of all or any part of the Property designated by
Beneficiary.
4.18 Further Assurances; Estoppel Certificates. Grantor will execute
and deliver to Beneficiary on demand, and pay the out-of-pocket costs of
preparation and recording thereof, any further documents that Beneficiary may
reasonably request to confirm or perfect the liens and security interests
created or intended to be created hereby, or to confirm or perfect any evidence
of the Secured Obligations. Grantor will also, within ten days after any request
by Beneficiary, deliver to Beneficiary a signed and acknowledged statement
certifying to Beneficiary, or to any proposed transferee of the Secured
Obligations, (a) the balance of principal, interest and other sums then
outstanding under the Notes, and (b) whether Grantor claims to have any offsets
or defenses with respect to the Secured Obligations and, if so, the nature of
such offsets or defenses. Grantor's failure to provide such a statement within
such ten-day period will result in Grantor being conclusively bound by any
representation that Beneficiary may make as to those matters.
ARTICLE 5
GRANTOR'S NEGATIVE COVENANTS
5.1 Waste and Alterations. Grantor will not commit or permit any waste
with respect to the Property, nor will Grantor cause or permit any material part
of the Property, including but not limited to any building, structure, parking
lot, driveway, landscape scheme, timber, or other ground improvement, to be
removed, demolished or materially altered without the prior written consent of
Beneficiary, other than such items which are either (i) obsolete and no longer
necessary for the conduct of Grantor's business, or (ii) promptly replaced with
a similar item of equal or greater value.
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5.2 Zoning and Private Covenants. Grantor will not initiate, join in or
consent to any change in any zoning ordinance or classification, any change in
the "zone lot" or "zone lots" (or similar zoning unit or units) presently
comprising the Property, any transfer of development rights, any change in any
private restrictive covenant, or any change in any other public or private
restriction limiting or defining the uses that may be made of the Property or
any part thereof, without the express written consent of Beneficiary. If under
applicable zoning provisions the use of all or any part of the Property is or
becomes a nonconforming use, Grantor will not cause or permit such use to be
discontinued or abandoned without the express written consent of Beneficiary.
5.3 Additional Tax Burden. Except with the prior written consent of
Beneficiary, Grantor will not initiate, join in or consent to any action or
proposal to include all or any part of the Property in any special improvement
district or other special district or taxing authority that does not include the
Property on the date of this Deed of Trust.
5.4 Interference with Leases. Grantor will neither do nor neglect to do
anything that may cause or permit the termination of any lease of all or any
part of the Property, or cause or permit the withholding or abatement of any
rent payable under any such lease. Except with the prior written consent of
Beneficiary, Grantor will not (a) collect rent from all or any part of the
Property for more than one month in advance, (b) modify any lease of all or any
part of the Property, (c) assign the rents from the Property or any part
thereof, or (d) consent to the cancellation or surrender of all or any part of
any such lease, except that Grantor may in good faith terminate any such lease
for nonpayment of rent or other material breach by the tenant.
5.5 Transfer of Property. Grantor will not convey, lease or otherwise
transfer, either voluntarily or involuntarily, the Property or any part thereof
or interest therein, without the prior written consent of Beneficiary. If
Beneficiary consents to any transfer otherwise prohibited by this section,
Beneficiary may condition such consent on changes in the terms for payment of
the Secured Obligations, including but not limited to an increase in the
interest rate borne by the Notes, a reduction in the term of the Notes, or both.
5.6 Further Encumbrance of Property. Except for Permitted Liens,
Grantor will neither create nor permit any junior lien or encumbrance against
the Property, other than a mortgage or deed of trust in which the mortgagee or
beneficiary:
i. expressly acknowledges the priority of this Deed of
Trust, as to all amounts then or at any time thereafter advanced hereunder or
secured hereby, over any lien or security interest created by such junior
mortgage or deed of trust, and
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ii expressly agrees that no foreclosure or other enforcement
proceeding under such mortgage or deed of trust will be effective to terminate
any lease of all or any part of the Property, regardless of the relative
priorities of such junior mortgage or deed of trust and such lease.
Any Person who acquires or records any lien or encumbrance against the Property
after the recording of this Deed of Trust will be deemed to have agreed to, and
will be bound by, the foregoing requirements, whether or not the document or
documents relating to such lien or encumbrance reflect that agreement.
5.7 Use of Regulated Substances. Grantor will not cause or permit all
or any part of the Property to be used to manufacture, generate, store,
transfer, treat, recycle or dispose of any Regulated Substance, except in
compliance with any Environmental Law, nor will Grantor cause or permit, as a
result of any intentional or unintentional act on the part of Grantor or any
tenant, subtenant or other user or occupant of the Property, any release of any
Regulated Substance onto the Property or from the Property onto other property.
Grantor will indemnify Beneficiary against, and hold Beneficiary harmless from,
any out-of-pocket loss, claim, damage or expense, including reasonable
attorneys' fees and other litigation expenses, incurred by Beneficiary in
connection with any actual or alleged violation of the preceding sentence. Such
indemnity is a part of the Secured Obligations but will survive payment or
performance of the other Secured Obligations and the release, foreclosure or
other discharge of this Deed of Trust.
5.8 Change of Name. Grantor shall not, except upon not less than 30
days prior written notice to the Beneficiary, change the address at which the
Grantor maintains its chief executive offices and principal place of business;
nor conduct its business activities under any names other than those set forth
in the Credit Agreement unless the Grantor notifies the Beneficiary of any such
new name not less than 30 days prior to beginning use of such new name, except
that no more than seven days notice shall be required in the case of a new name
resulting from an acquisition of a business or assets by the Grantor..
5.9 Improper Use of Property. Grantor will not use the Property for any
purpose or in any manner that violates any applicable law, ordinance or other
governmental requirement, the requirements or conditions of any insurance
policy, or any private covenant.
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ARTICLE 6
EVENTS OF DEFAULT
Each of the following events will constitute a default under this Deed
of Trust and under each of the other Loan Documents:
6.1 Failure to Pay Notes. Pursuant to the terms of the Loan
Documents, the occurrence of any failure to make any payment when due under the
terms of the respective Notes pursuant to the terms of the Loan Documents.
6.2 Violation of Other Covenants. The occurrence of any failure to
perform or observe any other covenant, condition or prohibition contained in any
of the Loan Documents which failure is not cured within fifteen (15) days after
Grantor's receipt of written notice thereof from Grantor;
6.3 Misrepresentation or Breach of Warranty. Beneficiary's
determination that any statement or warranty contained in any of the Loan
Documents is untrue or misleading in any material respect as of the date made;
6.4 Acts Threatening Forfeiture. Beneficiary's reasonable determination
that Grantor has committed any act or engaged in any pattern of actions that may
lead to a claim for forfeiture of Grantor's interest in the Property, it being
agreed that the issuance of any criminal complaint or indictment charging
Grantor with any such act or pattern of actions would be a sufficient basis for
such a determination by Beneficiary if one of the penalties for such complaint
or indictment is forfeiture of property;
6.5 Assertion of Priority. The assertion (except by the owner of an
encumbrance expressly excepted from Grantor's warranty of title herein) of any
claim of priority over this Deed of Trust, by title, lien or otherwise, unless
Grantor within 30 days after such assertion either causes the assertion to be
withdrawn or provides Beneficiary with such security as Beneficiary may require
to protect Beneficiary against all loss, damage or expense, including attorneys,
fees, that Beneficiary may incur in the event such assertion is upheld; or
6.6 Event of Default Under Credit Agreement. An "Event of
Default" (as such term is defined in the Credit Agreement) has occurred and is
continuing.
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ARTICLE 7
BENEFICIARY'S REMEDIES
Immediately upon or at any time after the occurrence of any event of
default hereunder, Beneficiary may exercise any remedy available at law or in
equity, including but not limited to those listed below and those listed in the
other Loan Documents, in such sequence or combination as Beneficiary may
determine in Beneficiary's sole discretion:
7.1 Performance of Defaulted Obligations. Beneficiary may make any
payment or perform any other obligation under the Loan Documents that Grantor
has failed to make or perform, and Grantor hereby irrevocably appoints
Beneficiary as the true and lawful attorney-in-fact for Grantor to make any such
payment and perform any such obligation in the name of Grantor. All out of
pocket payments made and expenses (including reasonable attorneys' fees)
incurred by Beneficiary in this connection, together with interest thereon at
the Default Rate from the date paid or incurred until repaid, will be part of
the Secured Obligations and will be immediately due and payable by Grantor to
Beneficiary. In lieu of advancing Beneficiary's own funds for such purposes,
Beneficiary may use any funds of Grantor that may be in Beneficiary's
possession, including but not limited to insurance or condemnation proceeds and
amounts deposited for taxes, insurance premiums or other purposes.
7.2 Specific Performance and Injunctive Relief. Notwithstanding the
availability of legal remedies, Beneficiary will be entitled to obtain specific
performance, mandatory or prohibitory injunctive relief or other equitable
relief requiring Grantor to cure or refrain from repeating any default.
7.3 Acceleration of Secured Obligations. Beneficiary may, upon
notice to Grantor, declare all of the Secured Obligations immediately due and
payable in full.
7.4 Suit for Monetary Relief. With or without accelerating the maturity
of the Secured Obligations, Beneficiary may sue from time to time for any
payment due under any of the Loan Documents, or for money damages resulting from
Grantor's default under any of the Loan Documents.
7.5 Possession of Property. To the extent permitted by applicable law,
Beneficiary may enter and take possession of the Property without seeking or
obtaining the appointment of a receiver, may employ a managing agent for the
Property and may lease or rent all or any part of the Property, either in
Beneficiary's name or in the name of Grantor, and may collect the rents, issues
and profits of the Property. Any revenues collected by Beneficiary under this
section will be applied first toward payment of all out of pocket expenses
(including reasonable attorneys' fees) incurred by
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Beneficiary, together with interest thereon at the Default Rate from the date
incurred until repaid, and the balance, if any, will be applied against the
Secured Obligations.
7.6 Enforcement of Security Interests. Beneficiary may exercise all
rights of a secured party under the Colorado Uniform Commercial Code with
respect to the Chattels and the Intangible Personalty, including but not limited
to taking possession of, holding and selling the Chattels and enforcing or
otherwise realizing on any accounts and general intangibles. Any requirement for
reasonable notice of the time and place of any public sale, or of the time after
which any private sale or other disposition is to be made, will be satisfied by
Beneficiary's giving of such notice to Grantor at least ten days prior to the
time of any public sale or the time after which any private sale or other
intended disposition is to be made. To the extent permitted by applicable law,
Beneficiary may, at Beneficiary's option, cause Trustee to sell any or all of
the Chattels, the Intangible Personalty or other personal property as part of
the sale of the Property, without making any distinction between real and
personal property.
7.7 Foreclosure Against Property. Beneficiary may foreclose this Deed
of Trust, insofar as it encumbers the Property, either by judicial action or
through Trustee. Foreclosure through Trustee will be initiated by Beneficiary's
filing of its notice of election and demand for sale with Trustee. Upon the
filing of such notice of election and demand for sale, Trustee shall promptly
comply with all notice and other requirements of the laws of Colorado then in
force with respect to such sales, and shall give four weeks' public notice of
the time and place of such sale by advertisement weekly in some newspaper of
general circulation then published in the County or City and County in which the
Property is located. Any sale conducted by Trustee pursuant to this section
shall be held at the front door of the county courthouse for such County or City
and County, or on the Property, or at such other place as similar sales are then
customarily held in such County or City and County, provided that the actual
place of sale shall be specified in the notice of sale. The proceeds of any sale
under this section shall be applied first to the fees and expenses of the
officer conducting the sale, and then to the reduction or discharge of the
Secured Obligations in such order as Beneficiary may elect; any surplus
remaining shall be paid over to Grantor or to such other Person or Persons as
may be lawfully entitled to such surplus. At the conclusion of any foreclosure
sale, the officer conducting the sale shall execute and deliver to the purchaser
at the sale a certificate of purchase, which shall describe the property sold to
such purchaser and shall state that upon the expiration of the applicable
periods for redemption, the holder of such certificate will be entitled to a
deed to the property described in the certificate. After the expiration of all
applicable periods of redemption, unless the property sold has been redeemed by
Grantor, the officer who conducted such sale shall, upon request, execute and
deliver an appropriate deed to the holder of the certificate of purchase or the
last certificate of redemption, as the case may be, and such deed shall operate
to divest Grantor and all Persons claiming under Grantor of all right, title and
interest, whether legal or equitable, in the property described in the deed.
Nothing in this section dealing with foreclosure
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procedures or specifying particular actions to be taken by Beneficiary or by
Trustee or any similar officer shall be deemed to contradict or add to the
requirements and procedures now or hereafter specified by Colorado law, and any
such inconsistency shall be resolved in favor of Colorado law applicable at the
time of foreclosure.
7.8 Appointment of Receiver. To the extent permitted by applicable law,
Beneficiary shall be entitled, as a matter of absolute right and without regard
to the value of any security for the Secured Obligations or the solvency of any
Person liable therefor, to the appointment of a receiver for the Property on ex
parte application to any court of competent jurisdiction. Grantor waives any
right to any hearing or notice of hearing prior to the appointment of a
receiver. Such receiver and his agents shall be empowered (a) to take possession
of the Property and any businesses conducted by Grantor or any other Person
thereon and any business assets used in connection therewith, (b) to exclude
Grantor and Grantor's agents, servants and employees from the Property, or, at
the option of the receiver, in lieu of such exclusion, to collect a fair market
rental from any such Persons occupying any part of the Property, (c) to collect
the rents, issues, profits and income therefrom, (d) to complete any
construction that may be in progress, (e) to do such maintenance and make such
repairs and alterations as the receiver deems necessary, (f) to use all stores
of materials, supplies and maintenance equipment on the Property and replace
such items at the expense of the receivership estate, (g) to pay all taxes and
assessments against the Property and the Chattels, all premiums for insurance
thereon, all utility and other operating expenses, and all sums due under any
prior or subsequent encumbrance, (h) to borrow from Beneficiary such funds as
may reasonably be necessary to the effective exercise of the receiver's powers,
on such terms as may be agreed upon by the receiver and Beneficiary, and (i)
generally to do anything that Grantor could legally do if Grantor were in
possession of the Property. All out of pocket expenses incurred by the receiver
or his agents, including obligations to repay funds borrowed by the receiver,
shall constitute a part of the Secured Obligations. Any revenues collected by
the receiver shall be applied first to the expenses of the receivership,
including reasonable attorneys' fees incurred by the receiver and by
Beneficiary, together with interest thereon at the Default Rate from the date
incurred until repaid, and the balance shall be applied toward the Secured
Obligations or in such other manner as the court may direct. Unless sooner
terminated with the express consent of Beneficiary, any such receivership will
continue until the Secured Obligations have been discharged in full, or until
title to the Property has passed after foreclosure sale and all applicable
periods of redemption have expired.
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ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 Time of the Essence. Time is of the essence with respect to
all provisions of the Loan Documents.
8.2 Joint and Several Obligations. If Grantor is more than one
Person, then all Persons comprising Grantor are jointly and severally liable for
all of the Secured Obligations.
8.3 Rights and Remedies Cumulative. Beneficiary's rights and remedies
under each of the Loan Documents are cumulative of the rights and remedies
available to Beneficiary under each of the other Loan Documents and those
otherwise available to Beneficiary at law or in equity. No act of Beneficiary
shall be construed as an election to proceed under any particular provision of
any Loan Document to the exclusion of any other provision in the same or any
other Loan Document, or as an election of remedies to the exclusion of any other
remedy that may then or thereafter be available to Beneficiary.
8.4 No Implied Waivers. Beneficiary shall not be deemed to have waived
any provision of any Loan Document unless such waiver is in writing and is
signed by Beneficiary. Without limiting the generality of the preceding
sentence, neither Beneficiary's acceptance of any payment with knowledge of a
default by Grantor, nor any failure by Beneficiary to exercise any remedy
following a default by Grantor, shall be deemed a waiver of such default, and no
waiver by Beneficiary of any particular default on the part of Grantor shall be
deemed a waiver of any other default or of any similar default in the future.
8.5 Dealings with Successor Owners. If the Property or any interest in
the Property is transferred to any Person other than Grantor, whether
voluntarily or involuntarily and whether or not Beneficiary has consented to
such transfer, then Beneficiary may deal with such successor owner in all
matters relating to the Secured Obligations, and no such dealings, including but
not limited to any change in the terms of the Secured Obligations, will be
deemed to discharge or impair the obligations of Grantor to Beneficiary under
the Loan Documents.
8.6 No Third Party Rights. No Person shall be a third party beneficiary
of any provision of any of the Loan Documents. All provisions of the Loan
Documents favoring Beneficiary are intended solely for the benefit of
Beneficiary, and no third party shall be entitled to assume or expect that
Beneficiary will not waive or consent to modification of any such provision in
Beneficiary's sole discretion.
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<PAGE>
8.7 Preservation of Liability and Priority. Without affecting the
liability of Grantor or of any other Person (except a Person expressly released
in writing) for payment and performance of all of the Secured Obligations, and
without affecting the rights of Beneficiary with respect to any security not
expressly released in writing, and without impairing in any way the priority of
this Deed of Trust over the interests of any Person acquired or first evidenced
by recording subsequent to the recording hereof, Beneficiary may, either before
or after the maturity of the Note, and without notice or consent: (a) release
any Person liable for payment or performance of all or any part of the Secured
Obligations; (b) make any agreement altering the terms of payment or performance
of all or any of the Secured Obligations; (c) exercise or refrain from
exercising, or waive, any right or remedy that Beneficiary may have under any of
the Loan Documents; (d) accept additional security of any kind for any of the
Secured Obligations; or (e) release or otherwise deal with any real or personal
property securing the Secured Obligations. Any Person acquiring or recording
evidence of any interest of any nature in the Property, the Chattels or the
Intangible Personalty shall be deemed, by acquiring such interest or recording
any evidence thereof, to have agreed and consented to any or all such actions by
Beneficiary.
8.8 Subrogation of Beneficiary. Beneficiary shall be subrogated to the
lien of any previous encumbrance discharged with funds advanced by Beneficiary
under the Loan Documents, regardless of whether such previous encumbrance has
been released of record.
8.9 Notices. Any notice required or permitted to be given by Grantor or
Beneficiary under any of the Loan Documents must be in writing and will be
deemed given on personal delivery or on the third business day after the mailing
thereof, by registered or certified United States mail, postage prepaid, to the
appropriate party at its address shown on the first page of this Deed of Trust.
Either party may change such party's address for notices by giving notice to the
other party in accordance with this section, but no such change of address will
be effective as against any Person without actual knowledge of the change.
8.10 Fixture Filing. This Deed of Trust is intended to serve as a
financing statement under the Colorado Uniform Commercial Code with respect to
any fixtures that may at any time be part of the Property or the Chattels, and
the recording of this Deed of Trust is intended to constitute a "fixture filing"
for purposes of such Uniform Commercial Code.
8.11 Defeasance. Upon payment and performance in full of all of the
Secured Obligations, Beneficiary will execute and deliver to Grantor such
documents as may be required to release this Deed of Trust of record.
8.12 Reconveyance by Trustee. Upon written request of Beneficiary
stating that all sums secured hereby have been paid, and upon surrender of the
Notes to Trustee for cancellation and
-20-
<PAGE>
retention and upon payment by Grantor of Trustee's fees, Trustee shall reconvey
to Grantor, or the person or persons legally entitled thereto, without warranty,
any portion of the Property then held hereunder. The recitals in such
reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The grantee in any reconveyance may be described as "the
person or persons legally entitled thereto."
8.13 Acceptance by Trustee. Trustee accepts this trust when this Deed
of Trust, duly executed and acknowledged, is made a public record as provided by
law.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-21-
<PAGE>
8.14 Severability. Wherever possible, each provision of the Loan
Documents is to be interpreted so as to be effective and valid under applicable
law. If any provision of any Loan Document is, for any reason and to any extent,
invalid or unenforceable, then neither the remainder of the Loan Document in
which such provision appears, nor any other Loan Document, nor the application
of the provision to other Persons or in other circumstances, shall be affected
by such invalidity or unenforceability.
Signed and delivered as of the date first mentioned above.
EFTC CORPORATION
a Colorado corporation
By: /s/
Name: Stuart Fuhlendorf
Vice President and
Chief Financial Officer
STATE OF COLORADO )
CITY AND) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 30th day
of September 1997, by Stuart W. Fuhlendorf as Vice President and Chief Financial
Officer, respectively, of EFTC CORPORATION, a Colorado corporation.
My commission expires: 11/17/97
Witness my hand and official seal.
/s/
Nick Nimmo
Notary Public
-22-
<PAGE>
EXHIBIT A
to
DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT
(Legal Description)
Weld County, Colorado
LOT C,
EFTC SUBDIVISION,
CITY OF GREELEY,
WELD COUNTY, COLORADO
A-1
<PAGE>
EXHIBIT B
to
DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT
(Exceptions to Warranty of Title)
Weld County, Colorado
1. Reservations by the Union Pacific Railroad Company to itself and its
assigns in Deed recorded JULY 1, 1895 in Book 121 at Page 531, of all
coal that may be underneath the surface of the land described therein
and the exclusive right to prospect and mine for the same; also such
right-of-way and other grounds as may be necessary for the proper
working of any coal mines that may develop upon said premises, and for
the transportation of the coal from the same; and any interests
therein, assignments or conveyances thereof.
2. Right-of-way for PIPE LINE purposes as granted to JEROME IGO AND WALKER
J. MOSIER by instrument recorded DECEMBER 17, 1925 in BOOK 785 at PAGE 178, said
right-of-way being about 2900 feet in length leading from a point on the North
Boomerang Lateral in the SE 1/4 of Section 5, Township 5 North, Range 66 West of
the 6th P.M., which is about 800 feet East of the West line of said SE 1/4,
thence leading Northeasterly about 1650 feet, thence Northerly about 1250 feet
to its terminus at a point which is in the NE 1/4 of said Section about 450 feet
North of the East and West center line of said Section, and which is about 250
feet East of the dwelling on said NE 1/4.
3. Right-of-way for DITCH purposes between HENRY ROTHE AND KATIE ROTHE,
GEORGE MOSIER AND ADDIE M. MOSIER, MARY M. IGO, JOSEPH CARL GRATZL AND
EILEEN GRATZL by instrument recorded MAY 20, 1953 in BOOK 1357 at PAGE
128, said right-of-way not being specifically defined.
4. Oil and Gas Lease from JOHN R.P. WHEELER, DAVID G. CLARKSON, WILLIAM C.
BENSLER, WILLIAM R. FARR, ROBERT G. TOINTON, AND PATRICK T. ROCHE
DOING BUSINESS AS GREELEY TECH CENTER, A JOINT VENTURE to
THOMAS H. MORGAN, recorded JULY 1, 1982 in BOOK 971 as RECEPTION
NO. 1896206, and any interests therein, assignments, or conveyances
thereof. Said Lease extended by AFFIDAVIT OF PRODUCTION recorded JUNE
28, 1990 in BOOK 1268 as RECEPTION NO. 2218384.
5. Covenants and restrictions, which do not contain reversionary clauses,
recorded JULY 7, 1989 in BOOK 1237 as RECEPTION NO. 2184750.
6. Easements for drainage and utility purposes over subject property as
shown on the street and easement dedication plat for Tech Center at
Boomerang Run recorded SEPTEMBER 13, 1990 in BOOK 1276 as RECEPTION
NO. 2227155.
A-2
<PAGE>
7. Easement for DRAINAGE AND UTILITY purposes as reserved by JOHN R. P.
WHEELER, INDIVIDUALLY AND AS JOINT VENTURER OF GREELEY TECH CENTER, A JOINT
VENTURE in instrument recorded JULY 16, 1987 in BOOK 1163 as RECEPTION NO.
2107311, said easement being a 15.00 foot drainage and utility easement
adjacent and parallel to the West line of the property described in the
above mentioned deed, and a 10.00 foot drainage and utility easement
parallel and adjacent to the North line and the East line of said property.
An additional 10.00 foot drainage and utility easement North of and
adjacent to an existing 15.00 foot drainage and utility easement adjacent
to the North right-of-way line of 4th Street, is herein granted along the
South side of said property and continuing East to an intersection with the
westerly right- of-way line of 71st Avenue as shown on the street and
easement dedication plat for the Greeley Tech Center.
8. Easement for DRAINAGE AND UTILITY purposes as reserved by WILLIAM R. FARR,
INDIVIDUALLY AND AS A JOINT VENTURER OF GREELEY TECH CENTER, A JOINT
VENTURE in instrument recorded JULY 16, 1987 in BOOK 1163, as RECEPTION NO.
2107312 said easement being a 15.00 foot drainage and utility easement
adjacent and parallel to the West line of the property described in the
above mentioned deed, and a 10.00 foot drainage and utility easement
parallel and adjacent to the North line and the East line of said property.
An additional 10.00 foot drainage and utility easement North of and
adjacent to an existing 15.00 foot drainage and utility easement adjacent
to the North right-of-way line of 4th Street, is herein granted along the
South side of said property and continuing East to an intersection with the
westerly right- of-way line of 71st Avenue as shown on the street and
easement dedication plat for the Greeley Tech Center.
9. Easement for DRAINAGE AND UTILITY purposes as reserved by ROBERT G.
TOINTON, INDIVIDUALLY AND AS JOINT VENTURER OF GREELEY TECH CENTER in
instrument recorded JULY 16, 1987 in BOOK 1163 as RECEPTION NO.
2107313, said easement being a 15.00 foot drainage and utility easement
adjacent
and parallel to the West line of the property described in the above
mentioned deed, and a 10.00 foot drainage and utility easement parallel
and adjacent to the North line and the East line of said property. An
additional 10.00 foot drainage and utility easement North of and
adjacent to an existing 15.00 foot drainage and utility easement
adjacent to the North right-of-way line of 4th Street, is herein
granted along the South side of said property and continuing East to an
intersection with the westerly right-of-way line of 71st Avenue as
shown on the street and easement dedication plat for the Greeley Tech
Center.
10. Site data and notes as contained on the plat of EFTC PUD recorded May
4, 1994 in Book 1440 as Reception No. 2386700.
11. Easements as shown on the plat of subdivision.
A-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EFTC CORPORATION
$15,000,000
Floating Rate Subordinated Notes due 2002
---------------------
NOTE AGREEMENT
---------------------
Dated as of September 5, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
1. THE NOTES..............................................................................................-1-
1a. Authorization of Issue of Notes...............................................................-1-
1b. Interest on the Notes.........................................................................-1-
2. SALE AND PURCHASE OF NOTES.............................................................................-3-
3. CLOSING................................................................................................-3-
3a. Closing, Closing Date.........................................................................-3-
4. CONDITIONS.............................................................................................-3-
4a. Opinions of Company Counsel...................................................................-3-
4b. Representations and Warranties; Etc...........................................................-3-
4c. Proceedings...................................................................................-3-
5. PREPAYMENT OF THE NOTES................................................................................-4-
5a. Optional and Mandatory Prepayments............................................................-4-
5b. Notice of Prepayment..........................................................................-4-
5c. Surrender of Notes; Notations Thereon.........................................................-4-
5d. Prohibition on Purchase of the Notes..........................................................-5-
6. AFFIRMATIVE COVENANTS..................................................................................-5-
6a. Financial Statements..........................................................................-5-
6b. Inspection of Property........................................................................-6-
6c. Financial Records.............................................................................-6-
6d. Corporate Existence; Etc......................................................................-6-
6e. Payment of Taxes and Claims...................................................................-7-
6f. Warrant.......................................................................................-7-
7. MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS......................................................-7-
8. SUBORDINATION..........................................................................................-8-
8a. Agreement That Notes Be Subordinate...........................................................-8-
8b. Limitation During Certain Defaults on Senior Indebtedness.....................................-8-
8c. Priority of Senior Indebtedness...............................................................-9-
8d. Payment to Holders of Senior Indebtedness of Certain Amounts Received by
Holders of Notes..............................................................................-9-
8e. Notice of Specified Events; Reliance on Certificate of Liquidating Agent
............................................................................................-10-
8f. Subrogation..................................................................................-10-
8g. Obligation to Pay Not Impaired...............................................................-11-
8h. Limitation During Event of Default Hereunder.................................................-11-
8i. Reliance by Senior Indebtedness on Subordination Provisions..................................-11-
8j. Certain Payments and Credits Permitted.......................................................-11-
8k. Subordination Not to Be Prejudiced by Certain Acts...........................................-11-
8l. Limitation on Securing Notes.................................................................-12-
<PAGE>
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................-12-
9a. Organization and Qualification...............................................................-12-
9b. Actions Pending; Compliance with Law.........................................................-12-
9c. Use of Proceeds..............................................................................-13-
9d. Insurance....................................................................................-13-
9e. Governmental Consent, Etc....................................................................-13-
9f. Holding Company Act and Investment Company Act Status........................................-13-
9g. Taxes........................................................................................-13-
9h. No Default; Conflicting Agreement or Charter Provisions......................................-13-
9i. Financial Statements.........................................................................-14-
9j. Offering of Securities.......................................................................-14-
10. REPRESENTATIONS AND COVENANT OF THE PURCHASER.........................................................-15-
10a. Acquisition for Investment...................................................................-15-
10b. ERISA........................................................................................-15-
10c. Restriction on Sale, Other Disposition.......................................................-15-
11. DEFAULT...............................................................................................-15-
11a. Events of Default; Acceleration..............................................................-15-
11b. Other Remedies...............................................................................-17-
12. DEFINITIONS...........................................................................................-18-
13. Miscellaneous.........................................................................................-20-
13a. Home Office Payment..........................................................................-20-
13b. Expenses.....................................................................................-20-
13c. Consent to Amendments........................................................................-21-
13d. Registration, Transfer and Exchange of Notes.................................................-22-
13e. Lost, Etc., Notes............................................................................-22-
13f. Survival of Representations and Warranties; Entire Agreement.................................-22-
13g. Disclosure to Other Persons..................................................................-22-
13h. Successors and Assigns.......................................................................-23-
13i. Notices......................................................................................-23-
13j. Descriptive Headings.........................................................................-23-
13k. Governing Law................................................................................-23-
13l. Counterparts.................................................................................-23-
13m. Satisfaction Requirement.....................................................................-23-
13n. Severability.................................................................................-24-
</TABLE>
Exhibit A - Form of Subordinated Note Exhibit B - Form of Opinion of Counsel to
the Company Exhibit C - Form of Warrant
<PAGE>
EFTC Corporation
9351 Grant Street, Suite 600
Denver, CO 80229
As of September 5, 1997
To the Purchaser Accepting
This Agreement on the Signature
Page Hereof
Ladies and Gentlemen:
EFTC CORPORATION (the "Company"), a Colorado corporation, hereby agrees
with you as follows:
1. THE NOTES.
1a. Authorization of Issue of Notes. The Company has duly authorized an
issue of $15,000,000 aggregate principal amount of floating rate subordinated
notes (the "Notes"), in the forms of Exhibit A. Each such Note shall bear
interest and be payable as provided herein and therein. As used herein, the term
"Notes" shall include all notes originally issued pursuant to this Agreement and
all notes delivered in substitution or exchange for any of said notes pursuant
to this Agreement and, where applicable, shall include the singular number as
well as the plural. The term "Note" means one of the Notes.
1b. Interest on the Notes. (i) Each Note shall bear interest at the
Applicable Interest Rate (LIBOR, as determined for each Interest Period, plus
2.0% per annum), and on any overdue payment as specified in Exhibit A. Not later
than 5:00 p.m. Denver, Colorado local time on the second Business Day next
following the Closing Date, you will notify the Company of LIBOR as determined
pursuant to (ii)(A), below, and the Company will determine the Applicable
Interest Rate for the Notes for the initial Interest Period commencing on the
Closing Date and will give notice thereof by facsimile transmission to you.
Promptly after the determination of LIBOR for each subsequent Interest Period,
the Company will give notice to each holder of a Note setting forth LIBOR as so
determined and the Applicable Interest Rate for the Notes for such Interest
Period.
(ii) For each Interest Period, the Company will calculate LIBOR for
such Interest Period as provided herein and each such calculation shall be
binding upon the holders of the Notes absent manifest error. As used herein,
"LIBOR" shall mean the interest rate determined in accordance with the following
provisions:
(A) Principal Method of Determination. If, for any Interest
Period, LIBOR is determined under the Montera Loan Documents, LIBOR for
the purposes hereof shall be equal to the "Index" rate determined for
the same Interest Period in accordance with the Montera Loan Documents.
As used herein, the term "Montera Loan Documents" means, together, the
Business Loan Agreement, dated February
-1-
<PAGE>
5, 1997, between Montera Cattle Company LLP and Bank One, Colorado,
N.A. and the related Promissory Note, dated February 5, 1997, issued by
Montera Cattle Company LLP to Bank One Colorado, N.A.
(B) Alternative Method of Determination. If, for any Interest
Period, LIBOR is not determined under the Montera Loan Documents, LIBOR
shall be determined as follows:
(I) On the Publication Day that is the first day of
each Interest Period, or if such first day is not a
Publication Day, the Publication day next preceding such first
day (a "LIBOR Interest Determination Date"), the Company will
determine LIBOR on the basis of the rates for deposits of not
less than U.S.$1,000,000 having a term comparable to such
Interest Period, commencing on the London Market Day that is
or, if such date is not a London Market Day, the London Market
Day that most nearly precedes, such LIBOR Interest
Determination Date, that are published in The Wall Street
Journal on such LIBOR Interest Determination Date; provided
that if such rate is not so published, LIBOR for such LIBOR
Interest Determination Date will be determined as described in
clause (II) below.
(II) If on any LIBOR Interest Determination Date no
LIBOR rate is so published having a term comparable to the
applicable Interest Period, LIBOR will be determined by the
banking institution with which the Company then has its
principal banking relationship on the basis of the rates on
such LIBOR Interest Determination Date at which deposits in
U.S. dollars having a term comparable to such Interest Period
are offered to prime banks in the London Interbank Market
commencing on the London Market Day that is or, if such date
is not a London Market Day, the London Market Day that most
nearly precedes, such LIBOR Interest Determination Date, and
in a principal amount equal to an amount of not less than U.S.
$1,000,000 that in such bank's judgment is representative for
a single transaction in such market at such time. The Company
will request such bank to provide a written quotation of such
rate. If such bank does not timely provide a proper quotation,
LIBOR for such LIBOR Interest Determination Date will be equal
to LIBOR for the immediately preceding Interest Period.
For the purposes of this clause (ii), "Publication Day" means any day on which
The Wall Street Journal (or any alternate publication agreed upon by the Company
and the Required Holder(s) or any successor publication) is published for
general circulation and "London Market Day" means any day on which deposits in
U.S. dollars are transacted in the London interbank market. All percentages
resulting from any calculation of LIBOR pursuant to this clause (B) will be
rounded, if necessary, to the nearest one-hundred thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544%
(or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from such calculations will be rounded to the nearest cent
(with one-half cent being rounded upwards).
-2-
<PAGE>
2. SALE AND PURCHASE OF NOTES. Upon the terms and subject to the
conditions herein set forth, the Company will issue and sell to you and you will
purchase from the Company Notes in the aggregate principal amount of
$15,000,000, at a purchase price of 100% of such principal amount.
3. CLOSING.
3a. Closing, Closing Date. The closing of the sale of Notes to you
shall take place at the offices of Holme Roberts & Owen LLC, 1700 Lincoln
Street, suite 4100, Denver, CO 80203 on September 7, 1997 or such later date as
shall be mutually agreeable to you and the Company. The date of the closing is
hereinafter referred to as the "Closing Date." At the closing, the Company will
deliver to you one or more Notes to be purchased by you, registered in your name
or in the name of your nominee, in any denominations (multiples of $1,000,000)
and in the aggregate principal amount to be purchased by you, all as you may
specify by timely notice to the Company (or in the absence of such notice, one
Note registered in your name), duly executed and dated the Closing Date, against
payment of the purchase price therefor with funds immediately available to the
Company at its account no. 126000106 at Bank One, Colorado, N.A., Denver, CO,
ABA No. 102001017, for further credit to the Company's account at Bank One,
Colorado, N.A., Greeley, CO, Branch #504. If at the closing the Company shall
fail to tender to you any of the Notes to be purchased by you as provided above
in this Section, or any of the conditions specified in Section 4 shall not have
been satisfied or waived by you by the fifth Business Day after the date
intended for the closing to occur, you shall, at your election, be relieved of
all further obligations under this Agreement, without thereby waiving any other
rights you may have by reason of such failure or such non-fulfillment.
4. CONDITIONS. Your obligations to purchase and pay for the Notes at the
closing hereunder are subject to the fulfillment to your satisfaction, on or
before the Closing Date, of the following conditions:
4a. Opinions of Company Counsel. You shall have received from Holme Roberts
& Owen LLC, an opinion substantially in the form of Exhibit B, dated the Closing
Date.
4b. Representations and Warranties; Etc. The representations and
warranties in Section 9 shall be true on and as of the Closing Date with the
same effect as though such representations and warranties had been made on the
Closing Date, except to the extent of changes caused by the transactions
contemplated hereby; the Company shall have performed all agreements on its part
required to be performed under this Agreement on or prior to the Closing Date;
no Default or Event of Default shall exist; and you shall have received an
Officer's Certificate, dated the Closing Date, to the effect specified in this
Section 4b.
4c. Proceedings. All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in substance and
form to you and your counsel, and you and your counsel shall have received all
such counterpart originals or certified or other copies of such documents as you
or they may reasonably request.
-3-
<PAGE>
5. PREPAYMENT OF THE NOTES. The Notes may not be paid or prepaid prior to
their final maturity except as hereinafter provided.
5a. Optional and Mandatory Prepayments. (i) Upon notice given as
provided in Section 5b, the Company, at its option, may prepay the Notes as a
whole (or from time to time in part in integral multiples of $50,000), in each
case at the principal amount so to be prepaid, without premium, together with
interest accrued thereon to the date fixed for such prepayment. It is understood
that the Company intends to use a portion of the net proceeds of any issuance
and sale of equity securities to repay all or a portion of the Notes. It is
further understood that the Company's ability to make any such prepayment may be
limited or prohibited at any particular time by the terms of the Company's then
outstanding Senior Indebtedness.
(ii) On the first Interest Payment Date after the anniversary of the
Closing Date in 1998, 1999, 2000 and 2001, the Company shall prepay $50,000 in
principal amount of the Notes then outstanding, or the entire outstanding
principal amount of the Notes if less than $50,000 in principal amount of Notes
remains outstanding.
(iii) If, on or prior to October 15, 1997, the Company has not executed
and delivered to you the Warrant referred to in Section 6f, then on or before
October 20, 1997, the Company shall prepay the entire principal amount of the
Notes then outstanding.
(iv) Upon written request of the holders of 100% of the Notes at the
time outstanding, given not less than thirty (30) days prior to the dates
specified in such notice as the prepayment date, the Company shall prepay the
entire principal amount of the notes then outstanding; provided that such notice
shall be void and the Company shall have no such obligation to so prepay the
Notes unless (a) the Company has legally available funds to make such a
prepayment in accordance with Section 5b, and (b) the Company is permitted to
make such payment pursuant to the terms of all Senior Indebtedness at the time
outstanding.
(v) In the event the principal amount of any such prepayment is less
than the outstanding principal amount all of the Notes at the time outstanding,
the Company will allocate the principal amount so to be prepaid among all
outstanding Notes in proportion to the respective unpaid principal amounts
thereof.
5b. Notice of Prepayment. The Company shall give written notice of each
prepayment of Notes pursuant to Section 5a to each holder of such Notes, which
notice shall be given not less than 20 days (or, in the case ot a prepayment
pursuant to Section 5a(iii), not less than 2 days) or more than 60 days prior to
the date fixed for such prepayment, shall specify the amount so to be prepaid
and the date fixed for such prepayment. Without the consent of each holder of a
Note so to be prepaid, no such prepayment date specified with respect to any
optional prepayment of Notes shall be other than an Interest Payment Date.
Notice of prepayment having been so given, the aggregate principal amount of the
Notes so to be prepaid as specified in such notice, together with interest
accrued thereon to such date fixed for prepayment, shall become due and payable
on the specified prepayment date.
-4-
<PAGE>
5c. Surrender of Notes; Notations Thereon. Subject to the provisions of
Section 13a, as a condition of prepayment of all or any part of the principal of
and interest on any Note, the Company may require the holder to present such
Note for notation of such payment and, if such Note is paid in full, require the
surrender thereof.
5d. Prohibition on Purchase of the Notes. The Company will not, and
will not permit any Affiliate of the Company to, acquire directly or indirectly
by purchase or prepayment or otherwise any of the outstanding Notes except (a)
by way of payment or prepayment in accordance with the provisions of the Notes
and of this Agreement or (b) pursuant to an offer to purchase made by the
Company or any Affiliate of the Company to the holders of all Notes, which offer
shall require the Company or such Affiliate to purchase on the same terms and
conditions, pro rata among all Notes tendered, and shall remain open for a
period of at least 20 Business Days after notice has been mailed to the holders
of all Notes; provided that at the time of such offer and purchase no Default or
Event of Default shall exist and no waiver in respect of any previous Default or
Event of Default shall then be in effect. Any Notes purchased by the Company or
any Affiliate in accordance with the preceding sentence shall thereupon be
canceled and no Notes shall be issued in substitution therefor.
6. AFFIRMATIVE COVENANTS. The Company covenants and agrees that
so long as any Note shall be outstanding:
6a. Financial Statements. The Company will deliver to each
Significant Holder in duplicate:
(i) as soon as practicable and in any event within 50 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of operations, cash flows and changes in
consolidated common stockholders' equity position of the Company and its
Subsidiaries for the period from the beginning of the current fiscal year to the
end of such quarterly period, and a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarterly period, which in each case
shall set forth in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified by an authorized
financial officer of the Company to present fairly and in accordance with GAAP,
the information contained therein (subject to changes resulting from year-end
adjustments); provided that, for so long as the Company is subject to the
periodic reporting requirements of the Exchange Act, the timely delivery of the
Company's Quarterly Report on Form 10-Q shall be deemed to satisfy the Company's
obligations under this Clause (i);
(ii) as soon as practicable and in any event within 100 days after the
end of each fiscal year, consolidated statements of operations, cash flows and
changes in consolidated common stockholders' equity position of the Company and
its Subsidiaries for such year, and a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, which in each case shall set
forth in comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail, in accordance with GAAP (except as
permitted by Section 6c), and accompanied by a report thereon of independent
public accountants of recognized national standing selected by the Company;
provided that, for so long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the timely delivery of the Company's Annual
Report to Shareholders, if any, for such fiscal year, the Company's Proxy
Statement with respect to the
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<PAGE>
Company's Annual Meeting next following such fiscal year and the Company's
Annual Report on Form 10-K for such fiscal year shall be deemed to satisfy the
Company's obligations under this Clause (ii);
(iii) concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Company, furnished pursuant to
clauses (i) and (ii) above, a certificate signed by the Chief Executive Officer,
the Chief Financial Officer or the Treasurer of the Company stating that, based
upon such examination or investigation and review of this Agreement as in the
opinion of the signer is necessary to enable the signer to express an informed
opinion with respect thereto, no Default or Event of Default has occurred during
such period, or, if any Default or Event of Default shall have occurred,
specifying all such Defaults and Events of Default, the nature and period of
existence thereof and what action the Company has taken, is taking or proposes
to take with respect thereto;
(iv) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as the Company or any
Subsidiary shall send to any holders of its securities that are registered under
the Exchange Act and copies of all registration statements (without exhibits),
other than on Form S-8 or any similar successor form, and all reports relating
to securities of the Company that the Company or any Subsidiary files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission); and
(v) promptly after the Company becomes aware of the existence of a
Default or Event of Default, an Officer's Certificate specifying the nature and
period of existence of such Default or Event of Default and what action the
Company has taken, is taking or proposes to take with respect thereto.
6b. Inspection of Property. The Company will, upon reasonable notice
and subject to applicable law, permit any Person designated in writing by any
Significant Holder (without limitation of any other rights which such
Significant Holder may have as a creditor of the Company) to visit and inspect
at such Significant Holder's expense such of the offices and properties (and,
during the existence of an Event of Default, to examine all corporate books and
financial records) of the Company and its Subsidiaries as such Significant
Holder may reasonably request and to discuss the affairs, finances and accounts
of any thereof with the principal officers of the Company (and, during the
existence of an Event of Default, its independent public accountants), all at
such reasonable times and as often as such, Significant Holder may reasonably
request.
6c. Financial Records. The Company will, and will cause each of its
consolidated Subsidiaries to, maintain financial records (including, but not
limited to, journals and ledgers) so as to reflect accurately its financial
condition in all material respects in accordance with GAAP or, in the case of
any Subsidiary that is not organized under the laws of the United States of
America, any State thereof or the District of Columbia, in accordance with any
prescribed system of accounts applicable from time to time to such Person.
6d. Corporate Existence; Etc. Subject to Section 7, the Company
will do or cause to be done all things necessary to preserve and maintain its
existence, rights and privileges; provided,
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however, that the Company shall not be required to preserve any such right or
privilege if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the holders of the Notes.
6e. Payment of Taxes and Claims. The Company will pay or discharge, or
cause to be paid or discharged before the same shall become delinquent, (i) all
taxes, assessments and governmental charges imposed upon the Company or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful material claims for labor, materials and
supplies that, if unpaid, might by law become a lien upon the property of the
Company or any Subsidiary; provided that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
6f. Warrant. Not later than October 15, 1997, the Company shall have
execute and deliver to you a Warrant to purchase 500,000 shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), substantially in
the form of Exhibit C. The Company shall use its best efforts to execute and
deliver such Warrant as promptly as practicable, which efforts shall include, if
necessary, submitting the issuance of such Warrant to the special meeting of the
Company's share holders next following the Date hereof. As used herein, the term
"Warrants" shall include the warrant originally issued pursuant to this
Agreement and all warrants delivered in substitution or exchange for any of said
warrants pursuant to this Agreement and, where applicable, shall include the
singular number as well as the plural. The term "Warrant" means one of the
Warrants.
7. MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS. The Company
covenants and agrees that so long as any Note shall be outstanding, the Company
will not consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any Person
unless:
(i) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
shall either (a) expressly assume in writing, by documentation satisfactory to
the Required Holder(s), the due and punctual payment of the principal of and
interest on all the Notes and the performance or observance of every covenant
and obligation in this Agreement and the Notes on the part of the Company to be
performed or observed or (b) cause a wholly owned Subsidiary of such Person to
assume in writing, and such Person shall unconditionally guarantee such
Subsidiary's obligations in respect of, in each case by documentation
satisfactory to the Required Holder(s), the due and punctual payment of the
principal of and interest on all the Notes and the performance or observance of
every covenant and obligation in this Agreement and the Notes on the part of the
Company to be performed or observed;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall exist;
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(iii) such Person shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia;
(iv) the Company has delivered to each holder of a Note an Officer's
Certificate and an opinion of legal counsel, each stating that such
consolidation, merger, conveyance, transfer or lease complies with this Section
7 and that all conditions precedent herein provided for relating to such
transaction have been complied with; and
(v) such merger or consolidation will not otherwise materially
adversely affect the ability of the Company (or any other obligator with respect
to the Notes and the Warrants) to perform its or their obligations under this
Agreement, the Notes or the Warrants.
The Company will give each holder of Notes written notice of any proposed
transaction permitted by this Section 7 not less than 30 days prior to the date
of consummation thereof. Upon any consolidation or merger of the Company into
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with the
provisions of this Section 7, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer or
lease is made (or such wholly owned Subsidiary that assumes the Company's
obligations pursuant to this Section 7) shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Agreement
and the Notes with the same effect as if such successor Person or Subsidiary, as
the case may be, had been named as the Company herein, and thereafter, except in
the case of a lease to another Person, the predecessor Person shall be relieved
of all obligations and covenants under this Agreement and the Notes.
8. SUBORDINATION.
8a. Agreement That Notes Be Subordinate. The Company covenants and
agrees, and you, and each other holder of Notes issued hereunder by the
acceptance thereof likewise covenants and agrees, that all Notes shall be issued
subject to the provisions of this Section 8; and each Person holding any Note,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions. All Notes shall, for all purposes and in
all respects without limitation, including those hereinafter in this Section 8
set forth, be subordinated and subject in right of payment to the prior payment
in full in cash or money's worth of the principal of and interest on all Senior
Indebtedness; provided, however, that payments on account of principal of and
interest on the Notes may be made from time to time, subject to the specific
limitations set forth in this Section 8.
8b. Limitation During Certain Defaults on Senior Indebtedness. If there
shall have occurred a default in the payment of the principal of or any premium
or interest on any Senior Indebtedness, or if there shall have occurred an event
of default with respect to any Senior Indebtedness permitting the holders
thereof to accelerate the maturity thereof, or if such payment would itself
constitute such an event of default, then, unless and until such default or
event of default shall have been cured or waived or shall have ceased to exist,
no payment shall be made by the Company on account of principal of or any
premium or interest on the Notes or on account of the purchase or other
acquisition of Notes.
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8c. Priority of Senior Indebtedness. Upon any distribution of all or
substantially all of the assets of the Company, or upon any dissolution, winding
up or liquidation of the Company, whether voluntary or involuntary, or upon any
reorganization, readjustment, arrangement or similar proceeding relating to the
Company or its property, whether or not the Company is a party thereto, and
whether in bankruptcy, insolvency or receivership proceedings or otherwise, or
upon any assignment by the Company for the benefit of creditors, or upon any
other marshaling of the assets and liabilities of the Company:
(i) the principal of and any premium and interest on all the
Senior Indebtedness and any and all other amount dues thereunder shall
first be paid in full in cash or money's worth, or provisions made for
such payment, before any payment is made on account of the principal of
or interest on the Notes; and
(ii) any distribution of assets of the Company or payment by
or on behalf of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Notes would be
entitled except for the provisions of this Section 8, shall be paid or
delivered by the liquidating trustee or agent or other Person making
such distribution or payment, whether a trustee in bankruptcy,
receiver, assignee for benefit of creditors, liquidating trustee, or
otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, to the extent necessary to
make payment in full in cash or money's worth of the principal of and
any premium and interest on all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent distribution or payment, or
provision therefor, to the holders of such Senior Indebtedness.
8d. Payment to Holders of Senior Indebtedness of Certain Amounts
Received by Holders of Notes. In the event that, notwithstanding the provisions
of Sections 8b and 8c, any distribution of assets of the Company or payment by
or on behalf of the Company of any kind or character, whether in cash, property
or securities, to which the holders of the Notes would be entitled but for the
provisions of this Section 8, shall be received by the holders of the Notes
before the principal of and any premium and interest on all Senior Indebtedness
is paid in full in cash or money's worth, or provision made for its payment,
such distribution or payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of such Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably as aforesaid, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay the principal of and any premium and interest on all such Senior
Indebtedness in full in cash or money's worth, after giving effect to any
concurrent distribution or payment, or provision therefor, to the holders of
such Senior Indebtedness.
8e. Notice of Specified Events; Reliance on Certificate of
Liquidating Agent. (i) The Company shall give prompt written notice to the
holders of the Notes of any dissolution, winding up, liquidation,
reorganization, readjustment, arrangement or similar proceeding, assignment for
the
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benefit of creditors, or any marshaling of assets and liabilities, in respect of
the Company, within the meaning of Section 8c, and shall also give prompt
written notice to the holders of the Notes of any event which pursuant to
Section 8b would prevent payment by the Company on account of the principal of
or interest on the Notes or on account of the purchase of the Notes. The holders
of the Notes shall be entitled to assume that no such event has occurred unless
the Company has given such notice.
(ii) Upon any distribution of assets of the Company or payment by or on
behalf of the Company referred to in this Section 8, the holders of the Notes
shall be entitled to rely upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 8c
are pending, and the holders of such Notes shall be entitled to rely upon a
certificate of the liquidating trustee or agent or other Person making any
distribution to the holders of such Notes for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 8. In the event that any holder of
Notes determines, in good faith, that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Section 8, such holder of Notes may
request such Person to furnish evidence to the reasonable satisfaction of such
holder of Notes as to the amount of Senior Indebtedness held by such Person, as
to the extent to which such Person is entitled to participate in such payment or
distribution, and as to other facts pertinent to the rights of such Person under
this Section 8, and if such evidence is not furnished, such holder of Notes may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment.
8f. Subrogation. Subject to the payment in full of the principal of and
any premium and interest on all Senior Indebtedness and of any and all other
amounts due thereunder, the holders of the Notes (together with the holders of
any other indebtedness of the Company which is subordinate in right of payment
to the payment of other indebtedness of the Company, but is not subordinate in
right of payment to the Notes and by its terms grants such right of subrogation
to the holders thereof) shall be subrogated to the rights of the holders of
Senior Indebtedness to receive distributions of assets of the Company or
payments by or on behalf of the Company, made on the Senior Indebtedness, until
the principal of and interest on the Notes shall be paid in full; and, for the
purposes of such subrogation, no distributions or payments to the holders of
Senior Indebtedness of any cash, property or securities to which the holders of
the Notes would be entitled except for the provisions of this Section 8, and no
payment over pursuant to the provisions of this Section 8 to the holders of
Senior Indebtedness by the holders of the Notes, shall, as between the Company,
its creditors other than the holders of Senior Indebtedness and the holders of
Notes, be deemed to be a payment by the Company to or on account of Senior
Indebtedness, it being understood that the provisions of this Section 8 are, and
are intended, solely for the purpose of defining the relative rights of the
holders of the Notes, on the one hand, and the holders of Senior Indebtedness,
on the other hand.
8g. Obligation to Pay Not Impaired. Nothing contained in this Section 8 or
elsewhere in this Agreement, or in the Notes, is intended to or shall alter or
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Notes, the
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obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of and interest on the Notes at the time and
place and at the rate prescribed, or to affect the relative rights of the
holders of the Notes and creditors of the Company other than the holders of
Senior Indebtedness, nor shall anything herein or therein prevent the holder of
any Notes from exercising all remedies otherwise permitted by applicable law
upon any Default or Event of Default under this Agreement, subject to the
rights, if any, under this Section 8 of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
8h. Limitation During Event of Default Hereunder. Subject to Section
8b, if there shall have occurred any Event of Default specified in Section 11a,
other than of the nature referred to in Section 8c, then and unless and until
either such Event of Default shall have been cured or waived or shall have
ceased to exist or the principal of and interest on all Senior Indebtedness
shall have been paid in full in cash or money's worth, no payment shall be made
by the Company on account of the principal of or interest on, the Notes, or on
account of the purchase or other acquisition of Notes, except (i) payments at
the maturity of Notes (subject to Section 8c), (ii) current interest payments,
and (iii) payments for the purpose of curing any such Event of Default.
8i. Reliance by Senior Indebtedness on Subordination Provisions. Each
holder of any Note by the acceptance thereof acknowledges and agrees that the
subordination provisions set forth in this Section 8 are, and are intended to
be, an inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold such Senior Indebtedness.
8j. Certain Payments and Credits Permitted. Nothing contained in this
Section 8 or elsewhere in this Agreement, or in any of the Notes, shall prevent
(i) the Company from making payment of the principal of or interest on the
Notes, at any time except under the conditions described in Sections 8b, 8c and
8h or (ii) the application by the holder of any Notes of any moneys under this
Agreement to the payment of or on account of the principal of or interest on the
Notes at any time except under the conditions described in Section 8d.
8k. Subordination Not to Be Prejudiced by Certain Acts. No right of any
present or future holder of any Senior Indebtedness of the Company to enforce
subordination as herein provided, shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Agreement,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
8l. Limitation on Securing Notes. The Company will not give, and the
holders of the Notes will not take or receive, any security interest for the
payment of the principal of or interest on the Notes, other than cash required
or permitted to be paid to such holders hereunder.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants as hereinafter set forth.
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9a. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, each of the Company's Subsidiaries is duly organized and existing in
good standing under the laws of the jurisdiction in which it is incorporated,
and the Company and each such Subsidiary has the corporate power to own its
respective property and to carry on its respective business as now being
conducted, and the Company and each Subsidiary is duly qualified as a foreign
corporation to do business and in good standing in every jurisdiction in which
the nature of the respective business conducted or property owned by it makes
such qualification necessary and where the failure so to qualify would have a
material adverse effect on the business or financial position of the Company or
the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries possess all rights, licenses and permits reasonably required for
the maintenance and operation of their respective properties and the conduct of
their respective businesses as now being maintained and operated and conducted.
The issuance and sale of the Notes and, when executed and delivered by the
Company in accordance with the terms hereof, the Warrants by the Company and the
execution and delivery of this Agreement and the Warrants by the Company and
compliance by the Company with all of the provisions of this Agreement, the
Warrants (when executed and delivered by the Company in accordance with the
terms hereof) and the Notes (i) are within the corporate powers and authority of
the Company, (ii) do not (and in the case of the Warrants, will not) require the
approval or consent of any stockholders of the Company and (iii) have (and in
the case of the Warrants, will have) been authorized by all requisite corporate
proceedings on the part of the Company.
9b. Actions Pending; Compliance with Law. There is no action, suit,
investigation or proceeding pending, or to the knowledge of the Company
threatened, against the Company or any of its Subsidiaries or any of their
respective properties or assets by or before any court, arbitrator or
governmental body, department, commission, board, bureau, agency or
instrumentality, which questions the validity of this Agreement, the Warrants or
the Notes or any action taken or to be taken pursuant hereto or thereto, or
which, in the opinion of senior management of the Company after consultation
with counsel, are reasonably likely to result in any material adverse change in
the business or financial condition of the Company and its Subsidiaries taken as
a whole. Neither the Company nor any of its Subsidiaries is in default in any
material respect with respect to any judgment, order, writ, injunction, decree,
or award, and, the business of the Company and its Subsidiaries is presently
being conducted so as to comply in all material respects with applicable
federal, state and local governmental laws and regulations, including without
limitation laws and regulations relating to environmental requirements (such as
requirements in respect of air, water and noise pollution) and to employment
practices (such as practices in respect of discrimination, health and safety),
all to the extent necessary to avoid any material adverse effect on the
business, properties or condition (financial or other) of the Company or the
Company and its Subsidiaries taken as a whole.
9c. Use of Proceeds. The Company will use the proceeds of the
sale of the Notes for general corporate purposes.
9d. Insurance. The Company and its Subsidiaries maintain
insurance in such amounts, including self-insurance, retainage and deductible
arrangements, and of such a character as is usually maintained by or required
for companies engaged in the same or similar business.
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9e. Governmental Consent, Etc. The Company is not required to obtain
any consent, approval or authorization of, or to make any declaration or filing
with, any governmental authority as a condition to or in connection with the
execution, delivery or performance of this Agreement, the Notes or, when issued
in accordance with the terms hereof, the Warrants or the valid offer, issue,
sale or delivery of the Notes or, when issued in accordance with the terms
hereof, the Warrants, or the performance by the Company of its obligations in
respect thereof.
9f. Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
9g. Taxes. The Company and its Subsidiaries have filed or caused to be
filed all federal and state income tax returns which are required to be filed
and have paid or caused to be paid all taxes as shown on said returns and on all
assessments received by it to the extent that such taxes have become due, except
taxes (i) the validity or amount of which is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside and (ii) which, in the aggregate, are in an amount that is not
material to the Company and its Subsidiaries taken as a whole. The Company and
its Subsidiaries have paid or caused to be paid, or have established reserves
adequate in all material respects, for all federal income tax liabilities and
state income tax liabilities applicable to the Company and its Subsidiaries for
all fiscal years which have not been examined and reported on by the taxing
authorities (or closed by applicable statutes).
9h. No Default; Conflicting Agreement or Charter Provisions. Neither
the Company nor any of its Subsidiaries is a party to any contract or agreement
or subject to any charter or other corporate restriction which materially and
adversely affects the business, property or assets or financial condition of the
Company and its Subsidiaries taken as a whole. Neither the issuance and sale of
the Notes and, when issued in accordance with the terms hereof, the Warrants nor
fulfillment of nor compliance with the terms and provisions hereof or of the
Notes and, when issued in accordance with the terms hereof, the Warrants, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, the Certificate of
Incorporation or by-laws of the Company or any material mortgage, agreement,
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or its property is subject. The Company has reserved for issuance,
upon exercise of the Warrants, 500,000 shares of the Common Stock. The Company
is not in default under any outstanding indenture or other debt instrument or
with respect to the payment of principal of or interest on any outstanding
obligations for borrowed money, and there exists no default by the Company under
any material contracts or agreements, or under any instrument by which the
Company is bound, which would materially and adversely affect the Company's
ability to perform its obligations hereunder or under the Notes or the Warrants
or which would materially and adversely affect its business, operations or
financial condition.
9i. Financial Statements. The Company has provided you copies of
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of December 31, 1996 and December 31, 1995 and the related consolidated
statements of operations, cash flows and changes
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in consolidated common stockholders' equity position of the Company and such
Subsidiaries for the fiscal years ended on said dates, all with reports thereon
of KPMG Peat Marwick, independent public accountants. The Company has also
provided to you copies of a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of June 30, 1997 and the related consolidated
statements of operations, cash flows and changes in consolidated common
stockholders' equity position of the Company and such Subsidiaries for the
fiscal quarter then ended. All of such financial statements (including the
related schedules and notes) fairly present the consolidated financial position
of the Company and such Subsidiaries as of the respective dates of said balance
sheets and the consolidated results of their operations for the fiscal periods
ended on said dates, and have been prepared in accordance with GAAP consistently
maintained by the Company and such Subsidiaries throughout such periods, except
as set forth in the notes thereto. There are no material liabilities, contingent
or otherwise, of the Company or any such Subsidiary as of December 31, 1996 that
are not reflected in said consolidated balance sheet (or the notes thereto as
required by GAAP) as of said date. Since December 31, 1996, there has been no
change in the business, financial condition, properties or prospects of the
Company and its Subsidiaries taken as a whole that could materially and
adversely affect the Company's ability to perform its obligations hereunder or
under the Notes or the Warrants.
9j. Offering of Securities. Neither the Company nor any agent acting on
its behalf has offered the Notes or the Warrants or any similar securities of
the Company for sale to, or solicited any offers to buy the Notes or the
Warrants or any similar securities of the Company from, or otherwise approached
or negotiated with respect thereof with, any Person other than you, and the
Company has offered the Notes and the Warrants to you for purposes of investment
and not for distribution. Neither the Company nor any agent acting on its behalf
has offered or will offer the Notes or any part thereof or any similar
securities for issue or sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
9k. Disclosure. None of this Agreement, the Warrants or any certificate
or written disclosure statement furnished to you on or prior to the Closing Date
by or on behalf of the Company in connection with the transactions contemplated
hereby and by the Warrants, when taken together as a whole, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances in which they were made, not misleading.
10. REPRESENTATIONS AND COVENANT OF THE PURCHASER.
10a. Acquisition for Investment. You represent, and in making this sale
to you it is specifically understood and agreed, that you are not acquiring the
Notes or the Warrants (and upon exercise thereof, the shares of Common Stock
underlying the Warrants) to be purchased by you hereunder with a view to, or for
sale in connection with, any distribution of any part thereof within the meaning
of the Securities Act, and that you have no present intention or plan to effect
any distribution of any of the Notes, the Warrants or such shares of Common
Stock.
10b. ERISA. You represent that your purchase of Notes hereunder is
not being made for or on behalf of any pension or welfare plan, as defined in
Section 3 of ERISA.
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10c. Restriction on Sale, Other Disposition. You agree that, without
the prior consent of the Company, you will not, directly or indirectly, sell,
transfer, pledge, encumber or otherwise dispose of (a "Transfer") any Notes or
the Warrants or any interest therein. Without limiting the foregoing, any
Permitted Transferee shall, by a written agreement reasonably satisfactory to
the Company, expressly assume your obligations, duties and covenants under this
Agreement as to the Notes so Transferred and under the Warrants and make a
representation to the Company to the same or similar effect as is contained in
Section 10b or provide other information reasonably satisfactory to the Company
to enable the Company to determine that the Transfer of such Note to such
Transferee will not constitute a non-exempt prohibited transaction under Section
406 of ERISA.
11. DEFAULT.
11a. Events of Default; Acceleration. (i) "Event of Default", wherever
used herein with respect to Notes, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Section 8 or be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(A) default in the due and punctual payment of all or any part
of the principal on any Note (whether at the stated maturity or by
declaration of acceleration, by notice of prepayment at the option of
the Company or otherwise); or
(B) default in the due and punctual payment of any interest on
any Note and such default shall have continued for a period of 10 days;
or
(C) default in the performance or observance of any other
covenant of the Company in this Agreement or the Warrants and such
default shall have continued for a period of 30 days after the Company
first becomes aware thereof; or
(D) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any
Subsidiary or under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or a Subsidiary, whether
such indebtedness now exists or shall hereafter be created, which
default shall constitute a failure to pay an aggregate principal amount
of such indebtedness exceeding $1,000,000 when due and payable after
the expiration of any applicable grace period with respect thereto or
shall have resulted in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become
due and payable in an aggregate principal amount exceeding $1,000,000,
without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 10 days after the
occurrence thereof; or
(E) any representation or warranty of the Company in this
Agreement, in the Warrants or in any certificate or other instrument
delivered hereunder or pursuant
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<PAGE>
hereto shall prove to be false or incorrect in any material respect on
the date as of which it was made; or
(F) the entry by a court having jurisdiction in the premises
of (1) a decree or order for relief in respect of the Company or a
Subsidiary in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency, reorganization
or other similar law of any applicable jurisdiction or (2) a decree or
order adjudging the Company or a Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable United States federal or state law or the
applicable law of any other jurisdiction or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or a Subsidiary or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(G) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable United States federal
or state bankruptcy, insolvency, reorganization or other similar law of
any applicable jurisdiction or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency, reorganization
or other similar law of any applicable jurisdiction or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable United States Federal or
state law or the applicable law of any other jurisdiction, or the
consent of the Company or a Subsidiary to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company or a Principal Subsidiary in furtherance of any
such action;
then (x) upon the occurrence of any Event of Default described in the foregoing
clause (F) or (G) with respect to the Company or a Subsidiary the unpaid
principal amount of all Notes, together with the interest accrued thereon, shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company, or (y) upon the occurrence of any other Event of Default,
the holder or holders of at least 25% of the outstanding principal amount of the
Notes may, by written notice to the Company, declare the unpaid principal amount
of all Notes to be, and the same shall forthwith become, due and payable,
together with the interest accrued thereon, all without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived; provided that, during the existence of an Event of Default described in
the foregoing clause (A) or
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clause (B) with respect to any Note, the holder of such Note may, by written
notice to the Company declare such Note to be, and the same shall forthwith
become, due and payable, together with the interest accrued thereon, all without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived. If any holder of any Note shall exercise the option
specified in the proviso to the-preceding sentence, the Company will forthwith
give written notice thereof to the holders of all other outstanding Notes and
each such holder may (whether or not such notice is given or received), by
written notice to the Company, declare the principal of all Notes held by it to
be, and the same shall forthwith become, due and payable, together with the
interest accrued thereon.
(ii) The provisions of this Section 11a are subject, however, to the
condition that if, at any time after any Note shall have so become due and
payable, the Company shall pay all arrears of interest on the Notes and all
payments on account of the principal of the Notes which shall have become due
otherwise than by acceleration (with interest on such principal and, to the
extent permitted by law, on overdue payments of interest, at the rate specified
in the Notes) and all Events of Default (other than nonpayment of principal of
and accrued interest on Notes due and payable solely by virtue of acceleration)
shall be remedied or waived pursuant to Section 13c, then, and in every such
case, the holder or holders of at least a majority of the outstanding principal
amount of the Notes, by written notice to the Company, may rescind and annul any
such acceleration and its consequences, but no such action shall affect any
subsequent Default or Event of Default or impair any right consequent thereon.
11b. Other Remedies. (i) If any Event of Default shall exist, subject
to the provisions of Section 8, the holder of any Note may proceed to protect
and enforce its rights, either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant or obligation contained in
this Agreement or in the Notes or in aid of the exercise of any power granted in
this Agreement, or the holder of any Note may proceed to enforce the payment of
all sums due upon such Note or to enforce any other legal or equitable right of
the holder of such Note.
(ii) The Company covenants that, if it shall default in the making of
any payment due under any Note or in the performance or observance of any
covenant or obligation contained in this Agreement or in the Notes, it will pay
to the holder thereof such further amounts, to the extent lawful, as shall be
sufficient to pay the costs and expenses of collection or of otherwise enforcing
such holder's rights, including reasonable legal or other professional fees.
(iii) No remedy herein conferred upon you or the holder of any Note is
intended to be exclusive of any other remedy each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
(iv) No course of dealing between the Company and you or any other
holder of a Note, and no delay or failure in exercising any rights hereunder or
under any Note, shall operate as a waiver of any rights you or any such holder
of a Note may have.
12. DEFINITIONS. For the purpose of this Agreement the following
terms shall have the meanings specified with respect thereto below:
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"Affiliate" means, with respect to a specified Person, any other Person
that controls, is controlled by, or is under common control with such specified
Person. For the purposes of this definition, the term "control" (including, with
correlative meanings, the terms "controlling," "controlled by" or "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Applicable Interest Rate" means the rate of interest borne by the
Floating Rate Notes from time to time, which rate is equal to LIBOR (as computed
for each Interest Period) in effect from time to time plus 2.0% per annum.
"Bank One" means Bank One, Colorado, N.A.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of Colorado are authorized or obligated
by law or executive order to close.
"Closing Date" shall have the meaning specified in Section 3a.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the introduction to this
Agreement.
"Default" means any event which, with notice or the lapse of time or
both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles as in effect in
the United States at the time of application to the provisions thereof.
"Interest Payment Date" means, with respect to any Interest Period, the
first day of the month next following the month in which such Interest Period
commenced.
"Interest Period" means the period commencing on the later of the date
of such Note and the most recent Interest Payment Date, if any, with respect to
such Note (or any Note in exchange or substitution for which such Note was
issued) to which interest on such Note has been paid and ending on, but
excluding, the next succeeding Interest Payment Date.
"LIBOR" shall have the meaning provided in Section 1b.
"Montera Loan Documents" shall have the meaning provided in Section 1b.
"Notes" shall have the meaning specified in Section 1a.
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"Officer's Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, if any, the Chief Executive Officer,
the Chief Financial Officer, the President or a Vice President of the Company or
any officers of the Company performing the same duties from time to time.
"Permitted Transferee" means a Person to whom Notes are permitted to be
Transferred pursuant to Section 10c.
"Person" means and include an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Required Holder(s)" means the holder or holders of at least 51% of the
outstanding principal amount of the Notes at the time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) the Business Loan Agreement between the
Company (then named Electronic Fab Technology Corporation) and Bank One, dated
as of February 24, 1997 and the related promissory notes delivered by the
Company to Bank One, Colorado, N.A., and any extensions or renewals, and any
substitute, refinancing or replacements thereof, (ii) the senior secured credit
facility that is anticipated to be entered into between the Company and Bank
One, as agent, and related promissory notes issued thereunder, (iii) all other
indebtedness of the Company for borrowed money that is duly created in
accordance with the terms of a contemporaneous writing expressly providing for
such indebtedness to be senior in right of payment to the Notes, and (iv) all
debts, liabilities, obligations, covenants and duties of the Company arising
under either of the foregoing.
"Significant Holder" means (i) you, so long as you shall hold (or be
committed under this Agreement to purchase) any Notes, (ii) any Affiliate of
yours, or (iii) any other holder of at least 25% of the outstanding principal
amount of the Notes from time to time.
"Subsidiary" means (i) any Person of which or in which the Company
and/or its other Subsidiaries own directly or indirectly more than 50% of (a)
all classes of Voting Stock of such Person, if it is a corporation, (b) the
capital interest or profits interest of such Person, if it is a partnership,
limited liability company, joint venture of similar entity or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization; provided that, in the case of each Person specified in the
foregoing clauses (a) through (c), such Person is accounted for as a
consolidated Subsidiary on the balance sheet of the Company in accordance with
GAAP, and (ii) any other Person that is accounted for as a consolidated
subsidiary of the Company in accordance with GAAP. Except as otherwise expressly
indicated herein, references to Subsidiaries shall refer to Subsidiaries of the
Company.
"Transfer" shall have the meaning specified in Section 10c.
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"Voting Stock" means, with respect to a corporation, all classes of
capital stock of such corporation that have voting power under ordinary
circumstances to elect the directors of such corporation, whether at all times
or only so long as no senior class of capital stock of such corporation has such
voting power as the result of the occurrence of any contingency; and without
limiting the foregoing, any such class of capital stock which is redeemable or
which has a preference upon redemption or upon payment of dividends over any
other class of capital stock of such corporation shall not, irrespective of
voting power, be deemed to be Voting Stock.
"Warrant" and "Warrants" shall have the meanings specified in Section
10c.
13. Miscellaneous.
13a. Home Office Payment. The Company agrees that, as long as you shall
hold any Notes, all payments to be made on, or in connection with the payment or
prepayment of, such Notes will be made at such place and in such manner you may
designate in writing, without any requirement for the presentation or surrender
of such Notes. You agree that (i) prior to any delivery upon the sale or other
disposition of any Note held by you, you will promptly make or cause to be made
a notation on such Note of any such payment on account thereof, (ii) if such
Note shall be paid in full you will promptly surrender such Note to the Company
for cancellation, and (iii) prior to any delivery upon the sale or other
disposition of any Note held by you, you will surrender such Note to the Company
in exchange for a new Note or Notes in the same aggregate principal amount being
sold or disposed of and the aggregate unpaid principal amount of Notes to be
held by you after such sale or disposition. The Company agrees to afford the
benefits of this Section 13a to any Permitted Transferee which shall have made
the same agreement as you have made in this Section 13a.
13b. Expenses. You and the Company agree to be responsible for and to
pay your and the Company's respective costs, fees and expenses incurred in
connection with the negotiation, execution and delivery of this Agreement, the
Notes and the Warrants and the funding of the purchase price of the Notes and
the funding of the exercise price of the Warrants.
13c. Consent to Amendments. (i) This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the consent to such amendment or waiver with respect
to such action or omission to act, by one or more substantially concurrent
written instruments signed by the Required Holder(s); provided, however, that
(A) no such amendment or waiver shall
(1) change the rate or extend the time of payment of
interest on any of the Notes, without the consent of the
holder of each Note so affected, or
(2) modify any of the provisions of this Agreement or
of the Notes with respect to the payment or prepayment
thereof, or reduce the percentage of the principal amount of
the Notes the holders of which are required to approve any
such amendment or effectuate any
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such waiver, without the consent of the holders of all the
Notes then outstanding, and
(B) no such waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon.
(ii) Any amendment or waiver pursuant to clause (i) above shall apply
equally to all the holders of the Notes and shall be binding upon them, upon
each future holder of any Note and upon the Company, in each case whether or not
a notation thereof shall have been placed on any Note.
(iii) the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of a Note (regardless of the principal
amount of Notes then held by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information to enable it to make an informed
decision with respect thereto. The Company will not, directly or indirectly, pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any holder of a Note as consideration
for or as an inducement to the entering into by such holder of any such
amendment or waiver unless such remuneration is concurrently paid, on the same
terms, ratably to the holders of all of the Notes then outstanding. The Company
shall promptly send copies of any amendment, waiver (and any request for any
such amendment, consent or waiver) relating to this Agreement to you and, to the
extent practicable, shall consult with you in connection with each such
amendment, consent and waiver.
(iv) For the purpose of determining whether the holders of the
requisite outstanding principal amount of Notes have taken any action or given
any consent or approval under this Agreement, any Notes held by the Company or
any of its Affiliates shall not be deemed outstanding.
13d. Registration, Transfer and Exchange of Notes. The Company will
keep at its principal executive office a note register in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), it will provide for the registration and transfer of
Notes.
The holder of any Note may, at such holder's option, surrender the same
for transfer or exchange at said office, or at the place of payment named in
such Note, accompanied in the case of a transfer by a written instrument of
transfer duly executed by the holder thereof or by such holder's attorney duly
authorized in writing. In case any holder shall so request transfer or exchange
of any Note, the Company at its expense (other than transfer taxes, if any, or
similar governmental charges) will deliver in exchange therefor one or more new
Notes (in minimum denominations of $1,000,000, except to evidence the entire
unpaid principal amount of the Note so surrendered), as requested by such
holder, in the same aggregate principal amount as the Note so surrendered, each
dated the later of the date of, or the date to which interest has been paid on,
the Note so surrendered.
The Company and any agent of the Company may treat the Person in whose
name any Note is registered as the owner of such Note for the purpose of
receiving payment of the principal of and interest on, such Note and for all
other purposes whatsoever, whether or not such Note be overdue,
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and prior to due presentment for registration of transfer, the Company shall not
be affected by notice to the contrary. If any Note shall have been transferred
to another holder pursuant to this Section and such holder shall have designated
in writing the address to which communications with respect to such Note shall
be mailed, all notices, certificates, requests, statements and other documents
required or permitted to be delivered to any holder of a Note by any provision
hereof shall be delivered to such holder.
13e. Lost, Etc., Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Note, and (in case of loss, theft or destruction) of indemnity satisfactory
to it, or (in the case of mutilation) upon surrender and cancellation of such
Note, the Company will make and deliver in lieu of such Note a new Note of like
tenor and for the same unpaid principal amount, dated the later of the date of,
or the date to which interest has been paid on, the Note in lieu of which such
new Note is made and delivered.
13f. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by the
Company in connection herewith shall survive the execution and delivery of this
Agreement, the sale and purchase of the Notes and the Warrants. Subject to the
preceding sentence, this Agreement embodies the entire agreement and
understanding between you and the Company and supersedes all prior agreements
and understandings relating to the subject matter hereof.
13g. Disclosure to Other Persons. The Company acknowledges that the
holder of any Notes may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any Subsidiary of the Company
in connection with or pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants (who shall be made
aware of the requirements of this Section 13g and the need to comply herewith),
(ii) any federal or state regulatory authority having jurisdiction over such
holder, (iii) any Person expressly identified in a prior written consent of the
Company or (iv) any other Person to whom such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such holder or (b) in response to any subpoena or other
legal process; provided that you agree not to disclose to any Person specified
in clause (iii) above any information delivered to you pursuant to Section 6a or
any other provisions of this Agreement that the Company has conspicuously
identified as non-public, confidential or proprietary in nature and subject to
the provisions hereof unless such Person shall have executed and delivered to
the Company an agreement substantially in the form of Exhibit D hereto.
13h. Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the Company's successors and assigns and your
successors and assigns, including any Permitted Transferees.
13i. Notices. All communications provided for hereunder shall be sent
by facsimile transmission, with written confirmation of receipt, or a nationwide
overnight delivery service, with receipt of delivery requested, and (i) if to
you, addressed to you at the address set forth by you for such communications on
the signature page hereof, or to such other address as you may have designated
to the Company in writing, (ii) if to any other holder of the Notes, addressed
to such
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holder at the address of such holder in the note register of the Company,
and (iii) if to the Company, addressed to it at, EFTC Corporation 9351 Grant
Street, Suite 600, Denver, CO 80229, Attention: Chief Financial Officer (Tel:
(303) 451-8200; Fax: (303) 451-8210), with a copy to the attention of Francis R.
Wheeler, Esq. at Holme Roberts & Owen LLC, Suite 4100, 1700 Lincoln Street,
Denver, CO 80203 (tel: (303) 861-7000; Fax: (303) 866-0200), or to such other
address or addresses as the Company may have designated in writing to you and
each other holder of any of the Notes at the time outstanding.
13j. Descriptive Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
13k. Governing Law. This Agreement, the Notes and the Warrants shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado (without regard to conflicts
of laws provisions thereof).
13l. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
13m. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, or any other thing, is by the terms
of this Agreement required to be satisfactory to you or to the Required
Holder(s), the determination of such satisfaction shall be made by you or the
Required Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
13n. Severability. In case any one or more of the provisions contained
in this Agreement or in any instrument contemplated hereby, or any application
thereof, shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein, and any other application thereof, shall not in any way be
affected or impaired thereby.
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If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding agreement between you
and the undersigned.
Very truly yours,
EFTC CORPORATION
By /s/
Title:
The foregoing Agreement is hereby accepted and agreed as of the date first above
written:
/s/
Richard L. Monfort
Address: 3519 Holman Court, Greeley, CO 80631
Telephone: (970) 351-6442
Fax Number: (970) 351-6441
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EXHIBIT A
[FORM OF NOTE]
EFTC CORPORATION
Floating Rate Subordinated Note due 2002
No. R-_______ Denver, Colorado
$__________ ____________, 1997
EFTC CORPORATION, a Colorado corporation (the "Company"), for value
received, hereby promises to pay to or registered assigns, the principal sum of
DOLLARS (or so much thereof as shall have not been prepaid) on December 31, 2002
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid principal hereof from the date hereof at the Applicable
Interest Rate (as such term and other terms used in this Section are below
defined) for each Interest Period, payable in arrears on each Interest Payment
Date for the immediately preceding Interest Period (unless any such Interest
Payment Date is a Saturday, a Sunday or a day on which banking institutions in
Denver, Colorado, or New York, New York are authorized or obligated by law or
executive order to close (an "Excluded Day"), in which case the interest payment
due on such Interest Payment Date will be made the next day thereafter that is
not an Excluded Day), until such principal sum shall have become due and payable
(whether at maturity, upon acceleration, upon notice of prepayment or otherwise)
and to pay on demand interest (so computed) on any overdue principal and, to the
extent permitted by applicable law, on any overdue interest, from the due date
thereof at a rate per annum equal to the greater of (i) 1% over the Applicable
Interest Rate for this Note from time to time in effect pursuant to the Note
Agreement and (ii) 1% above the prime commercial lending rate of interest
announced from time to time by Bank One, Colorado, N.A. at its principal office
in Denver, Colorado (or, if said bank shall no longer be in existence, by the
domestic commercial bank which at the time has the largest capital and surplus
of all domestic commercial banks), until the obligation of the Company with
respect to the payment thereof shall be discharged. Payments of principal and
interest shall be made in lawful money of the United States of America upon the
presentation hereof (subject to the provisions of Section 13a of the Note
Agreement with respect to payments to certain holders) at said principal office
of the Company.
This Note is one of the Floating Rate Subordinated Notes due 2002 of
the Company issued pursuant to the Note Agreement dated as of September 5, 1997
(as at any time amended, the "Note Agreement") entered into by the Company with
the initial purchaser, and the duly registered holder of this Note is entitled
to the benefits thereof. Capitalized terms used herein without definition have
the meanings ascribed thereto in the Note Agreement.
As used herein: the term "Applicable Interest Rate" means a rate of
interest for each Interest Period equal to LIBOR, as computed pursuant to the
Note Agreement, plus 2.0% per annum; the term "LIBOR" means the rate of interest
determined pursuant to the terms of the Note Agreement
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for each Interest Period on the applicable LIBOR Interest Determination Date;
the term "Interest Payment Date" means, with respect to any Interest Period, the
first day of the month next following the month in which such Interest Period
commenced; and the term "Interest Period" means the period commencing on the
later of the date hereof or the most recent Interest Payment Date, if any, with
respect to this Note (or any Note issued in exchange or substitution for which
this Note was issued) to which interest has been paid and ending on, but
excluding, the next succeeding Interest Payment Date.
The Company may at its election prepay this Note, in whole or in part,
and the maturity hereof may be accelerated following an Event of Default, all as
provided in the Note Agreement, to which reference is made for the terms and
conditions of such provisions as to prepayment and acceleration. The Notes
outstanding under the Note Agreement, including this Note, are subject to
mandatory prepayments on the anniversary of the Closing Date in 1998, 1999, 2000
and 2001, each in the amount of $50,000. If any such prepayment is less than the
then outstanding principal amount of the Notes, the amount so prepaid shall be
allocated to the outstanding Notes pro rata.
Upon surrender of this Note for registration of transfer or exchange,
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note of the same series and for a like principal amount will be
issued to, and, at the option of the holder, registered in the name of, the
transferee. The Company and any agent of the Company may deem and treat the
Person in-whose name this Note is registered as the owner hereof for the purpose
of receiving payments of the principal hereof and interest hereon and for all
other purposes whatsoever whether or not this Note is overdue, and the Company
shall not be affected by any notice to the contrary.
Payments of principal and interest in respect of this Note are
subordinate, to the extent and upon the terms set forth in the Note Agreement,
to all payments on or in respect of "Senior Indebtedness". The holder of this
Note, by acceptance hereof, is deemed to accept the terms and conditions of said
Note Agreement providing for such subordination.
As provided in the Note Agreement, this Note shall be governed by and
construed in accordance with the laws of the State of Colorado.
EFTC CORPORATION
By
Title:
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EXHIBIT B
[FORM OF OPINION OF HRO]
[TO COME.]
B-1
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
C-1
<PAGE>
EXHIBIT D
[FORM OF CONFIDENTIALITY AGREEMENT]
[Date]
EFTC Corporation
9351 Grant Street, Suite 600
Denver, CO 80229
Ladies and Gentlemen:
In connection with the Note Agreement, dated as of September 5, 1997 (the
"Agreement"), between EFTC Corporation (the "Company") and the initial purchaser
of the notes specified therein, the Company may furnish us with certain
information that is non-public, confidential or proprietary in nature.
As used herein, "Confidential Information" means information about the Company
furnished to us by the Company (or by a holder of Notes issued under the
Agreement who received such information as provided in the Agreement) pursuant
to Section 6a thereof (or any other information delivered to us pursuant to the
Agreement) if the Company or such holder has conspicuously identified such
information as non-public, confidential or proprietary in nature and subject to
the provisions of the Agreements or this letter, but does not include
information (i) which was publicly known, or otherwise known to me, at the time
of disclosure, (ii) which subsequently becomes publicly known through no act or
omission by me or (iii) which otherwise becomes known to me, other than through
disclosure by the Company.
I agree that I will (1) hold in confidence the Confidential Information and (2)
not disclose or permit disclosure of the Confidential Information, except as
permitted in Section 13g of the Agreement, a copy of which is attached hereto as
Annex I. Notwithstanding the foregoing, I will be free, after notice to the
Company, to correct any false or misleading information which may become public
concerning our relationship to the Company.
Please confirm your agreement with the foregoing by signing and returning to me
the enclosed copy of this letter.
Very truly yours,
Print Name:
Accepted and agreed to:
EFTC CORPORATION
By
Title:
D-1
<PAGE>
ANNEX I
To Confidentiality Agreement
13g. Disclosure to Other Persons. The Company acknowledges that the holder
of any Notes may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary of the Company in
connection with or pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants (who shall be made
aware of the requirements of this Section 13g and the need to comply herewith),
(ii) any federal or state regulatory authority having jurisdiction over such
holder, (iii) any Person expressly identified in a prior written consent of the
Company or (iv) any other Person to whom such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such holder or (b) in response to any subpoena or other
legal process; provided that you agree not to disclose to any Person specified
in clause (iii) above any information delivered to you pursuant to Section 6a or
any other provisions of this Agreement that the Company has conspicuously
identified as non-public, confidential or proprietary in nature and subject to
the provisions hereof unless such Person shall have executed and delivered to
the Company an agreement substantially in the form of Exhibit D hereto.
D-2
<PAGE>
NUMBER OF SHARES: 500,000 WARRANT No. 1
WARRANT TO PURCHASE
COMMON STOCK OF EFTC CORPORATION
EFTC CORPORATION, a Colorado corporation (the "Company"), HEREBY
CERTIFIES THAT, for value received, Richard L. Montfort, or registered assigns,
is entitled to purchase 500,000 Common Shares, par value $.01 per share, of the
Company (adjusted as below provided) at any time from the Closing Date (as
defined below) until 5:00 p.m., Denver, Colorado time, on the Termination Date
(as defined below) or the next succeeding Business Day if such Warrant
Expiration Date is not a Business Day (as defined below). As used herein, the
term "Common Stock" means the Company's Common Shares, par value $.01 per share,
as constituted on the date of original issue of this Warrant, and any shares of
capital stock into which such Common Shares may thereafter be changed or that
may be issued in respect of, in exchange for, or in substitution of such Common
Shares by reason of any transaction described in Section 8. As used herein, the
term "Warrants" means the warrant to purchase 500,000 shares of Common Stock
originally issued pursuant to the Agreement (as defined below) and all warrants
delivered in substitution or exchange for such warrant. The term "Warrant" means
one of the Warrants.
This Warrant to Purchase Common Stock of the Company is issued pursuant
to the Note Agreement dated as of September 5, 1997 (the "Agreement"), entered
into by the Company with Richard L. Monfort (the "Purchaser"). This Warrant is
being issued on October 6, 1997 (the "Closing Date"). The holder of this Warrant
is entitled to certain benefits of the Agreement. In addition to payment of the
Warrant Price (as defined herein) the Company has granted this Warrant and
agreed to issue the shares of Common Stock issuable upon exercise hereof as
consideration and in exchange for the agreement of the Purchaser to enter into
the Agreement and to purchase the Company's Floating Rate Subordinated Note due
2002 to be issued in an aggregate principal amount of $15,000,000 pursuant to
the Agreement.
Section 1. Term of Warrants; Exercise of Warrants. Subject to the terms
hereof, the holder of this Warrant shall have the right, at any time during the
period commencing on the Closing Date and ending at 5:00 p.m., Denver, Colorado
time, on the fifth Business Day following the Closing Date (the "Termination
Date"), to purchase from the Company up to the number of shares of Common Stock
which such holder may at the time be entitled to purchase pursuant to this
Warrant, upon at least five Business Days' prior written notice to the Company
of such holder's election to exercise this warrant and upon surrender to the
Company, at its address for receipt of notices pursuant to the Agreement, of
this Warrant, together with the purchase form at the end hereof duly completed
and signed, accompanied by payment to the Company of the Warrant Price (as
defined in and determined in accordance with the provisions of Sections 7 and 8)
for the number of shares with respect to which this Warrant is then exercisable.
Payment of the aggregate Warrant Price shall be made by certified or cashier's
check or wire transfer. As used herein, the term "Business Day" means any day
other than a Saturday or Sunday or a day on which commercial
1
<PAGE>
banks are required or authorized by law to be closed in either New York, New
York or Denver, Colorado.
Upon such surrender of this Warrant and payment of such Warrant Price
as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the holder of this Warrant
and in such name or names as such holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased,
together with cash, as provided in Section 9, with respect to any fractional
shares of Common Stock otherwise issuable upon such surrender. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of such shares of
Common Stock as of the close of business on the date of the surrender of this
Warrant and payment of the Warrant Price as aforesaid, notwithstanding that the
certificates representing such shares shall not actually have been delivered or
that the stock transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the election of the holder of
this Warrant, either in full or from time to time in part. In the event that
this warrant is exercised with respect to less than the aggregate number of
shares of Common Stock this Warrant then entitles such holder to purchase, the
Company shall deliver to or upon the order of such holder hereof a new Warrant
evidencing the rights of such holder to purchase the unpurchased shares of
Common Stock then called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant. In the alternative, at the
request of the holder upon any partial exercise of this Warrant, appropriate
notation may be made on this Warrant and the same shall be returned to such
holder.
Section 2. Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the shares of
Common Stock upon exercise of this Warrant, provided that the Company shall not
be required to pay any tax or taxes which may be payable with respect to any
secondary transfer of a Warrant or the shares of Common Stock issued upon
exercise of any Warrant, and in such case the Company shall not be required to
issue or deliver any certificates for shares of Common Stock, until the person
requesting the same has paid to the Company the amount of such tax or has
established to the Company's reasonable satisfaction that such tax has been paid
or that no such tax is due.
Section 3. Transferability.
Section 3.1 Registration. The Warrants shall be numbered and shall be
registered on the books of the Company maintained for such purpose (the "Warrant
Register").
Section 3.2 Transfer. Subject to compliance with Sections 3.3 and 3.4,
this Warrant, the warrant Shares (as defined below) and all rights hereunder are
transferable upon delivery hereof together with the assignment form at the end
hereof duly completed and signed by the holder hereof or such holder's duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer, provided that any transferee of
this Warrant or such
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Warrant Shares shall expressly agree to be bound by the terms and conditions
hereof. Upon any registration of transfer of this Warrant, the Company shall
execute and deliver a new Warrant or Warrants as may be requested by such holder
for the same aggregate number of shares of Common Stock as this Warrant. As used
herein, the term "Warrant Shares" shall mean, collectively, the shares of Common
Stock acquired pursuant to the exercise of this Warrant and any securities
issued as a dividend on or other distribution with respect to or in exchange or
replacement for or upon any subdivision of any of said shares of Common Stock.
Section 3.3 Limitations on Transfer of the Warrants and the Warrant
Shares. (a) If, at the time of any transfer of this Warrant or any Warrant
Shares, this Warrant or such Warrant Shares, as the case may be, are not
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), the Company may require as a condition precedent to allowing
such transfer that the holder or transferee of this Warrant or such Warrant
Shares furnish to the Company such information as, in the reasonable opinion of
counsel to the Company, is necessary in order to establish that such transfer or
exchange may be made without registration under the Securities Act, including a
written statement that such holder or transferee will not sell or otherwise
dispose of this Warrant or such Warrant Shares purchased or acquired by him in
any transaction which would violate the Securities Act or any other securities
laws.
(b) Prior to the Termination Date,
(i) the holder of this Warrant or any Warrant Shares will not
sell, transfer or otherwise dispose of this Warrant or any Warrant
Shares without the prior written consent of the Company or in
accordance with Section 3.4, and
(ii) the holder of this Warrant or any Warrant Shares will not
sell, transfer or otherwise dispose of this Warrant or any Warrant
Shares except in connection with a transfer of this Warrant and all
such Warrant Shares as an entirety,
provided that such holder may, without complying with the requirements of this
Section 3.3(b) or Section 3.4, transfer any portion of this Warrant or any
Warrant Shares (A) to the extent necessary, in the opinion of the Purchaser's
counsel, in order to comply with any applicable law, statute, rule or regulation
of any governmental body or with any order of any court, arbitrator or
governmental body and (B) to any parent, child, sister, brother, sister-in-law
or brother-in-law of such holder following the written agreement, reasonably
satisfactory to the Company and its counsel, of such transferee to be bound by
the terms hereof.
Section 3.4 Right of First Offer. (a) Subject to Section 3.3(b), if the
holder of this Warrant or any Warrant Shares (a "Selling Holder") desires at any
time prior to the Termination Date to sell this warrant or any Warrant Shares,
such holder shall first give notice to the Company (the "First Offer Notice")
that such holder desires to sell this Warrant or the Warrant Shares (the
"Offered Securities").
(b) Upon receipt of the First Offer Notice, the Company shall have the
option to offer to purchase the Offered Securities by written notice to the
Selling Holder given within 30 days from
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<PAGE>
receipt of the First Offer Notice and setting forth the aggregate cash price the
Company proposes to pay for the Offered Securities (the "Offered Price"). Upon
receipt of such written offer, or if the Company shall have failed to make a
written offer, the Selling Holder shall have the right for a period of 180 days
(i) to sell the Offered Securities as an entirety to any third party, provided
that any such sale shall be for a price no less favorable to the Selling Holder
than the Offered Price or (ii) to accept the Offered Price (in case the Company
made such written offer) to sell the Offered Securities as an entirety to the
Company pursuant to Subsection (c) below. Any Offered Securities not sold by
such Selling Holder within such 180 day period may not be sold by such Selling
Holder prior to the Termination Date unless such Offered Securities are again
offered to the Company in accordance with this Section 3.4.
(c) The Selling Holder may elect to accept the Offered Price by written
notice to the Company and such Selling Holder shall sell, and the Company shall
purchase, the Offered Securities at such time and place reasonably acceptable to
the Company as shall be designated by the Selling Holder in said notice. Upon
consummation of such sale and purchase, the Selling Holder shall deliver the
Offered Securities with an appropriate instrument of transfer (without any
representation or warranty other than as to ownership of such Offered Securities
free and clear of all adverse claims of any kind created by or resulting from
any actions or omissions of the Selling Holder) against payment of the Offered
Price by certified or cashier's check or wire transfer to the account of the
Selling Holder.
Section 3.5 Legend on Warrant Shares. Each certificate for shares of
Common Stock initially issued upon exercise of this Warrant, unless at the time
of exercise such shares are registered under the Securities Act, shall bear the
following legend:
"The securities represented by this Certificate have not been
registered or qualified under the Securities Act of 1933 or the
securities laws of any other jurisdiction and may not be sold,
exchanged, hypothecated or transferred in any manner except in
compliance with said Act and other applicable laws. The rights of the
holder of this Certificate to transfer this Certificate or the
securities represented hereby, and certain other rights and obligations
of the holder hereof, are subject to the terms of a Warrant Agreement,
dated as of September 5, 1997, between the Company and the initial
holder of this Certificate. A copy of such agreement, as amended, will
be provided without charge to the registered holder of this Certificate
upon written request to the Secretary of the Company"
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution in the United States pursuant to a registration
statement under the Securities Act of the securities represented thereby) shall
also bear the above legend unless counsel for the Company renders a written
legal opinion to the Company that the securities represented thereby need no
longer be subject to such restriction.
Section 4. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling the holder thereof
to purchase a like aggregate number of shares of Common Stock as this
certificate then entitles such holder to purchase. Any holder of
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<PAGE>
a Warrant desiring to exchange such Warrant certificate shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver one or more new Warrant certificates as so requested.
Section 5. Mutilated or Missing Warrant. In case any Warrant
certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at
the request of the holder thereof, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate or
certificates, or in lieu of and substitution for the certificate or certificates
lost, stolen or destroyed, a new Warrant certificate or certificates of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant and indemnity, if requested, satisfactory to the Company. In the case of
the initial Purchaser, the initial Purchaser's unsecured agreement of indemnity
shall be deemed satisfactory to the Company.
Section 6. Requirement of Availability of Shares of Common Stock. There
are authorized and available for issuance, and so long as any Warrant remains
outstanding the Company shall at all times keep authorized and available for
issuance, such number of shares of the Company's authorized but unissued Common
Stock as will be sufficient to permit the exercise in full of all outstanding
Warrants so as to ensure that the authorized capital of the Company comprises
sufficient unissued shares of Common Stock for issuance upon the exercise in
full of all outstanding Warrants and that such Common Stock may be issued by the
Board of Directors of the Company without any further authorization by the
shareholders of the Company. Every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Warrants shall be
irrevocably authorized and directed at all times to keep available such number
of authorized shares and other securities as will be sufficient for such
purpose. The Company shall supply any such transfer agent with duly executed
stock and other certificates for such purpose and shall provide or otherwise
make available any cash which may be payable as provided in Section 9.
Section 7. Warrant Price. The price per share of Common Stock (the
"Warrant Price") at which shares of Common Stock shall be purchasable upon the
exercise of the Warrants shall be U.S.$8.00, subject to adjustment pursuant to
Section 8.
Section 8. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
Section 8.1 Adjustments. The number of shares purchasable upon the
exercise of this Warrant and the Warrant Price shall be subject to adjustment as
follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) pay a liquidating cash dividend as so
denominated in accordance with generally accepted accounting principles, (iii)
subdivide its outstanding Common Stock, (iv) combine its outstanding Common
Stock into a smaller number of shares of Common Stock, or (v) issue by
reclassification of its Common Stock, spin-off, split-up, recapitalization,
merger,
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<PAGE>
consolidation or any similar corporate event or arrangement other securities of
the Company, the number of shares of Common Stock purchasable upon exercise of
this Warrant immediately prior thereto shall be adjusted so that the holder of
this Warrant shall be entitled to receive the kind and number of shares or other
securities of the Company which it would have owned or would have been entitled
to receive after the happening of any of the events described above had this
Warrant been exercised immediately prior to the happening of such event and any
record date with respect thereto. Any adjustment made pursuant to this
subsection (a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
(b) Except in respect of transactions described in subsection (a)
above, in case the Company shall sell or issue Common Stock or rights, options,
warrants, convertible securities or options or other rights to purchase
convertible securities or any similar instrument containing the right to
subscribe for, purchase or otherwise acquire shares of Common Stock
(collectively, "Derivative Securities") at a price per share which is lower at
the date of such sale or issuance of such Common Stock or lower at the record
date for determination of shareholders entitled to receive (or purchase) such
Derivative Securities than the then current Warrant Price immediately prior to
such sale or issue, then the number of shares of Common Stock purchasable upon
exercise of this Warrant shall be the number determined by multiplying the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the first public announcement (or consummation of such
transaction if the Common Stock is not then publicly traded) of such transaction
(or the record date for determination of shareholders entitled to receive (or
purchase) such Derivative Securities in the case of a distribution or issuance
thereof in respect of the Common Stock) by a fraction (not to be less than one)
with (A) a numerator equal to the product of (1) the number of shares of Common
Stock outstanding after giving effect to such sale or issuance (and assuming in
the case of Derivative Securities that such Derivative Securities had been fully
exercised or converted, as the case may be) and (2) the Warrant Price in effect
immediately before such public announcement date, consummation date or record
date, as the case may be, and (B) a denominator equal to the sum of (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such public announcement date, consummation date or record date, as the
case may be, and (y) the Warrant Price in effect immediately before such public
announcement date, consummation date or record date, as the case may be, and
(ii) the aggregate consideration received by the Company for the shares of
Common Stock to be so issued or sold or to be purchased or subscribed for upon
exercise of such Derivative Securities.
For the purposes of such adjustments, the Common Stock which the
holders of any such Derivative Securities shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
public announcement date, consummation date or record date, as the case may be,
and the consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such Derivative Securities, plus any
underwriting discounts or selling commissions paid by the Company, plus the
consideration or premiums stated in such Derivative Securities to be paid for
the Common Stock covered thereby. In case the Company shall sell or issue Common
Stock or Derivative Securities containing the right to subscribe for or purchase
Common Stock for a consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the "consideration
received by the Company" for purposes of this subsection (b), the fair market
value of said property shall be determined in good
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faith by the Board of Directors of the Company acting upon the advice of any
Independent Financial Expert acceptable to the Majority Warrantholders.
As used herein, the term "Majority Warrantholders" means the holder or
holders of then unexercised Warrants to purchase at least a majority of the
shares of Common Stock covered by all outstanding Warrants. For purposes of
determining whether the holders of outstanding Warrants at any time have taken
any action authorized by this Section or otherwise by this Warrant, any Warrants
owned by the Company, any Subsidiary or any Affiliate (as such terms are defined
in the Agreement) of the Company shall not be deemed outstanding.
As used herein, the term "Independent Financial Expert" means a
qualified appraisal or investment banking firm that (i) has experience in the
valuation of companies similar to the Company, (ii) does not (and whose
directors, officers, employees and affiliates do not) have a direct or indirect
financial interest in the Company or any of its affiliates or the holder of this
Warrant or any of its affiliates, (ii) has not been, and, at the time it is
called upon to give independent financial advice, is not (and none of whose
directors, officers, employees or affiliates is) a promoter, director or officer
of the Company or any of its affiliates or such holder or any of its affiliates,
and (iii) does not provide any advice or opinions to, and is not otherwise
compensated by, the Company or any of its affiliates or such holder or any of
its affiliates, except as an Independent Financial Expert.
(c) If the Company shall distribute in any calendar year to all or
substantially all holders of its Common Stock evidences of its indebtedness
(including Derivative Securities) or assets (including cash or other dividends
or distributions out of earnings) and the aggregate fair market value of all
assets or evidences of indebtedness so distributed in such calendar year exceeds
the greater of $1,000,000 and 10% of the Consolidated Net Income (as defined
below) for the preceding calendar year (the "Dividend Threshold"), then, and in
each case, the Company shall pay to the holder of this Warrant an amount equal
to such holder's pro rata share (assuming for such purpose the exercise of this
Warrant in full) of the amount by which such distributions exceeded the Dividend
Threshold in such year. The "fair market value of the portion of the assets
(other than cash) or evidences of indebtedness so distributed" shall be
determined in good faith by the Board of Directors of the Company acting upon
the advice of any Independent Financial Expert acceptable to the Majority
Warrantholders. As used herein, the term "Consolidated Net Income" shall mean,
for any period, the aggregate net income of the Company and its Subsidiaries as
determined on a consolidated basis in accordance with GAAP, provided that
Consolidated Net income shall be deemed to be zero in any period for which the
Company and its Subsidiaries have a net loss for such period determined on a
consolidated basis in accordance with GAAP.
(d) No adjustment in the number of shares of Common Stock purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent in the number of shares of Common Stock then
purchasable upon the exercise of this Warrant, provided that any adjustments
which by reason of this subsection (d) are not required to be made immediately
shall be carried forward and taken into account in any subsequent adjustment.
(e) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is increased or decreased as provided in this Section
8, the Warrant Price payable upon
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exercise of this Warrant shall be adjusted by multiplying the Warrant Price in
effect immediately prior to such adjustment by a fraction, the numerator of
which shall be the number of shares of Common Stock purchasable upon exercise of
this Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of shares so purchasable immediately after such adjustment.
(f) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant or the Warrant Price is adjusted as herein provided,
the Company shall cause to be promptly mailed to the holder by first-class mail,
postage prepaid, notice of such adjustment or adjustments and a certificate of
an executive officer of the Company setting forth the number of shares of Common
Stock purchasable upon the exercise of this Warrant and the Warrant Price after
such adjustment, a brief statement of the facts requiring such adjustment and
the computation by which such adjustment was made.
(g) If, as a result of an adjustment made pursuant to this Section 8,
the holder of this Warrant shall become entitled to purchase any shares of the
Company other than Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Warrant Price of such shares
shall be subject to adjustment. from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions of this Section 8 with
respect to the shares of Common Stock.
Section 8.2 No Adjustment in Certain Cases. No adjustments to the
number of shares of Common Stock issuable upon the exercise of this Warrant or
the Exercise Price shall be made in connection with the issuance of (a) Common
Stock upon exercise of any of the Warrants or (b) stock options granted to
employees and directors of the Company for the purchase of a number of shares of
Common Stock as may from time to time be duly authorized by the Board of
Directors.
Section 8.3 Preservation of Purchase Rights Upon Reorganization,
Consolidation, Merger, etc. In case of any reorganization, consolidation or
merger of the Company with or into another entity as a result of which the
holders of the Company's Common Stock become holders of other shares or
securities of the Company or of another entity or person, or such holders
receive cash or other assets, or in case of any sale or conveyance to another
person of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing entity
or person, as the case may be, shall execute with the holder of this Warrant an
agreement that such holder shall have the right thereafter upon payment of the
aggregate Warrant Price in effect immediately prior to such action to purchase
upon exercise of this Warrant the kind and amount of shares and other securities
and property which such holder would have owned or have been entitled to receive
after the happening of such reorganization, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such action and
the record date, if any, with respect to such action.
The agreements referred to in this Section 8.3 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. The provisions of this Section 8.3
shall similarly apply to successive reorganizations, consolidations, mergers,
sales or conveyances.
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Section 8.4 Statement on Warrants. This Warrant shall entitle the
holder hereof to purchase such number of shares of Common Stock at such Warrant
Price as may be determined in accordance with the terms hereof after giving
effect to any adjustments in the number or kind of shares purchasable upon the
exercise hereof or the Warrant Price, as the case may be, notwithstanding that
this Warrant certificate may continue to express the same price and number and
kind of shares as are initially stated herein.
Section 8.5 Adjustment by Board of Directors. If any event occurs as to
which, in the reasonable good faith opinion of the Board of Directors of the
Company, the provisions of this Section 8 are not strictly applicable or if
strictly applicable would not fairly protect the rights of the holder of this
Warrant in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no event shall any
adjustment have the effect of increasing the Warrant Price as otherwise
determined pursuant to any of the provisions of this Section 8, except in the
case of a combination of shares of a type contemplated in Section 8.1(a) and
then in no event to an amount larger than the Warrant Price as adjusted pursuant
to Sections 8.1(a) and 8.1(e).
Section 8.6 No Dilution or Impairment. The Company will not, through
any reorganization, transfer of assets, consolidation, merger, dissolution or
otherwise, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in carrying out all of the provisions of this Section
8.
Section 9. Fractional Interests. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of any Warrant. If any
fraction of a Share would, except for the provisions of this Section 9, be
issuable on the exercise of this Warrant (or specified portions thereof), the
Company shall pay an amount in cash equal to the then current market price of a
share of Common Stock (as determined in good faith by the Board of Directors of
the Company) multiplied by such fraction.
Section 10. No Rights as Shareholder; Notices. Nothing contained in
this Warrant shall be construed as conferring upon the holder or its transferees
any rights as a shareholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a shareholder with respect to any
meeting of shareholders for the election of directors of the Company or any
other matter. If, however, at any time prior to the Termination Date and prior
to the exercise of this Warrant, any of the following events shall occur:
(a) any action which would require an adjustment pursuant
to Section 8.1 or 8.5; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety) shall be proposed;
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then in any one or more of said events, the Company shall give notice in writing
of such event to each holder of Warrants as provided in Section 12 at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any
relevant dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up but failure to mail or receive such notice or any
defect therein or in the mailing thereof shall not affect the validity of any
such action taken. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be.
Section 11 Registration Rights.
Section 11.1 Demand Registration Rights.
(a) Right to Make Demand. At any time beginning one year after the date
hereof, the holders of a majority of the then outstanding Registrable
Securities, may request registration under the Securities Act of all or part of
their Registrable Securities (the "Initial Demand"). In addition, at any time
eighteen (18) months after the effectiveness of the Registration Statement filed
with respect to the Initial Demand, the holders of a majority of the then
outstanding Registrable Securities, may request an additional registration under
the Securities Act of all or part of their Registrable Securities not registered
pursuant to the Initial Demand (the "Secondary Demand"). In either instance,
such holders may exercise their right under this Section 11.1(a) by giving a
written request to the Company signed by them specifying the number of shares of
Registrable Securities requested to be included and the intended method of
disposition thereof. Within ten days after receipt of the request, the Company
will give written notice of the request to all other holders of Registrable
Securities and will include in such registration all Registrable Securities for
which the Company has received written requests for inclusion within fifteen
(15) days after Parent's notice is given to the holders pursuant to this Section
11.1(a), so long as the aggregate amount of Registrable Securities that the
holders request be included in each such registration equals at least 40% of all
Registrable Securities and have a fair market value at the time of the request
equal to $2,500,000 (a "Demand Registration").
(b) Underwritten Offerings; Priority on Demand Registrations. If the
holders of a majority of the Registrable Securities requested to be included so
elect, the Demand Registration may be in the form of an underwritten offering.
If the Demand Registration is an underwritten offering, the Company shall select
the managing underwriters for the offering and the Company may elect to include
other securities in such registration on the same terms and conditions as the
Registrable Securities to be included in such registration; provided, that, if
the managing underwriters advise the Company in writing that in their opinion
the number of Registrable Securities and other securities to be included in the
registration exceeds the number that can be sold in such offering at a price
satisfactory to the holders of a majority of the Registrable Securities
requested to be included in such registration, the Company will give priority
for inclusion in such registration: (i) first, to the Registrable Securities
requested to be included in such registration (or to such lesser number of
Registrable Securities that is equal to the number that, in the opinion of the
managing underwriters, can be sold, pro rata among the holders thereof based on
the number of Registrable Securities owned), (ii) second, to the securities, if
any, requested to be included in such
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registration pursuant to warrants or options issued to the representatives of
the underwriters with respect thereto; (iii) third, to the securities the
Company proposes to include in such registration; (iv) fourth, to the securities
that the Company is otherwise obligated to include in such registration; and (v)
fifth, to other securities that the Company may desire to include in such
registration.
(c) Restrictions on Demand Registration. Notwithstanding anything in
this Section 11.1 to the contrary, if the Company shall furnish to the holders
of Registrable Securities requesting registration a certificate signed by the
Chief Executive Officer or President of the Company stating that, in the good
faith reasonable judgment of the Board of Directors of Parent, such registration
of Registrable Securities would materially interfere with, or require premature
disclosure of, any financing, acquisition or reorganization involving the
Company or any of its wholly-owned subsidiaries or would otherwise have a
material adverse effect on the Company or the selling holders if undertaken at
the time requested, the Company shall have the right to defer taking action with
respect to such filing for a period of not more than ninety (90) days after
receipt of the request of the holders of Registrable Securities; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(d) Expenses. Except as otherwise provided in this Section 11.1, the
Company will pay all Registration Expenses in connection with a Demand
Registration. In a Demand Registration that is an underwritten offering, all
underwriting discounts, commissions spreads or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the Registrable Securities being offered thereby will be paid by the holders
thereof pro rata based on the number of Registrable Securities that each such
holder has requested be registered.
(e) As used herein, the term "Registrable Securities" means,
collectively, the Warrants, or any portion thereof, and all Warrant Shares
(including all such Warrant Shares issued upon exercise of any other Warrant),
or any portion thereof. Registrable Securities will cease to be such when (i) a
registration statement covering such Registrable Securities has become or been
declared or ordered effective and they have been disposed of pursuant to such
effective Registration Statement, (ii) they are sold, transferred or distributed
pursuant to and in compliance with Rule 144 (or any similar provision then in
force, but not including Rule 144A) under the Securities Act, or (iii) they have
been otherwise transferred and the Company has delivered new certificates or
other evidences of ownership for them not subject to any stop transfer order or
other restriction on transfer and not bearing a legend restricting transfer in
the absence of an effective registration or an exemption from the registration
requirements of the Securities Act.
(f) As used herein, the term "Registration Expenses" means all expenses
incident to the Company's performance of or compliance with this Agreement,
including, all registration and filing fees, fees and expenses of compliance
with federal and state securities laws, printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding underwriting
discounts, commissions spreads or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals), and other
representatives or advisors retained by the Company for the purpose of
fulfilling its obligations under this Agreement.
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Section 11.2 Piggyback Registration.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its securities under the Securities Act (other than as (i) a Demand
Registration; (ii) a registration of securities in connection with a merger, an
acquisition, an exchange offer, other business combination or an employee
benefit plan maintained by the Company or its subsidiaries; or (iii) a
registration of securities on Form S-4 or S-8 or any successor or similar form)
and the registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), the Company will give
prompt written notice to all holders of Registrable Securities of its intention
to effect such a registration and will include in such registration, subject to
Section 11.2(c), all Registrable Securities with respect to which the Company
has received written requests for Piggyback Registration within fifteen (15)
days after Parent's notice is given to the holders of Registrable Securities.
(b) Piggyback Expenses. The Company will pay all Registration Expenses
in connection with a Piggyback Registration. In a Piggyback Registration that is
an underwritten offering, all underwriting discounts or commissions spreads of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the Registrable Securities being offered thereby will
be paid by the holders thereof pro rata based on the number of Registrable
Securities that each such holder has requested be registered.
(c) Restrictions on Piggyback Registrations. Notwithstanding anything
to the contrary in this Section 11.2: (i) if, at any time after receiving such
requests and prior to the effective date of the Registration Statement filed in
connection with the Piggyback Registration, the Company for any reason decides
not to register securities of Parent, the Company will give written notice of
its decision to the holders of Registrable Securities and thereupon be relieved
of its obligation to register any Registrable Securities in connection with such
registration; and (ii) if the Company determines for any reason to delay a
Piggyback Registration, the Company may do so by giving written notice of its
decision to the holders of Registrable Securities.
(d) Priority on Underwritten Primary Registrations. If a Piggyback
Registration is an underwritten offering initiated on behalf of the Company and
the managing underwriters advise the Company in writing that in their opinion
the number of securities to be included in such registration exceeds the number
that can be sold in such offering at a price satisfactory to Parent, the Company
will give priority for inclusion in such registration: (i) first, to the
securities the Company proposes to include in such registration; (ii) second, to
the securities, if any, requested to be included in such registration pursuant
to warrants or options issued to the representatives of the underwriters with
respect thereto; (iii) third, securities that the Company has become, prior to
the date hereof, otherwise obligated to include in such registration; (iv)
fourth, to the Registrable Securities requested to be included in such
registration (or to such lesser number of Registrable Securities, which is equal
to the number that, in the opinion of the managing underwriters, can be sold,
pro rata among the holders thereof based on the number of Registrable Securities
owned); and (v) fifth, to other securities that the Company may desire to
include in such registration.
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(e) Priority on Underwritten Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
Parent's securities, and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in the
registration exceeds the number that can be sold in the offering, the Company
will give priority for inclusion in such registration: (i) first, to the
securities requested to be included by the holders requesting such registration;
(ii) second, to the securities sought to be included in such registration
pursuant to the warrants or options issued to the representatives of the
underwriters with respect thereto; (iii) third, to the Registrable Securities
requested to be included in such registration (or to such lesser number of
Registrable Securities, which is equal to the number that, in the opinion of the
managing underwriters, can be sold, pro rata among the holders thereof based on
the number of Registrable Securities owned), and (iv) fourth, to other
securities that the Company may desire to include in such registration.
Section 11.3 Transferability. The registration rights granted in this
Section 11 shall not be assignable in any manner to any transferee of any of the
Warrants or Registrable Securities except in connection with the sale by the
holder of this Warrant or the Registrable Securities issued upon exercise hereof
of all of this Warrant or such securities, as the case may be, in a transaction
not involving a public offering for the purposes of the Securities Act.
Section 11.4 Right to Review the Registration Statement. (a) In
connection with the preparation and filing of each registration statement under
the Securities Act pursuant to Sections 11.1 and 11.2, the Company will give the
holders of Registrable Securities registered under such registration statement,
the underwriters, and their respective counsel and accountants, the opportunity
to review and comment upon such registration statement, each prospectus included
therein or filed with the Commission and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
(b) Each such holder of Registrable Securities shall have the right to
review and comment upon such Registration Statement and to request the insertion
therein of material furnished to the Company in writing which in the judgment of
such holder (a "Requesting Holder") of Registrable Securities should be
included; provided, however, such information shall not be required to be
included if in the reasonable opinion of counsel of the Company, the inclusion
of such material furnished by such holder would be misleading or otherwise in
violation of the rules and regulations of the Securities Act. Furthermore, a
Requesting Holder has the right to require the deletion of any reference to such
Requesting Holder by name or otherwise if such reference is not required by the
Securities Act or the rules promulgated thereunder.
Section 11.5 Registration Procedures.
(a) Procedures the Company Will Follow. Whenever the holders of the
Registrable Securities duly request that any Registrable Securities be
registered pursuant to this Agreement, the Company will use its best efforts to
effect the registration of the Registrable Securities on a form
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available under the Securities Act for which the Company then qualifies and that
counsel for the Company deems appropriate and which form is available for the
sale of the Registrable Securities in accordance with the intended method of
disposition, and pursuant thereto the Company will do the following as
expeditiously as possible:
(i) Registration Statement. The Company will prepare and file
with the SEC, and use its best efforts to cause to become effective, a
Registration Statement with respect to the Registrable Securities the
Company has been so requested to register on a form available under the
Securities Act for which the Company then qualifies and that counsel
for the Company deems appropriate and which form is available for the
sale of the Registrable Securities in accordance with the intended
method of disposition.
(ii) Maintenance of Effectiveness. The Company will prepare
and file with the SEC such amendments and supplements to the
Registration Statement and prospectus used for the sale of the
Registrable Securities as may be necessary to keep the Registration
Statement effective until the earlier of: (A) the date on which the
sale of the Registrable Securities is completed and (B) the date 90
days after the Registration Statement with respect to the Registrable
Securities becomes effective, and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by the Registration Statement during its effectiveness in
accordance with the intended methods of disposition of such securities.
(iii) Copies of Prospectuses. The Company will furnish to the
holders the number of copies of the Registration Statement, each
amendment and supplement thereto, the prospectus included in the
Registration Statement (including each preliminary prospectus) and such
other documents that the holders may reasonably request to facilitate
the disposition of the Registrable Securities the Company has been so
requested to register. At any time when a prospectus with respect to
the Registrable Securities is required to be delivered under the
Securities Act, the Company will notify the holders of the occurrence
of any material change in the information contained in the prospectus
included in the Registration Statement. Whenever in Parent's judgment
it is necessary, the Company will prepare a supplement or amendment to
the prospectus so that, as thereafter delivered to the proposed
purchasers of the Registrable Securities, the prospectus will not
contain, to Parent's knowledge, any untrue statement of material fact
or omit to state any fact necessary to make the statements in it not
misleading, and the holders will discontinue disposition of the
Registrable Securities until the holders are advised in writing by the
Company that the use of the prospectus may be resumed and are furnished
with a supplement or amendment to the prospectus. If the Company shall
give any notice to suspend the disposition of Registrable Securities
pursuant to a prospectus, the Company shall extend the period of time
during which the Company is required to maintain the Registration
Statement effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such
notice through and including the date the holders are advised by
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the Company that the use of the prospectus may be resumed or receive
the copies of the supplement or amendment to the prospectus.
(iv) Blue Sky Compliance. The Company will use its best
efforts to register or qualify the Registrable Securities the Company
has been so requested to register under the securities or blue sky laws
of such jurisdictions within the United States of America as any holder
of Registrable Securities selling Registrable Securities in connection
with the registration reasonably requests, and do any and all other
acts and things reasonably necessary or advisable to enable the holder
to dispose of the holder's Registrable Securities in such
jurisdictions; except the Company will not be required to: (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified or (B) consent to, or take any action that would subject it
to, general service of process or taxation in any jurisdiction where it
is not then so subject.
(v) Listing; Transfer Agent. The Company will use its best
efforts to cause all such Registrable Securities to be listed on all
securities exchanges or quoted on all automated quotation systems on
which securities of the same class issued by the Company are then
listed or quoted and will provide a transfer agent and registrar for
all such Registrable Securities no later than the effective date of the
Registration Statement.
(vi) Customary Agreements. In the case of an underwritten
offering, the Company will enter into customary agreements, including
an underwriting agreement in customary form, as the holders of a
majority of the Registrable Securities being registered or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Registrable Securities being so
registered.
(vii) Certain Information. The Company will make available for
inspection upon reasonable request by any holder of Registrable
Securities being registered, any underwriter participating in any
disposition pursuant to the Registration Statement, and any attorney,
accountant or other agent retained by the holder or underwriter, all
financial and other records, pertinent corporate documents and
properties of Parent, and cause Parent's officers, directors and
employees to supply all information reasonably requested by the holder,
underwriter, attorney, accountant or agent in connection with the
Registration Statement, upon receipt by the Company of confidentiality
agreements satisfactory to Parent.
(viii) Compliance with Law. The Company will comply with all
rules and regulations of the SEC and applicable state securities laws
governing the manner of sale of securities in connection with the
disposition of any Registrable Securities pursuant to any Registration
Statement.
(ix) Stop-Orders. The Company will promptly notify all
holders of Registrable Securities being registered of its receipt of:
(A) any stop-order,
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injunction or order suspending the effectiveness of any Registration
Statement covering any Registrable Securities or, to Parent's
knowledge, the initiation of any proceeding for that purpose, or (B)
any notification with respect to the limitation, restriction or
suspension of the offer or sale of any Registrable Securities in any
jurisdiction in which the Registrable Securities were qualified to be
sold or, to Parent's knowledge any proceeding for that purpose. If the
Company notifies the holders of any such event, the holders will
immediately discontinue all sales or other dispositions of the
Registrable Securities pursuant to the Registration Statement until the
Company notifies the holders that such stop-order, injunction, order,
limitation, restriction or suspension has been lifted, except, unless
the Company notifies the holders otherwise, if a stop-order,
injunction, order, limitation, restriction or suspension issued by a
state securities or blue sky administrator applies only to offers and
sales in such state, the holders will immediately discontinue all sales
and other disposition of the Registrable Securities in such state.
Parent, with cooperation of the holders, will use its reasonable
efforts to contest any such proceeding and to obtain the withdrawal of
any such stop-order, injunction, order, limitation, restriction or
suspension.
(b) Procedures Holders of Registrable Securities Will Follow. Whenever the
holders of the Registrable Securities duly request that any Registrable
Securities be registered pursuant to this Agreement, the holders will do the
following as expeditiously as possible:
(i) Certain Information. The holders will provide the Company
with such information and affidavits about the holders and the intended
manner of disposition of the Registrable Securities and otherwise use
their best efforts to cooperate with the Company and the underwriters,
if any, the Company may require to satisfy any obligation of the
Company under this Agreement to register the Registrable Securities
under federal and state securities laws and otherwise take actions
related thereto. If the holders fail to provide the information
required under this Section 11.5(b)(i), the Company may delay the
registration until the information is provided and the holders agree to
pay the Company its out-of-pocket expenses that arise from the failure
to provide such information. The holders will notify the Company of the
occurrence of any material change in the information provided by them
that is contained in the prospectus included in the Registration
Statement, as then in effect. Whenever in Parent's judgment it is
necessary, the Company will prepare a supplement or amendment to the
prospectus so that, as thereafter delivered to the proposed purchasers
of the Registrable Securities, the prospectus will not contain, to
Parent's knowledge, any untrue statement of material fact or omit to
state any fact necessary to make the statements in it not misleading,
and the holders will discontinue disposition of the Registrable
Securities until the holders are advised in writing by the Company that
the use of the prospectus may be resumed and are furnished with a
supplement or amendment to the prospectus. If the Company shall give
any notice to suspend the disposition of Registrable Securities
pursuant to a prospectus, the Company shall extend the period of time
during which the Company is required to maintain the Registration
Statement effective pursuant to this
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Agreement by the number of days during the period from and including
the date of the giving of such notice through and including the date
the holders are advised by the Company that the use of the prospectus
may be resumed or receive the copies of the supplement or amendment to
the prospectus.
(ii) Compliance with Law. The holders will comply with all
rules and regulations of the SEC and applicable state securities laws
governing the manner of sale of securities in connection with the
disposition of any Registrable Securities pursuant to any Registration
Statement.
(iii) Participation in Underwritten Offerings. No holder of
Registrable Securities may participate in any underwritten offering
hereunder unless such holder: (A) agrees to sell such holder's
securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the holders of
a majority (by number of shares) of Registrable Securities to be
included in such underwritten offering and (B) completes and executes
all questionnaires, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements.
(c) Restrictions on Public Sale by Holders. Whenever the Company
proposes to register any of its securities under the Securities Act in an
underwritten offering (other than as (i) a Demand Registration; (ii) a
registration of securities in connection with a merger, an acquisition, an
exchange offer, other business combination or an employee benefit plan
maintained by the Company or its subsidiaries; or (iii) a registration of
securities on Form S-4 or S-8 or any successor or similar form) and if requested
by the managing underwriters, each holder of Registrable Securities will not
effect any public sale or disposition of securities of the Company the same as
or similar to those being registered, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act, except as part of such registration, during
the 14-day period prior to, and during the 90-day period (or, with respect to a
Piggyback Registration, such longer period of up to 120 days as may reasonably
be requested by such managing underwriters) beginning on the effective date of
the related Registration Statement, to the extent timely notified in writing by
the Company or the managing underwriters.
(d) Restrictions on Public Sale by the Company and Others. In
connection with any Demand Registration that is an underwritten offering and if
requested by the managing underwriters, the Company will not effect any public
sale or disposition of any securities the same as or similar to those being
registered by Parent, except as part of such registration, during the 14-day
period prior to, and during the 90-day period beginning on the effective date of
the related Registration Statement to the extent timely notified in writing by
the managing underwriters. Notwithstanding anything to the contrary in the
foregoing, the restrictions under this Section 11.5(c) shall not limit the
issuance of securities of Parent, or options or warrants to purchase such
securities, that the Company is required to issue pursuant to: (i) any employee
stock option plan or non-employee director stock option plan in effect at the
time the Company receives a request for Demand Registration; (ii) the exercise
of any outstanding options or warrants with respect to securities of Parent; or
(iii) the exercise of any conversion or exchange right in accordance with the
terms of any other security
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convertible into or exchangeable for securities the same as or similar to those
being registered by Parent.
(e) Third-Party Registration Rights. This Agreement is in all cases
subject to the contractual registration rights granted pursuant to: (i) the
Registration Rights Agreement between the Company and certain of its
shareholders, entered into by the Company and such shareholders in connection
with the Company's initial public offering of common stock, (ii) the
Registration Rights Agreement between the Company and certain former
shareholders of Current Electronics, Inc. dated February 24, 1997, and (iii) the
Registration Rights Agreement between the Company and certain former
shareholders of Circuit Test, Inc., entered into pursuant to the Agreement and
Plan of Reorganization between the Company, Circuit Test, Inc., and CTI
Acquisition Corp., dated as of July 9, 1997.
Section 11.6 Indemnification.
(a) Indemnification by Parent. The Company will indemnify and hold
harmless, to the extent permitted by law, each each holder of Registrable
Securities and, if applicable, the officers and directors of the holder, and
each Person who controls the holder (within the meaning of the Securities Act or
the Exchange Act) from and against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, injunction, judgment, order,
decree, ruling, damage, dues, penalty, fines, costs, amounts paid in settlement,
liabilities, obligations, losses, expenses and fees, including court costs and
attorneys' fees and expenses (collectively, "Losses") that the holder and, if
applicable, the officers and directors of the holder, and each Person who
controls the holder may suffer through and after the date of the claim for
indemnification caused by or arising out of any untrue or alleged untrue
statement of material fact contained in any Registration Statement, prospectus,
preliminary prospectus, or other related filing with the SEC or any other
federal or state governmental agency, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by any
holder of Registrable Securities expressly for use therein or by any holder's
failure to comply with any legal requirement applicable to such holder and not
contractually assumed by the Company to deliver a copy of the Registration
Statement or prospectus or any amendments or supplements thereto after the
Company has furnished the holder with a sufficient number of copies of the same.
In connection with an underwritten offering, the Company shall indemnify the
underwriters, their officers and directors, and each Person who controls the
underwriters (within the meaning of the Securities Act or the Exchange Act) to
the extent customary.
(b) Indemnification by Holders. In connection with any registration in
which a holder of Registrable Securities is participating, each such Holder will
indemnify and hold harmless, to the extent permitted by law, Parent, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act or the Exchange Act) from and against the holder's
Pro Rata Share (as defined in this Section 11.6(b)) of all Losses that Parent,
its directors and officers and each Person who controls the Company may suffer
through and after the date of the claim for indemnification caused by or arising
out of any untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus, preliminary prospectus, or other related
filing
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with the SEC or any other federal or state governmental agency, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that the same are caused by or contained in any information furnished
in writing to the Company by any holder of Registrable Securities expressly for
use therein or by any holder's failure to comply with any legal requirement
applicable to such holder and not contractually assumed by the Company to
deliver a copy of the Registration Statement or prospectus or any amendments or
supplements thereto after the Company has furnished the holder with a sufficient
number of copies of the same. For purposes of the foregoing, a holder's "Pro
Rata Share" means that fraction equal to the amount of the proceeds received or
to be received by the holder in connection with the registration over the total
proceeds received or to be received by all holders in connection with the
registration.
(c) Indemnification Procedure. If any Person has a claim for Losses
hereunder (an "Indemnified Party"), the Indemnified Party will: (i) notify the
party or parties hereto from which it is entitled to make such claim
(individually, an "Indemnifying Party" and, together, the "Indemnifying
Parties") of such claim, specifying the nature of the Losses and the amount or
estimated amount thereof if feasible, and (ii) unless in the Indemnified Party's
reasonable judgment (based on written advice of counsel) a conflict of interest
between the Indemnified Party and the Indemnifying Parties may exist with
respect to the matter giving rise to such claim, permit the Indemnifying Party
to assume and thereafter conduct the defense of the matter with counsel of the
Indemnifying Party's choice reasonably satisfactory to the Indemnified Party. If
the defense is so assumed, the Indemnifying Party will not be subject to any
liability for any settlement made with respect to such claim by the Indemnified
Party without its consent, which will not be unreasonably withheld. An
Indemnifying Party who is not entitled to or elects not to assume the defense of
a claim, will not be obligated to pay the fees and expenses of more than one
counsel for all parties it indemnifies with respect to such claim, unless in the
reasonable judgment of any Indemnified Party (based on written advice of
counsel) a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim.
Section 12. Notices. Any notice by the Company, the holder of this
Warrant or the holders of Warrant Shares or Registrable Securities shall be in
writing and shall be deemed to have been duly given if hand delivered on the
date of such delivery, or on the fifth day after being mailed by certified mail,
return receipt requested, or on the business day after timely delivery to a
recognized overnight courier that guarantees overnight delivery, (a) if to the
Company, at 9351 Grant Street, Suite 600, Denver, Colorado 80229, Attention:
Chief Financial Officer, or at such other address as the Company may designate
by notice to each holder of Warrants, Warrant Shares or Registerable Securities
at the time outstanding, with a copy to Francis R. Wheeler, Esq., Holme Roberts
& Owen, Suite 4100, 1700 Lincoln Street, Denver, Colorado 80203, (b) if to any
Purchaser that holds Warrants, Warrant Shares or Registerable Securities, at
such Purchaser's address set forth in the Agreement or at such other address as
such Purchaser may designate by written notice to the Company and (c) if to any
other holder of Warrants, Warrant Shares or Registerable Securities, at the
address of such holder as it appears on the Warrant Register.
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Section 13. Successors. Except as expressly provided in Section 11.3,
this Warrant shall bind and inure to the benefit of the Company and its
permitted successors and assigns hereunder, the Purchasers and their respective
successors and assigns hereunder and, in addition, shall inure to the benefit of
and be enforceable by all holders from time to time of the Warrants, the Warrant
Shares and the Registerable Securities. No such assignee may claim rights under
Section 11 hereof without at the time of such claim agreeing to be bound by the
provisions thereof.
Section 14. Applicable Law. This Warrant shall be enforced in
accordance with, and the rights of the Company, the holder of this Warrant and
the holders of Registerable Securities issued upon the exercise hereof shall be
governed by, the laws of the State of Colorado (without regard to conflicts of
laws principles thereof).
Section 15. Benefits of this Agreement. Nothing in this Warrant shall
be construed to give to any person or corporation other than the Company, the
holder of this Warrant and the holders of the Warrant Shares or Registrable
Securities any legal or equitable right, remedy or claim under this Warrant and
this Warrant shall be for the sole and exclusive benefit of the Company, the
holder hereof and the holders of the Warrant Shares and the Registrable
Securities.
Section 16. Survival. All covenants and agreements of the Company that
relate to the Warrant Shares or the Registerable Securities and all rights and
duties if the holders from time to time of the Warrant Shares or the
Registerable Securities in this Warrant shall be deemed to survive any surrender
hereof to the Company upon exercise hereof as contemplated by Section 1.
References herein to the Agreement and terms defined therein shall be deemed to
survive the termination of the Agreements.
EFTC CORPORATION
By /s/
Title:
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EFTC CORPORATION
ELECTION TO PURCHASE
EFTC Corporation
9351 Grant Street, Suite 600
Denver, Colorado 80229
Att: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the Warrant to which this Election to Purchase is
attached for, and to purchase thereunder, _____________ shares of Common Stock
(or other securities) of the Company provided for therein, and requests that
certificates for said shares (or other securities) be issued in the name of:
(Please Print Name and Address)
and, if said number of shares shall not be all the shares of Common Stock
purchasable hereunder, that a new Warrant certificate for the balance of said
shares purchasable under the said Warrant be registered in the name of the
undersigned holder or its nominee as below indicated and delivered to the
address stated below:
Dated: ,
Name of holder or
Nominee (Please Print):
Address:
Signature:
Signature Guaranteed:
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(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing Attorney to
transfer said Warrant on the books of EFTC Corporation with full power of
substitution in the premises.
Dated: ,
Signature of Registered Holder
Signature Guaranteed:
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