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
FEBRUARY 24, 1997
(Date of earliest event reported)
ELECTRONIC FAB TECHNOLOGY CORP.
(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.)
7251 West 4th Street
Greeley, Colorado 80634-9763
(Address of principal executive offices)
(970) 353-3100
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 24th, 1997, pursuant to an Agreement and Plan
of Merger, dated as of January 15, 1997 (the "Merger Agreement"),
and a Share Purchase Agreement, dated as of January 15, 1997
(the "Share Purchase Agreement"), Electronic Fab Technology
Corp., a Colorado corporation (the "Company"), completed its
acquisition of Current Electronics, Inc., an Oregon corporation
("CEI"), and its affiliate, Current Electronics (Washington),
Inc., a Washington corporation ("CEWI"). The acquisition
included (1) the merger of CEI with and into Current Merger
Corp., an Oregon corporation and a wholly owned subsidiary of
the Company, in exchange for a cash payment of $3.37 million and
1,980,000 shares of the Company's Common Stock, par value $.01
per share ("the Common Stock"), and (2) the payment of $1.53
million to the existing shareholders of CEWI in exchange for all
of the outstanding capital stock of CEWI. The issuance of the
shares of Common Stock that constituted a portion of the
consideration paid under the Merger Agreement was approved and
adopted by the requisite votes of the Company's stockholders at
a special meeting held on February 24, 1997. The aggregate cash
consideration of $3.37 million received by the former holders of
the common stock of CEI is subject to certain future
adjustments, which may increase or decrease the aggregate amount
of such consideration. The acquisitions of CEI and CEWI will be
accounted for using the purchase method of accounting. Mr.
Gregory Hewitson, Mr. Matthew Hewitson, and Mr. Charles
Hewitson: the principal shareholders of CEI prior to its
acquisition by the Company, have been appointed to the Company's
Board of Directors. In Connection with the acquisitions of CEI
and CEWI, (a) pursuant to a Registration Rights Agreement, dated
as of February 24, 1997 (the "Registration Rights Agreement"),
the company agreed to register the resale of Mr. Gregory
Hewitson's, Mr. Matthew Hewitson's and Mr. Charles Hewitson's
shares of Common Stock under the Securities Act of 1933 under
certain circumstances and (b) pursuant to an Indemnification
Agreement, dated as of February 24, 1997 (the "Indemnification
Agreement"), the shareholders of CEI and CEWI agreed to indemnify
the Company against certain damages that could result from
breaches of certain covenants and representations and warranties
set forth in the Merger Agreement and the Share Purchase
Agreement.
The foregoing discussion of the Merger Agreement, the
Share Purchase Agreement, the Registration Rights Agreement and
the Indemnification Agreement are qualified in their entirety by
reference to the terms of such agreements, which constitute
exhibits hereto and are incorporated herein by reference.
The Company also finalized an unsecured short term bridge
facility and an amendment to its revolving line of credit with
Bank One in order to finance this acquisition. The amended line
of credit has substantially the same terms as the prior
existing line, except that the total amount available thereunder
has increased to $15,000,000. The short term bridge facility in
the amount of $4,900,000 was used to pay the cash portion of
the consideration under the Merger Agreement and the Share
Purchase Agreement and has a term of 90 days. The Company is
engaged in discussions for the issuance of convertible debt,
preferred stock or other securities, the proceeds of which will
be used to repay the bridge facility.
Prior to the acquisition, CEI and CEWI were independent
providers of manufacturing services, cables and wire harnesses
to OEMs primarily in the aerospace/avionics, instrumentation,
telecommunications and computer peripherals industries. CEI
operates a campus, including manufacturing facilities comprising
47,000 square feet in Newberg, Oregon and employs approximately
290 people. CEWI operates a 20,000 square feet manufacturing
facility in Moses Lake, Washington, and employs approximately 50
people.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
The following financial statements of CEI and CEWI
(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,
approximately May 9,1997.
i. Combined Statements of Income and Retained
Earnings for the years ended September 30, 1996,
1995, and 1994;
ii. Combined Balance Sheets as of September 30,
1996 and 1995;
iii. Combined Statement of Cash Flows for the years
ended September 30, 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 Proxy Statement
dated February 11, 1997 relating to the special meeting of the
Company's shareholders held on February 24, 1997:
i. Unaudited Pro Forma Condensed Statement of
Operations for the Nine Months Ended September
30, 1996;
ii.i. Unaudited Pro Forma Condensed Statement of
Operations for the Year Ended December
31,1995;
iii.i. Unaudited Pro Forma Condensed Balance Sheet
as of September 30, 1996.
(c) Exhibits
The following exhibits are filed herewith or incorporated
by reference:
2.1 Agreement and Plan of Merger among Electronic
Fab Technology Corp.,
Current Merger Corp., and Current Electronic,
Inc., dated as of January 15, 1997 (Pursuant
to Item 601(b)(2) of Regulation S-K, the
Company agrees to furnish supplementally to
the Commission upon request a copy of any
schedule or exhibit omitted from such
Agreement and Plan of Merger as filed
herewith.)
2.2 Share Purchase Agreement, dated as of January
15, 1997, among the Company and the
shareholders of Current Electronics
(Washington), Inc. (Pursuant to Item 601(b)(2)
of Regulation S-K, the Company agrees to
furnish supplementally to the Commission upon
request a copy of any schedule or exhibit
omitted from such Share Purchase Agreement as
filed herewith.)
10.1 Registration Rights Agreement, dated as of
February 24,1997, among the Company, Charles
E. Hewitson, Matthew J. Hewitson, and Gregory
Hewitson and certain other parties.
10.2 Indemnification Agreement, dated as of
February 24, 1997, among the shareholders of
Current Electronics, Inc. party thereto, the
shareholders of Current Electronics
(Washington), Inc. party thereto and the
Company.
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.
Electronic Fab Technology
Corp.
Stuart Fuhlendorf
Date: March 5, 1997 Stuart Fuhlendorf
V.P. Finance and CFO
APPENDIX A
CONFORMED COPY
================================================================
AGREEMENT AND PLAN OF MERGER
among
ELECTRONIC FAB TECHNOLOGY CORP.,
CURRENT MERGER CORP.
and
CURRENT ELECTRONICS, INC.
January 15, 1997
=========================================================================
TABLE OF CONTENTS
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I MERGER . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Time . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Certain Tax Positions . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Taking of Necessary Action; Further Action
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II SURVIVING CORPORATION . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Articles of Incorporation . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Officers . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III EFFECT OF MERGER ON CAPITAL STOCK OF
MERGER SUB
AND TARGET . . . . . . . . . . . . . . . . . . . . . 2
3.1 Effect on Capital Stock . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Exchange of Certificates . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 No Further Ownership Rights in Target
Common
Stock . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Lost, Stolen or Destroyed Certificates . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Stock Subject to Conditions . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TARGET .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Organization, Standing and Power . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Capitalization; Shareholders . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Subsidiaries . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Due Authorization . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Financial Statements . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Absence of Certain Changes . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Liabilities . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Litigation . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Restrictions on Business Activities . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Governmental Authorization . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Contracts and Commitments . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.12 Title to Property . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Intellectual Property . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 Environmental Matters . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.15 Taxes . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.16 Employee Benefit Plans . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.17 Employee Matters . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.18 Interested Party Transactions . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.19 Insurance . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.20 Compliance With Laws . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.21 Major Customers . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.22 Suppliers . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.23 Inventory . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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4.24 Product Warranty and Product Liability . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.25 Minutes Books . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.26 Brokers' and Finders' Fees . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.27 Section 60.835 of OBCA Not Applicable . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.28 Proxy Statement . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.29 Regulation D Offering . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.30 Disclosure . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT
AND
MERGER SUB . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Organization, Standing and Power . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Capitalization . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Due Authorization . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 SEC Documents; Financial Statements . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Absence of Certain Changes . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Compliance with Laws . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Board Approval . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Brokers' and Finders' Fees . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Conduct of Business of Target . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 No Solicitation; Acquisition Proposals . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Notice of Breach . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII ADDITIONAL COVENANTS . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 Proxy Statement . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Meetings of Shareholders . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Access to Information . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Confidentiality . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Publicity . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Filings; Cooperation . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 Employment Matters . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.8 Director Nominees . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.9 Further Assurances . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.10 Certain Tax Matters . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII CONDITIONS PRECEDENT . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 Conditions to Obligations of Each Party to
Effect the Merger . . . . . . . . . . . . . . . . . . . .
23
8.2 Additional Conditions to Obligations of
Target
to Effect the Merger . . . . . . . . . . . . . . . . 23
8.3 Additional Conditions to the Obligations
of
Parent and Merger Sub to Effect the Merger . . . . . . .
24
ARTICLE IX RESTRICTIONS ON TRANSFER . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Legends . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Notice of Proposed Dispositions . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X TERMINATION, AMENDMENT AND WAIVER . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Termination . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 Effect of Termination . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 Amendment . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 Extension; Waiver . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1 Survival of Representations and Warranties
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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11.2 Notices . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Interpretation . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 Counterparts . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.5 Entire Agreement; Nonassignability;
Parties in
Interest . . . . . . . . . . . . . . . . . . . . . . 28
11.6 Severability . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.7 Remedies Cumulative; No Waiver . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.8 Governing Law . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.9 Rules of Construction . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.10 Expenses. . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.11 Attorneys Fees . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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EXHIBITS
Exhibit 7.7A Consulting Agreement
Exhibit 7.7B Employment Agreement
Exhibit 8.2(c) Opinion of Counsel to Parent
Exhibit 8.2(e) Registration Rights Agreement
Exhibit 8.3(c) Opinion of Counsel to Target and
Shareholders of CEWI
Exhibit 8.3(g) Indemnification Agreement
Exhibit 8.3(h) Tax Letter
SCHEDULES
Schedule 3.1(b)-1
Schedule 3.1(b)-2
Schedule 8.2(f)
Target Disclosure Schedule
Parent Disclosure Schedule
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INDEX OF DEFINED TERMS
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1994 Audit Fees . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Adjusted Debt Amount . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Agreement . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annual Financial Statements . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
business combination . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Cash Amount . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
CEWI . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificates . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Date . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Combined Equity . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Confidential Information . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Designees . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Dissenting Shares . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Effective Time . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Environmental Law . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
environment . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Governmental Entity . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hewitson Consulting Agreements . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Holder . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Indemnification Agreement . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Intellectual Property . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Interim Target Financial Statements . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Inventory . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
include . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
includes . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
including . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
knowledge . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Material Adverse Effect . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Materials of Environmental Concern . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Merger . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
multiemployer plan . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
material . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
made available . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub Common Stock . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
no action . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
OBCA . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
A-v
<PAGE> 99
<TABLE>
<S>
<C>
Parent . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Balance Sheet Date . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Parent Common Stock . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Parent Disclosure Schedule . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Parent Financial Statements . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Parent SEC Documents . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Parent Shareholders Meeting . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Parent Stock Option Plans . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Per Share Cash Amount . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Proprietary Information . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Proxy Statement . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchase Agreement . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
prohibited transaction . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
release . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
reportable event . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Registration Rights Agreement . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Securities . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Shareholders . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Amount . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stock Price Amount . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Surviving Corporation . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Target . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Target Authorizations . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Target Common Stock . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Target Disclosure Schedule . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Target Employee Plans . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Tax authority . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Tax Return . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Team Bonuses . . . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Third Party Intellectual Property Rights . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Voting Agreement . . . . . . . . . . . . . . . . . . . . .
. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
A-vi
<PAGE> 100
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
"Agreement"),
dated as of
January 15, 1997, is among ELECTRONIC FAB TECHNOLOGY CORP.,
a
Colorado
corporation ("Parent"), CURRENT MERGER CORP., an Oregon
corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and
CURRENT
ELECTRONICS,
INC., an Oregon corporation ("Target").
RECITALS
A. The Boards of Directors of Parent and
Target
have determined
that a business combination between Parent and Target is in
the
best interests
of their respective companies and shareholders, and
accordingly
have approved
this Agreement and the merger provided for herein whereupon
Target shall merge
with and into Merger Sub upon the terms, and subject to the
conditions, set
forth herein. In addition, each shareholder of Target has
approved this
Agreement and the merger provided for herein.
B. 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").
C. Parent, Merger Sub and Target desire to
make
certain
representations, warranties and agreements in connection
with
the merger.
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
MERGER
1.1 The Merger. Subject to the terms and
conditions of this
Agreement, at the Effective Time (as defined in Section
1.3),
Target shall be
merged with and into Merger Sub in accordance herewith and
the
separate
corporate existence of Target shall thereupon cease (the
"Merger"). Merger Sub
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 60.497 of the Oregon Business
Corporation Act (the
"OBCA").
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 Target 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 meeting the
requirements of
Section 60.494 of the OBCA to be properly executed and duly
filed in accordance
with the OBCA on the Closing Date. The Merger shall become
effective at the
time when the Articles of Merger are so filed or at such
later
time that the
parties hereto agree and is designated in such Articles of
Merger (the
"Effective Time").
<PAGE> 101
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)(D) 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.
1.5 Taking of Necessary Action; Further
Action.
If, at any time
after the Effective Time, any further action is necessary
or
desirable to carry
out the purposes of this Agreement and to vest Surviving
Corporation with full
right, title and possession to all assets, property,
rights,
privileges, powers
and franchises of Target and Merger Sub, the officers and
directors of Target
and Merger Sub are fully authorized in the name of their
respective
corporations or otherwise to take, and will take, all such
lawful and necessary
action consistent with this Agreement.
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, except that Article I of
the
Articles of
Incorporation of Surviving Corporation shall be amended to
read
as follows:
"The name of the corporation is 'Current Electronics,
Inc.'"
2.2 Bylaws. The Bylaws of Merger Sub in
effect
immediately prior
to the Effective Time shall be the Bylaws of Surviving
Corporation until duly
amended in accordance with applicable law.
2.3 Directors. The directors of Merger Sub
immediately prior to
the Effective Time shall be the directors of Surviving
Corporation until their
respective successors are duly elected or appointed and
qualified.
2.4 Officers. The officers of Merger Sub
immediately prior to the
Effective Time shall be the officers of Surviving
Corporation
until their
respective successors are duly elected or appointed and
qualified.
ARTICLE III
EFFECT OF MERGER ON CAPITAL STOCK
OF MERGER SUB AND TARGET
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,
Target or the
holders of any of the following securities all of the
following
shall occur:
(a) Cancellation of Target Common
Stock
Owned by Parent
or Target. All shares of Common Stock, $.01 par value, of
Target ("Target
Common Stock") that are owned by Target, and all shares of
Target Common Stock
owned by Parent, Merger Sub or any other subsidiary of
Parent
immediately prior
to the Effective Time shall be canceled.
(b) Conversion of Target Common
Stock.
(i) Each issued and
outstanding
share of Target
Common Stock (other than Dissenting Shares (as defined in
Section 3.1(f)) shall
be converted into the right to receive cash or cash and
shares
of Common Stock,
$.01 par value, of Parent ("Parent Common Stock") in
accordance
with this
Section 3.1(b). The consideration to be received by the
holders
of Target
Common Stock pursuant to the Merger is hereinafter referred
to
as the "Merger
Consideration." The aggregate Merger Consideration to be
received by all
shares of Target Common Stock (assuming there are no
Dissenting
Shares) shall
be equal to $3,370,000, adjusted as provided in
A-2
<PAGE> 102
Section 3.1(c)(as so adjusted, the "Cash Amount"), and the
Stock
Amount (as
defined in Section 3.1(b)(ii)). Subject to Section 3.1(c),
(A)
each
shareholder of Target Common Stock listed on Schedule
3.1(b)-1
shall be
entitled to receive with respect to the shares of Target
Common
Stock held by
it an amount of cash equal to the Per Share Cash Amount (as
defined in Section
3.1(b)(ii)) times the number of shares of Target Common
Stock so
held, and (B)
each shareholder of Target Common Stock listed on Schedule
3.1(b)-2 shall be
entitled to receive with respect to the shares of Target
Common
Stock held by
the him the portion of the Cash Amount not to be received
by the
shareholders
of Target Common Stock pursuant to clause (A) and the Stock
Amount, such cash
and shares of Parent Common Stock included in the Stock
Amount
to be allocated
among such shareholders pro rata in accordance with the
number
of shares of
Target Common Stock so held.
(ii) The "Per Share Cash
Amount"
shall be equal to
the sum of the Cash Amount and the Stock Price Amount (as
defined in this
Section 3.1(b)(ii)) divided by 30,000 (adjusted to reflect
fully
the effect of
any stock split, reverse stock split, stock dividend
(including
any dividend or
distribution of securities convertible into target Common
Stock), subdivision,
reclassification, combination, exchange, reorganization,
recapitalization or
other similar transaction with respect to Target Common
Stock
occurring after
the date hereof and prior to the date of determination).
The
"Stock Price
Amount" shall be equal to the last closing sale price of
Parent
Common Stock on
the Nasdaq National Market on the trading day immediately
preceding the Closing
Date times the Stock Amount. The "Stock Amount" shall be
1,980,000 shares of
Parent Common Stock (adjusted to reflect fully the effect
of any
stock split,
reverse stock split, stock dividend (including any dividend
or
distribution of
securities convertible into Parent Common Stock or Target
Common
Stock),
subdivision, reclassification, combination, exchange,
reorganization,
recapitalization or other similar transaction with respect
to
Parent Common
Stock or Target Common Stock occurring after the date
hereof and
prior to date
of determination).
(c) Adjustments to Merger
Consideration.
(i) The Cash Amount will be
$3,370,000 (A)
increased by the amount by which the interest bearing
indebtedness for borrowed
money of Target ("Debt") as of the Effective Time is less
than
the Adjusted
Debt Amount (as defined in this Section 3.1(c)(i)), (B)
reduced
by the amount
by which Debt as of the Effective Time exceeds the Adjusted
Debt
Amount and (C)
if the total combined stockholders' equity of Target and
Current
Electronics
(Washington), Inc., a Washington corporation ("CEWI"), as
of the
Effective Time
("Combined Equity") is less than $4.0 million, reduced or
increased, as the
case may be, by the amount by which the total shareholders'
equity of Target as
of the Effective Time ("Equity") is less or more than
$3,715,000. For purposes
of the foregoing calculation, (x) "Adjusted Debt Amount"
shall
be $2.0 million,
increased by the amount of any bonuses (not to exceed
$180,000)
paid to
Target's leadership team pursuant to Section 6.1(b)(vi)
hereof
(the "Team
Bonuses") and by the amount of any additional Debt
outstanding
as of the
Effective Time that has been authorized by Parent under
Section
3(c)(ii), (y)
Equity and Combined Equity shall be determined without
deduction
for (i) the
amount of any Team Bonuses, (ii) the fees and expenses of
the
accountants of
conducting the audit of the 1994 fiscal year of Target and
CEWI
requested by
Parent (the "1994 Audit Fees"), (iii) any writedown or
writeoff
of leasehold
improvements of Target's Newberg, Oregon facility or any
reserves relating to
any move from such facility of Target's operations that is
contemplated by
Parent, or (iv) such other reserves, writedowns or
adjustments
as may be
approved in writing by Parent, and (z) Equity and Combined
Equity shall be
reduced (regardless of when paid or accrued) by (i) the
amount
of any legal and
accounting fees and expenses incurred by CEWI or Target, as
the
case may be,
with their present counsel and accountants that relate to
the
transactions
contemplated by this Agreement and the Purchase Agreement
(as
defined in
Section 8.1(d)) and any other similar expenses that relate
to
the
representation of the interests of the present shareholders
of
CEWI or Target
with respect to such transactions (other than the 1994
Audit
Fees), and (ii)
the amount of any fees and expenses incurred to Pacific
Crest
Securities, Inc.
as contemplated by the letter agreement identified in
Section
4.26 of this
Agreement. Any Debt owed by CEWI to Target, and any Debt
owed
by Target to
CEWI, shall be ignored in determining the Adjusted Debt
Amount
and the amount
of Debt outstanding. For the avoidance of doubt, the term
Debt
shall not
include the then outstanding balances of two accounts
payable
owed by CEWI to
Allied Signal in the approximate amounts of $676,000 and
$180,000 as of
December 31, 1996. The amount of Debt outstanding, the
Adjusted
Debt Amount
and the amount of Equity as of the Effective Time shall be
determined as
provided in Section 3(c)(iv).
A-3
<PAGE> 103
(ii) Target may request that
Parent
consent to an
increase in the Adjusted Debt Amount to permit borrowings
by
Target to fund
actual or expected increased sales volumes and related
working
capital and
capital equipment requirements. Such request may be made
by
giving written
notice to Parent, accompanied by appropriate information
supporting such
request. Parent shall respond to any such request
promptly, and
shall not
unreasonably withhold its consent where such borrowings
would be
necessary to
fund working capital and capital equipment requirements
prudently required in
connection with increases in product sales by Target.
(iii) Target shall prepare and
submit to Parent,
not later than five days prior to the Closing Date, a
written
estimate of the
Cash Amount as of the Closing Date. The estimate shall be
based
upon the books
and records of Target and shall be accompanied by (A) a
statement setting forth
in reasonable detail the calculation of the estimate and
(B) a
certificate
signed by Target confirming that the estimate was
calculated in
accordance with
this Article I. Target shall also deliver to Parent such
other
information as
may be reasonably requested by Parent to verify the
estimate of
the Cash Amount
provided. The amount paid at the Closing based upon the
Cash
Amount under
Section 3.1(b) shall be equal to the estimate provided by
Target, absent
reasonable objection by Parent, in which event the amount
paid
at the Closing
shall be equal to such reasonable amount as may be
specified by
Parent. Within
30 days after the Closing Date, Parent shall deliver to the
Representative (as
defined in the Indemnification Agreement to be delivered
pursuant to Section
8.3(g)) a statement calculating the Cash Amount as of the
Closing Date in
accordance with this Section 3.1. Such calculation shall
be
made in accordance
with generally accepted accounting principles consistently
applied, except as
otherwise specified herein. Parent's statement and report
shall
be final and
binding on the parties unless the Representative delivers a
notice to Parent
disputing any matter including in such statement and
stating the
Representative's position with respect to the disputed
matter.
If the
Representative delivers such notice and the parties are
unable
to resolve all
disputed matters within 30 additional days, Parent or the
Representative may
elect to submit the disputed matter to Arthur Andersen &
Co.,
independent
certified public accountants ("AA"), for determination.
The
determination of
all disputed matters pursuant to the preceding sentence
shall be
final and
binding on the parties and the fees and expenses of AA
shall be
borne by Parent
and the shareholders of Target receiving shares of Parent
Common
Stock in the
Merger (the "Shareholders") in proportion to the amount by
which
the
determination of all matters varies from the positions of
Parent
and the
Shareholders on all matters. Promptly following the
determination of matters
by AA, Parent shall pay to the Shareholders or the
Shareholders
shall pay to
Parent, as appropriate, the amount, if any, determined to
have
been overpaid or
underpaid at the Closing.
(d) Fractional Shares. No fraction
of a
share of Parent
Common Stock will be issued, but in lieu thereof each
holder of
shares of
Target Common Stock who would otherwise be entitled to a
fraction of a share of
Parent Common Stock (after aggregating all fractional
shares of
Parent Common
Stock to be received by such holder) shall receive from
Parent
an additional
share of Parent Common Stock.
(e) Capital Stock of Merger Sub.
Each
issued and
outstanding share of Common Stock, $.01 par value, of
Merger Sub
("Merger Sub
Common Stock") shall be unaffected by the Merger and shall
remain issued and
outstanding.
(f) Dissenting Shares. All issued
and
outstanding shares
of Target Common Stock of any holder who has properly
exercised
his dissenters'
rights with respect thereto in accordance with Sections
60.551
et sec. of the
OBCA and who, as of the Effective Time, has not effectively
withdrawn or lost
such rights (the "Dissenting Shares") will not be converted
into
the right to
receive the Merger Consideration pursuant to Section 3.1(b)
or
any other amount
otherwise payable to such holder hereunder, and the holder
thereof will have
such rights as are granted by the OBCA only. If, after the
Effective Time, any
such holder effectively withdraws or loses such rights, the
holder's Dissenting
Shares thereupon will be treated as if they had been
converted,
at the
Effective Time, into the right to receive the Merger
Consideration and any
other amount otherwise payable to such holder hereunder,
without
interest
thereon. Target will give Parent prompt notice of any
payment
demand received
by Target for any shares of Target Common Stock, any
withdrawal
of such demands
and any other document or instrument received by Target in
connection
therewith. Parent will have the right to participate in
all
negotiations
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and proceedings with respect to any such demand and Target
will
not, except
with the prior written consent of Parent, make any payment
with
respect to, or
settle or offer to settle, any such demand.
3.2 Exchange of Certificates.
(a) Exchange; Payment. At 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
Target
Common Stock (the
"Certificates"), Parent shall cause to be paid or delivered
to
the holder of
record of such Certificates, without interest thereon, the
Merger Consideration
to be received by such holder as specified in Section 3.1.
Notwithstanding
anything in the foregoing to the contrary, Certificates may
be
surrendered
after the Closing, but until so surrendered, Parent shall
not
cause to be paid
or delivered to the holder of record of such Certificates
the
shares or cash
amounts referred to in the previous sentence and each
outstanding Certificate
that prior to the Effective Time represented shares of
Target
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, the right to receive an additional share of
Parent Common Stock
in lieu of the issuance of any fractional shares in
accordance
with Section
3.1(d) 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 Target
of
the shares of
Target 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 of
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
of the
Investor Questionnaire and the Investor Letter,
Indemnification
Agreement and
Registration Rights Agreement (each as defined in Section
8.3)
from such
person.
(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 Target
Common
Stock. All
shares of Parent Common Stock issued upon surrender for
exchange
of shares of
Target Common Stock in accordance with the terms hereof
(including any
additional share of Parent Common Stock issued in lieu of
fractional shares)
shall be deemed to have been issued in full satisfaction of
all
rights
pertaining to such shares of Target Common Stock, and there
shall be no further
registration of transfers on the records of Surviving
Corporation of shares of
Target 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.
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3.4 Lost, Stolen or Destroyed Certificates.
If any
Certificate is
lost, stolen or destroyed, the 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.
3.5 Stock Subject to Conditions. All shares
of
Parent Common
Stock that are received in the Merger in exchange for
shares of
Target Common
Stock, which, under agreements with Target, are unvested
and
which, by their
terms, do not terminate due to the Merger will also be
unvested,
and the
certificates evidencing such shares will be marked with
appropriate legends.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
TARGET
Except as disclosed in a document of even date
herewith
and delivered
by Target to Parent prior to the execution and delivery of
this
Agreement and
referring to the representations and warranties in this
Agreement (the "Target
Disclosure Schedule"), Target represents and warrants to
Parent
and Merger Sub
as follows:
4.1 Organization, Standing and Power. Target
is a
corporation
duly organized and validly existing under the laws of the
State
of Oregon, 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 Target. Target has delivered
to
Parent a true and
correct copy of its Articles of Incorporation and Bylaws,
each
as amended to
date. Target is not in violation of any of the provisions
of
its Articles of
Incorporation or Bylaws or equivalent organizational
documents.
4.2 Capitalization; Shareholders.
(a) The authorized capital stock of
Target
consists of
2,000,000 shares of Target Common Stock and 1,000,000
shares of
Preferred
Stock, $.01 par value, of which there are issued and
outstanding
30,000 shares
of Target Common Stock and no shares of Preferred Stock.
There
are no other
outstanding shares of capital stock or other securities of
Target 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
Target, or otherwise obligating Target to issue, transfer,
sell,
purchase,
redeem or otherwise acquire such stock or securities. All
outstanding shares
of Target Common Stock are duly authorized, validly issued,
fully paid and
non-assessable and 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 Target or any agreement to which
Target is a party
or by which it is bound. There are no contracts,
commitments or
agreements
relating to voting, purchase or sale of Target's capital
stock
(i) between or
among Target and any of its shareholders and (ii) to the
Target's knowledge,
between or among any of Target's shareholders, except for
the
shareholders
named in Schedule 4.2 of the Target Disclosure Schedule.
(b) Schedule 4.2 of the Target
Disclosure
Schedule sets
forth a true and complete list of the names of all the
record
holders of Target
Common Stock, together with the number of shares of Target
Common Stock held by
each such holder. Except as set forth in Schedule 4.2 of
the
Target Disclosure
Schedule, each holder so listed that is an individual is a
competent adult or
nonprofit corporation 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
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dividends or distributions with respect to such shares.
Except
as set forth in
Schedule 4.2 of the Target Disclosure Schedule, each holder
so
listed that is
an entity is the record and the beneficial owner 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 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. Target 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) Target 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 Target, subject only to the
approval of the
Merger by Target's shareholders as contemplated by Section
7.2.
This Agreement
has been duly executed and delivered by Target and
constitutes
the valid and
binding obligation of Target enforceable against Target in
accordance with its
terms. The execution and delivery of this Agreement by
Target
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
Target, (ii) violate or conflict with any permit, order,
license, decree,
judgment, statute, law, ordinance, rule or regulation
applicable
to Target or
the properties or assets of Target, 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
Target 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 Target 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
Target 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 Target in connection with the
execution
and delivery of
this Agreement or the consummation of the transactions
contemplated hereby,
except for the filing of 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
Target or prevent the consummation of transactions
contemplated
hereby.
(b) All holders of Target 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 Target Common
Stock or other equity securities of Target is required for
Target to execute
and deliver this Agreement and consummate the transaction
contemplated hereby.
By virtue of such approval, no holder of Target Common
Stock or
other equity
securities of Target has any right to dissent and obtain
payment
for such
holder's shares under applicable law.
4.5 Financial Statements. Target has
heretofore
delivered to
Parent true and complete copies of audited balance sheet,
and
the related
statements of operations and stockholders' equity and of
cash
flows at
September 30, 1996 on a combined basis with CEWI, with
separate
disclosure of
the balance sheet and income and retained earnings of
Target
(the "Annual
Financial Statements"), with an opinion of Target's
independent
public
accountants. Target also has heretofore delivered to
Parent
true copies of the
unaudited balance sheet of Target at November 30, 1996 and
the
related
unaudited statements of income for the two months then
ended
(the "Interim
Target Financial Statements"). The Annual Financial
Statements
and the Interim
Target 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
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<PAGE> 107
Interim Target Financial Statements, that no notes are
included)
and fairly
present the consolidated financial condition and operating
results of Target
(combined with CEWI to the extent applicable) at the dates
and
during the
periods indicated therein, subject, in the case of the
Interim
Target Financial
Statements, to normal, recurring year-end audit
adjustments.
4.6 Absence of Certain Changes. Except as
specifically permitted
by this Agreement or as set forth in Schedule 4.6 of the
Target
Disclosure
Schedule, since September 30, 1996, Target has conducted
its
business in the
ordinary course consistent with past practice and there has
not
occurred:
(a) any change, event or condition
(whether covered by
insurance) that has resulted in, or might reasonably be
expected
to result in,
a Material Adverse Effect on Target;
(b) any sale, lease or other transfer
or
disposition of
any property or asset of Target, except for the sale of
inventory in the
ordinary course of business;
(c) any change in accounting methods,
practices or
policies (including any change in depreciation or
amortization
policies or
rates) by Target or any revaluation by Target of any of its
assets, except as
described in the notes to the Annual Financial Statements;
(d) any declaration, setting aside,
or
payment of any
dividend or other distribution to Target's shareholders, or
any
direct or
indirect redemption, retirement, purchase or other
acquisition
by Target of any
of its capital stock or other securities or options,
warrants or
other rights
to acquire capital stock;
(e) any entering into, amendment or
termination of, or
default under, by Target of any contract to which Target is
a
party or by which
it is bound other than in the ordinary course of business
and as
provided to
Parent;
(f) any damage, destruction or loss
(whether or not
covered by insurance) to the properties and assets of
Target;
(g) any commitment or transaction
(including any capital
expenditure, capital financing or sale of assets) by Target
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;
(h) any Lien on any asset allowed to
exist
by Target;
(i) any cancellation of any debt or
waiver
or release of
any right or claim by Target;
(j) any payment, discharge or
satisfaction
of any claim,
liability or obligation by Target, other than as reflected
or
reserved against
in the Annual Financial Statements or the Interim Target
Financial Statements
or in the ordinary course of business consistent with past
practice;
(k) to Target's knowledge, any labor
dispute, litigation
or governmental investigation affecting the business or
financial condition of
Target;
(l) any issuance or sale of capital
stock
or other
securities, exchangeable or convertible securities,
options,
warrants, puts,
calls or other rights to acquire capital stock or other
securities of Target;
(m) any indebtedness for borrowed
money
incurred, assumed
or guaranteed by Target;
(n) 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;
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(o) any increase in any salary, wage,
benefit or other
remuneration payable or to become payable to any current or
former officer,
director, employee or agent of Target or any bonus or
severance
payment or
arrangement made to, for or with any officer, director,
employee
or agent of
Target or any supplemental retirement plan or other program
or
special
remuneration for any officer, director, employee or agent
of
Target, except for
(i) the Team Bonuses and (ii) normal salary or wage
increases
relating to
periodic performance reviews and annual bonuses consistent
with
past practice
of Target where such increases or bonuses are not given to
Target's
shareholders or their relations or members of the
leadership
team of Target or
CEWI;
(p) any grant of 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 Target
with
respect to the
granting of credit;
(q) any delay in the payment of any
trade
or other
payables other than in the ordinary course of business
consistent with past
practice; or
(r) any agreement, whether in writing
or
otherwise, by
Target to do any of the foregoing.
4.7 Liabilities. Except as set forth in the
Annual
Financial
Statements, the Interim Target Financial Statements,
Schedule
4.7 of the Target
Disclosure Schedule or any other Schedule of the Target
Disclosure Schedule and
except for liabilities or obligations arising in the
ordinary
course and
consistent with past practice and those incurred in
connection
herewith, Target
does not have any liability or obligation of any nature,
whether
due or to
become due, fixed or contingent.
4.8 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
Target,
threatened against Target 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 Target. There is no judgment, decree or order against
Target, or, to the
knowledge of Target, 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 Target.
4.9 Restrictions on Business Activities.
There is
no material
agreement, judgment, injunction, order or decree binding
upon
Target which has
or reasonably could be expected to have the effect of
prohibiting or materially
impairing any current or proposed business practice of
Target,
any acquisition
of property by Target or the conduct of business by Target
as
currently
conducted or as proposed to be conducted by Target.
4.10 Governmental Authorization. Target has
obtained each federal,
state, county, local or foreign governmental consent,
license,
permit, grant,
or other authorization that are necessary for Target 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
"Target
Authorizations"), Target has performed and fulfilled its
obligations under the
Target Authorizations, and all the Target Authorizations
are in
full force and
effect, except where the failure to obtain or have any of
such
Target
Authorizations could not reasonably be expected to have a
Material Adverse
Effect on Target.
4.11 Contracts and Commitments. Except as set
forth
in Schedule
4.11 of the Target Disclosure Schedule, Target 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 Target 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
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<PAGE> 109
collective bargaining agreement or (ii) agreements that
limits
the right of
Target, 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 Schedule 4.11 of the Target
Disclosure
Schedule or any
other section thereto have been delivered to Parent.
Target 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,
Target
has not
received any notice of termination, cancellation or
acceleration
or any notice
of breach, violation or default thereof.
4.12 Title to Property. Except as set forth in
Schedule 4.12 of
the Target Disclosure Schedule, Target 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 Target that
are
used in the
operations of its business are in good operating condition
and
repair. All
plants, property and equipment have been well maintained
and
conform (to
Target's knowledge) with all applicable ordinances,
regulations
and zoning and
other laws and do not encroach on the property of others.
There
is no pending
or, to Target's knowledge, threatened change in any such
ordinance, regulation
or zoning or other law, and there is no pending or, to
Target's
knowledge,
threatened condemnation of any such building, machinery or
equipment. The
properties and assets of Target include all rights,
properties,
interests in
properties and assets necessary to permit Surviving
Corporation
to conduct its
business as currently conducted or as proposed to be
conducted.
Schedule 4.12
of the Target Disclosure Schedule identifies each parcel of
real
property owned
or leased by Target.
4.13 Intellectual Property.
(a) Target 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 or
proposed to
be used in the
business of Target as currently conducted or as proposed to
be
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
Target.
(b) Schedule 4.13 of the Target
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 Target 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 issuance and registration
has
been filed,
(ii) all material licenses, sublicenses and other
agreements as
to which Target
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 Target is a party and pursuant to
which
Target 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 Target.
(c) To the knowledge of Target, there
is
no unauthorized
use, disclosure, infringement or misappropriation of any
Intellectual Property
rights of Target, any trade secret material to Target, or
any
Third Party
Intellectual Property Right, by any third party, including
any
employee or
former employee of Target. Target 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.
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(d) Target is not, and will not be as
a
result of the
execution and delivery of this Agreement or the performance
of
Target'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 Target.
(e) All patents, registered
trademarks,
service marks and
copyrights held by Target are valid and subsisting. Target
(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. The manufacture, marketing, licensing or sale
of
the products and
services of Target does not infringe any patent, trademark,
service mark,
copyright, trade secret or other proprietary right of any
third
party.
(f) Target 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
Target does not
already own by operation of law.
(g) Target 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 Target 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 Target has
been pursuant to the terms of a written agreement with the
owner
of such
Confidential Information, or is otherwise lawful.
4.14 Environmental Matters.
(a) Target has complied with, and is
in
compliance with,
all Environmental Laws (as defined in this Section 4.14(a))
applicable to its
business, properties and assets. Target has, and Target
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
Target.
There is no
pending or, to Target'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 Target is a
party or,
to Target's
knowledge, threatened to be made a party. For purposes of
this
Agreement,
"Environmental Law" means any federal, state or local law,
statute, rule or
regulation or the common law relating to the environment or
occupational health
and safety, including any statute, regulation or order
pertaining to (i)
treatment, storage, disposal, generation and transportation
of
industrial,
toxic or hazardous substances or solid or hazardous waste;
(ii)
air, water and
noise pollution; (iii) groundwater and solid contamination;
(iv)
the release or
threatened release into the environment of industrial,
toxic or
hazardous
substances, or solid or hazardous waste, including without
limitation
emissions, discharges, injections, spills, escapes or
dumping of
pollutants,
contaminants or chemicals; (v) the protection of wild life,
marine sanctuaries
and wetlands, including without limitation all endangered
and
threatened
species; (vi) storage tanks, vessels and containers; (vii)
underground and
other storage tanks or vessels, abandoned, disposed or
discarded
barrels,
containers and other closed receptacles; (viii) health and
safety of employees
and other persons; and (ix) manufacture, processing, use,
distribution,
treatment, storage, disposal, transportation or handling of
pollutants,
contaminants, chemicals or industrial, toxic or hazardous
substances or oil or
petroleum products or solid or hazardous waste. As used
herein,
the terms
"release" and "environment" have the meanings set forth in
the
federal
Comprehensive Environmental Compensation, Liability and
Response
Act of 1980
("CERCLA").
(b) There have been no releases of
any
Materials of
Environmental Concern (as defined in this Section 4.14(b))
into
the environment
at any parcel of real property or any facility presently or
formerly owned by
Target or by Target at any parcel of real property or any
facility presently or
formerly leased, operated or
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controlled by Target. With respect to any such releases of
Materials of
Environmental Concern, Target has given all required
notices to
government
authorities, copies of which have been provided to Parent.
Target is not aware
of any releases of Materials of Environmental Concern at
parcels
of real
property or facilities other than those presently or
formerly
owned, leased,
operated or controlled by Target that could reasonably be
expected to have an
impact on the real property or facilities owned, leased,
operated or controlled
by Target. For purposes of this Agreement, "Materials of
Environmental
Concern" means any chemicals, pollutants or contaminants,
hazardous substances
(as such term is defined under CERCLA), solid wastes and
hazardous wastes (as
such terms are defined under the Federal Resources
Conservation
and Recovery
Act), toxic materials, oil or petroleum and petroleum
products.
(c) Set forth in Schedule 4.14 of the
Target Disclosure
Schedule is a list of all environmental reports,
investigations
and audits in
the possession of Target with respect to the operations of,
or
real property
leased by Target (whether conducted by or on behalf of
Target or
a third party
and whether done at the initiative of Target or directed by
a
Governmental
Entity or other third party). True and complete copies of
each
such report, or
the results of each such investigation or audit, have been
provided to Parent.
(d) Target is not aware of any
material
environmental
liability arising out of the utilization by Target of any
solid
and hazardous
waste transporter or treatment, storage and disposal
facility.
4.15 Taxes. Target, and any consolidated,
combined,
unitary or
aggregate group for Tax (as defined in this Section 4.15)
purposes of which
Target is or has been a member have timely filed all Tax
Returns
(as defined in
this Section 4.15) required to be filed by it taking into
account extensions of
due dates, have paid all Taxes shown thereon to be due and
has
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. Target 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. Target does not have any
liability under
Treasury Regulation Section 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. Target does not have any liability under Treasury
Regulation Section
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 Schedule 4.15 of the Target Disclosure Schedule, (a) no
material claim for
Taxes has become a Lien against the property of Target or
is
being asserted
against Target other than Liens for Taxes not yet due and
payable, (b) no audit
of any Tax Return of Target is being conducted by a Tax
authority, (c) no Tax
authority is now asserting, or to the knowledge of Target,
threatening to
assert against Target 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 Target, (d) no extension of the
statute of
limitations on the assessment of any Taxes has been granted
by
Target and is
currently in effect, (e) Target 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 Target from any period prior to
the
Effective Date
to any period after the Effective Date, (g) Target has
never
been included in
an affiliated group of corporations, within the meaning of
Section 1504 of the
Code, (h) Target 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 Target, (j) Target has not disposed of any
property
that has been
accounted for under the installment method, (k) Target is
not a
party to any
interest rate swap, currency swap or similar transaction,
(l)
Target is not a
United States real property holding corporation within the
meaning of Section
897(c)(2) of the Code, (m) Target 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) Target 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, and (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. Target will not be required to
include any
material adjustment in Taxable income for any Tax period
(or
portion thereof)
ending after
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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. Schedule 4.15 of the Target
Disclosure Schedule
contains accurate and complete information with respect to:
(w)
all material
tax elections in effect with respect to Target, (x) the
current
tax basis of
the assets of Target, (y) the current and accumulated
earnings
and profits of
Target, and (z) the tax credit carry overs of Target. 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. Target 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.
4.16 Employee Benefit Plans.
(a) Schedule 4.16 of the Target
Disclosure
Schedule
lists, with respect to Target, and any trade or business
(whether or not
incorporated) which is treated as a single employer with
Target
(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
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 "Target Employee Plans").
(b) Target has furnished to Parent a
copy
of each of the
Target 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 Target 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 Target
Employee Plan intended to be qualified under Sections
401(a) or
501(c)(9) of
the Code has either obtained from the Internal Revenue
Service a
favorable
determination letter as to its qualified status under the
Tax
Reform Act of
1986 and subsequent legislation, or has applied to the
Internal
Revenue Service
for such a determination letter prior to the expiration of
the
requisite period
under applicable Treasury Regulations or Internal Revenue
Service
pronouncements in which to apply for such determination
letter
and to make any
amendments necessary to obtain a favorable determination.
Target
has also
furnished Parent with the most recent Internal Revenue
Service
determination
letter issued with respect to each such Target 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
Target Employee
Plan subject to Code Section 401(a)), and all prohibited
transaction exemptions
(or requests for such exemptions), private letter rulings,
opinions,
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information letters or compliance statements issued with
respect
to any plan
described in Section 4.16(a) by the Internal Revenue
Service,
the Department of
Labor or the Pension Benefit Guaranty Corporation.
(c) (i) None of the Target Employee
Plans
promises or
provides retiree medical or other retiree welfare benefits
to
any person; (ii)
there has been no "prohibited transaction," as such term is
defined in Section
406 of ERISA and Section 4975 of the Code, with respect to
any
Target Employee
Plan, which could reasonably be expected to have, in the
aggregate, a Material
Adverse Effect; (iii) each Target Employee Plan has been
administered in
accordance with its terms and 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
Target,
and Target and
each ERISA Affiliate have performed all obligations
required to
be performed by
them under, are not in any respect in default under or
violation
of, and have
no knowledge of any default or violation by any other party
to,
any of the
Target Employee Plans, which default or violation could
reasonably be expected
to have a Material Adverse Effect on Target; (iv) neither
Target
nor any ERISA
Affiliate is subject to any liability or penalty under
Sections
4976 through
4980 of the Code or Title I of ERISA with respect to any of
the
Target Employee
Plans which have a Material Adverse Effect on any such
parties;
(v) all
material contributions required to be made by Target or any
ERISA Affiliate to
any Target Employee Plan have been made on or before its
due
dates and a
reasonable amount has been accrued for contributions to
each
Target Employee
Plan for the current plan years; (vi) with respect to each
Target Employee
Plan, no "reportable event" within the meaning of Section
4043
of ERISA
(excluding any such event for which the 30-day notice
requirement has been
waived under the regulations to Section 4043 of ERISA) nor
any
event described
in Section 4062, 4063 or 4041 of ERISA has occurred; and
(vii)
no Target
Employee Plan is covered by, and neither Target nor any
ERISA
Affiliate has
incurred or expects to incur any liability under Title IV
of
ERISA or Section
412 of the Code. With respect to each Target Employee Plan
subject to ERISA as
either an employee pension plan within the meaning of
Section
3(2) of ERISA or
an employee welfare benefit plan within the meaning of
Section
3(1) of ERISA,
Target has prepared in good faith and timely filed all
requisite
governmental
reports (which were true and correct as of the date filed)
and
has properly and
timely filed and distributed or posted all notices and
reports
to employees
required to be filed, distributed or posted with respect to
each
such Target
Employee Plan except where the failure to timely file,
distribute or post such
documents would not, in the aggregate, have a Material
Adverse
Effect on
Target. No suit, administrative proceeding, action or
other
litigation has
been brought, or to the knowledge of Target, is threatened,
against or with
respect to any such Target Employee Plan, including any
audit or
inquiry by the
Internal Revenue Service or United States Department of
Labor.
Neither Target
nor any ERISA Affiliate is a party to, or has made any
contribution to or
otherwise incurred any obligation under, any "multiemployer
plan" as defined in
Section 3(37) of ERISA.
(d) With respect to each Target
Employee
Plan, Target has
complied with (i) the applicable health care continuation
and
notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of
1985
("COBRA") and the
proposed regulations thereunder and (ii) the applicable
requirements of the
Family and Medical Leave Act of 1993 and the regulations
thereunder, except to
the extent that such failure to comply would not, in the
aggregate, have a
Material Adverse Effect on Target.
(e) 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 Target,
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.
(f) There has been no amendment to,
written
interpretation or announcement (whether or not written) by
Target, or any ERISA
Affiliate relating to, or change in participation or
coverage
under, any Target
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.
4.17 Employee Matters. Schedule 4.17 of the
Target
Disclosure
Schedule lists all employees of Target and the remuneration
and
benefits to
which such employees are entitled. Schedule 4.17 also
lists all
employment
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contracts and collective bargaining agreements, and all
pension,
bonus, profit
sharing, or other agreements or arrangements providing for
employee
remuneration or benefits to which Target is a party or by
which
it is bound;
all of these contracts and arrangements are in full force
and
effect, and
neither Target nor any other party is in default under
them.
There have been
no claims of defaults and, to Target'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
Target's
knowledge, threatened labor dispute, strike, or work
stoppage
that would have a
Material Adverse Effect on Target. Target is in compliance
in
all 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
are not
engaged in any unfair labor practice. There are no pending
claims against
Target under any workers compensation plan or policy or for
long
term
disability. Target does not have any obligations under
COBRA
with respect to
any former employees or qualifying beneficiaries
thereunder.
4.18 Interested Party Transactions. Except as
disclosed in
Schedule 4.18 of the Target Disclosure Schedule, Target is
not
indebted to any
shareholder, director, officer, employee or agent of Target
(except for amounts
due as normal salaries and bonuses and in reimbursement of
ordinary expenses),
and no such person is indebted to Target, 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.
4.19 Insurance. Target 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 Target. Schedule 4.19 of
the
Target
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 bond as to which Target has received a denial,
or,
to Target's
knowledge, 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 Target is
otherwise
in compliance in
all material respects with the terms of such policies and
bonds.
Target 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.
4.20 Compliance With Laws. Target 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 Target.
4.21 Major Customers. Schedule 4.21 of the
Target
Disclosure
Schedule contains a list of the customers of Target for
each of
the two most
recent fiscal years, which 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. Target
has
no knowledge or
information of any facts indicating, nor any other reason
to
believe, that any
of the customers listed in such Schedule 4.21 will not
continue
to be customers
of Target after the Closing at substantially the same level
of
purchases.
4.22 Suppliers. As of the date hereof, no
supplier
of Target has
indicated to Target that it will stop, or decrease the rate
of,
supplying
materials, products or service to Target. Target has not
knowingly breached,
so as to provide a benefit to Target that was not intended
by
the parties, any
agreement with, or engaged in any fraudulent conduct with
respect to, any
customer or supplier of Target.
4.23 Inventory. All inventories of raw
materials,
work-in process
and finished goods (including all such in transit) of
Target,
together with
related packaging materials (collectively, "Inventory"),
reflected in the
Interim Target Financial Statements consist of a quality
and
quantity usable
and saleable in the ordinary course of
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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 Schedule 4.23 of the Target Disclosure
Schedule,
all Inventory is
located on premises owned or leased by Target. 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 Target with no recent history of credit problems with
respect
to Target;
neither Target nor any such customer is in material breach
of
the terms of any
obligation to the other, and, based on Target's knowledge
or
what Target
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.
4.24 Product Warranty and Product Liability.
Schedule 4.24 of the
Target Disclosure Schedule contains a true and complete
copy of
Target's
standard warranty or warranties for its manufacturing
services.
There has been
no variation from such warranties, except as set forth in
Schedule 4.24 of the
Target Disclosure Schedule. Except as stated therein,
there are
no warranties,
commitments or obligations with respect to Target's
performance
of services.
Schedule 4.24 of the Target 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
Target's knowledge, threatened, or which have been asserted
or
commenced
against Target 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
Target's
manufacturing services that would adversely affect
performance
of products
Target manufactures or create an unusual risk of injury to
persons or property.
Target'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.
4.25 Minutes Books. The minute books of Target
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
Target, and reflect all transactions referred to in such
minutes
accurately in
all material respects.
4.26 Brokers' and Finders' Fees. Except for
the
letter agreement,
dated August 23, 1996 between Target and Pacific Crest
Securities, Inc., Target
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.
4.27 Section 60.835 of OBCA Not Applicable.
The
Board of Directors
of Target has taken all actions, including the approval of
the
Merger, so that
the restrictions contained in Section 60.835 of the OBCA
applicable to a
"business combination" (as defined in Section 60.825 of the
OBCA) will not
apply to the execution, delivery or performance of this
Agreement or the
consummation of the Merger or the other transactions
contemplated by this
Agreement.
4.28 Proxy Statement. The information supplied
by
Target 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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4.29 Regulation D Offering. To Target's
knowledge,
the information
provided to Parent by the holders of shares of Target
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.
4.30 Disclosure. None of the representations
or
warranties made by
Target herein or in the Target Disclosure Schedule, or in
any
certificate
furnished by Target 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. Target 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
Target.
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 Target prior to the execution and delivery of
this
Agreement and
referring to the representations and warranties in this
Agreement (the "Parent
Disclosure Schedule"), Parent and Merger Sub represent and
warrant to Target 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 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. Merger Sub has not engaged in
any
business (other
than certain organizational matters) since the date of its
incorporation.
5.2 Capitalization. As of September 30, 1996,
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 3,942,660 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 September 30, 1996 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 September 30,
1996,
Parent has
reserved (a) 405,000 shares of Parent Common Stock for
issuance
to employees,
directors and independent contractors pursuant to the
Parent
Stock Option
Plans, (b) 267,800 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
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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, or equivalent charter documents of any of its
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 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 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 and 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
Target with true and complete copies of its (a) Annual
Report on
Form 10-K for
the fiscal year ended December 31, 1995, as filed with the
SEC,
(b) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996,
June
30, 1996, and
September 30, 1996, as filed with the SEC, (c) proxy
statements
related to all
meetings of its shareholders (whether annual or special)
since
December 31,
1994, and (d) all other reports and registration statements
filed by Parent
with the SEC since December 31, 1994, 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. As
of their respective filing dates, none of the Parent SEC
Documents contained
any untrue statement of a material fact or omitted to state
a
material fact
required to be stated therein or necessary to make the
statements made therein,
in light of the circumstances under which they were made,
not
misleading,
except to the extent corrected by a subsequently filed
Parent
SEC Document.
The financial statements of Parent, including the notes
thereto,
included in
the Parent SEC Documents (the "Parent Financial
Statements"),
complied as to
form in all material respects with applicable accounting
requirements and with
the published rules and regulations of the SEC with respect
thereto as of their
respective dates, and 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 may be
indicated in the
notes thereto or, in the case of unaudited statements
included
in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the
SEC), and
fairly present
the consolidated financial condition and operating results
of
Parent and its
subsidiaries at the dates thereof and during the periods
indicated therein
(subject, in the case of unaudited 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
September 30,
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
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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.
5.6 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 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.
ARTICLE VI
CONDUCT PRIOR TO EFFECTIVE TIME
6.1 Conduct of Business of Target. Prior to
the
Effective Time,
except as expressly contemplated by this Agreement or as
agreed
in writing by
Parent:
(a) Affirmative Covenants. Target
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 Target; or
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(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
Target and such
contest does not have a Material Adverse Effect on Target
and
adequate reserves
therefor are reflected on the Annual Financial Statements
or the
Interim Target
Financial Statements.
(b) Negative Covenants. Target will
not
do any of the
things enumerated in Section 4.6. In addition, but without
limiting the
generality of the foregoing, Target will not:
(i) cause or permit any
amendments
to its
Articles of Incorporation or Bylaws or equivalent charter
documents;
(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 for (A) the Team
Bonuses
and (B) normal
salary or wage increases relating to periodic performance
reviews and annual
bonuses consistent with past practices of Target where such
increases or
bonuses are not given to Target's shareholders or their
relations or members of
the leadership team of Target or CEWI;
(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; or
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(xii) agree, whether in writing
or
otherwise, to do
any of the foregoing.
6.2 No Solicitation; Acquisition Proposals.
Subject to the
fiduciary duties of Target's Board of Directors under
applicable
law, as
advised by counsel, Target 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,
Target or any business combination with Target 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, and
Target will notify Parent immediately if any inquiries or
proposals are
received by, any information is requested from, or any
negotiations or
discussions are sought to be initiated or continued with
Target,
in each case
in connection with any of the foregoing. Target 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
Target and
shall cease any negotiations conducted in connection
therewith
or otherwise
conducted with any such parties.
6.3 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.
The Board of
Directors of Parent shall recommend a vote in favor of the
Merger.
(b) Target Shareholders Meeting.
Target
shall take all
action necessary in accordance with applicable law and its
Articles of
Incorporation and Bylaws within 30 days after the date
hereof
either (i) to
obtain the written consent of the shareholders of Target 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, Target 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 Target's Board of Directors under
applicable law, as
advised by counsel, the Board of Directors of Target shall
recommend a consent
or vote in favor of the Merger.
7.3 Access to Information. Target 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 Target's
properties, books,
contracts, commitments and records, and (b) all other
information concerning
the business, properties and personnel of Target as Parent
may
reasonably
request. Target agrees to provide to Parent and its
accountants, counsel and
other representatives copies of internal
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financial statements promptly upon request. Parent shall
cooperate with Target
with its due diligence review of Parent to the extent
necessary
to confirm the
accuracy of Parent's and Merger Sub's representations and
warranties. Subject
to compliance with applicable law, from the date hereof
until
the Effective
Time, each of Parent and Target 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. The parties hereto will
treat
as
confidential and hold in confidence all information
concerning
the businesses
and affairs of Target and the business and affairs of
Parent and
Merger Sub
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.
For avoidance
of doubt, the letter agreement between Parent and Pacific
Crest
Securities
Inc., dated October 2, 1996, relating to the disclosure of
Target's
confidential information and Section 11 of letter
agreement,
dated December 18,
1996, among Target, CEWI and Parent shall cease to have any
further force or
effect.
7.5 Publicity. Target 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
Target 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 Target
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 consulting agreements with each of Messrs. Charles E.
Hewitson, Greg
Hewitson and Matthew J. Hewitson (the "Hewitson Consulting
Agreements"), which
Hewitson Consulting Agreements shall be substantially in
the
form attached
hereto as Exhibit 7.7A, and Parent will offer to enter into
an
employment
agreement with each member of the Target leadership team
identified and at the
same salary level as currently compensated as disclosed to
Parent, which
employment agreement shall be substantially in the form
attached
hereto as
Exhibit 7.7B. Target shall cause the employment
arrangements of
each person
that is related to a Target shareholder to be terminated
(other
than the
employment of Chris Hewitson, which is to continue), such
terminations to be
effective at the Effective Time and without liability to
Target
in any respect.
7.8 Director Nominees. At the Effective Time,
Parent shall take
such action as is necessary in order to enable three
individuals
designated by
Target to be elected to Parent's Board of Directors (the
"Designees"). Target
has selected as the Designees Messrs. Charles E. Hewitson,
Greg
Hewitson and
Matthew J. Hewitson.
7.9 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,
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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) Target 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.
7.10 Certain Tax Matters. Parent shall
continue at
least one
significant historical business line of Target, or shall
use at
least a
significant portion of Target's historical business assets
in a
business, in
each case within the meaning of Treasury Regulation Section
1.368-1(d).
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 Target
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, Target 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.
(d) Simultaneous with the occurrence
of
the Closing
hereunder, the Closing shall have occurred under the Share
Purchase Agreement,
dated as of January 15, 1997, among Parent and the
shareholders
of CEWI (the
"Purchase Agreement").
8.2 Additional Conditions to Obligations of
Target
to Effect the
Merger. The obligations of Target 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 Target:
(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
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<PAGE> 123
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) Target 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) Target 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) The guaranties given by Messrs.
Charles E. Hewitson,
Greg Hewitson and Matthew J. Hewitson as contemplated by
that
certain Loan
Agreement between First Interstate Bank of Oregon, N.A. and
Target, dated May
30, 1996 shall have been terminated or Messrs. Charles E.
Hewitson, Greg
Hewitson and Matthew J. Hewitson shall have been released
from
all liability
thereunder as a result of repayment of the related credit
facilities or
otherwise.
(e) Parent shall have executed and
delivered to the
holders of Target 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(e) attached hereto.
(f) Parent shall have granted to the
members of Target's
management identified on Schedule 8.2(f) the employee stock
options specified
in such schedule.
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:
(a) Target 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
Target
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 Target 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
Hershner, Hunter, Andrews, Neill & Smith, LLP, legal
counsel to
Target,
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 Target otherwise.
(e) There shall not have occurred any
Material Adverse
Effect on Target.
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<PAGE> 124
(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 Target.
(g) The Voting Agreement, dated the
date
hereof (the
"Voting Agreement"), among Messrs. Charles E. Hewitson,
Greg
Hewitson and
Matthew J. Hewitson and Target shall be in full force and
effect
as of the
Effective Time and Messrs. Charles E. Hewitson, Greg
Hewitson
and Matthew J.
Hewitson 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. Messrs. Charles E.
Hewitson, Greg Hewitson
and Matthew J. Hewitson 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; (ii)
an
agreement with
respect to indemnification of Parent and Merger Sub with
respect
to breaches of
terms and conditions of this Agreement (the
"Indemnification
Agreement"), which
Indemnification Agreement shall be substantially in the
form of
Exhibit 8.3(g)
attached hereto; (iii) the Registration Rights Agreement;
and
(iv) the Hewitson
Consulting Agreements.
(h) Parent shall have received from
each
of the holders
of Target Common Stock who are receiving Parent Common
Stock in
the Merger a
letter substantially in the form of Exhibit 8.3(h) 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)(D) of the Code.
(i) All shareholders of Target
expressly
shall have
consented to the specific arrangement specified in Section
3.1(b) for the
conversion of their shares of Target Common Stock into
Merger
Consideration.
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
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
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<PAGE> 125
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 Target and Parent, this Agreement
may be
terminated:
(a) by mutual consent of Parent and
Target;
(b) by either Parent or Target, if,
without fault of the
terminating party, the Closing shall not have occurred on
or
before April 30,
1997, or 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;
(d) by Target, 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 Target 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 Target 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 Target or Merger Sub shall not (a) alter or
change the amount
or kind of consideration to be received on conversion of
the
Target 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 Target Common Stock
or
Parent.
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<PAGE> 126
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 Target in Sections 4.1 -
4.14
and 4.16 - 4.30
shall survive the Merger and continue in full force and
effect
for one year
after the Effective Time. All the other representations
and
warranties of
Target, including those in Section 4.15, shall survive the
Merger and continue
in full force and effect forever after the Effective Time
(subject to any
applicable statute of limitations). The representations
and
warranties of
Parent and Merger Sub shall not survive the Merger.
11.2 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:
Electronic Fab Technology Corp.
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
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<PAGE> 127
(b) if to Target, to:
Current Electronics, Inc.
125 Elliott Road
Newberg, Oregon 97132
Attention: Charles E. Hewitson
Facsimile No.: (503) 537-9926
with a copy to:
Hershner, Hunter, Andrews, Neill
&
Smith LLP
180 East 11th Avenue
Eugene, Oregon 97440
Attention: Robert Stout, Esq.
Facsimile No.: (541) 344-2025
11.3 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
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 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 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.
11.4 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.
11.5 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
Target 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.
11.6 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
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<PAGE> 128
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.
11.7 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 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.
11.8 Governing Law. This Agreement shall be
governed by and
construed in accordance with the laws of the State of
Oregon
(without regard to
the principles of conflicts of law thereof).
11.9 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.
11.10 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.
11.11 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.
IN WITNESS WHEREOF, Target, 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.
ELECTRONIC FAB TECHNOLOGY
CORP.
By: /s/ Stuart Fuhlendorf
-------------------------------
CURRENT MERGER CORP.
By: /s/ Stuart Fuhlendorf
-------------------------------
CURRENT ELECTRONICS, INC.
By: /s/ Charles E. Hewitson
VP
-------------------------------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement")
dated as of February 24, 1997, is among ELECTRONIC FAB
TECHNOLOGY CORP., a Colorado corporation ("Parent"), and the
undersigned SHAREHOLDERS (individually a "Shareholder" and
together, the "Shareholders") of Parent.
RECITALS
A. Parent, Current Merger Corp., an Oregon corporation
("Merger Sub"), and Current Electronics, Inc., an Oregon
corporation ("Target"), have entered into the Agreement and
Plan
of Merger, dated as of January 15, 1997 (the "Merger
Agreement"), pursuant to which Target 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
Sections 8.2(e) of the Merger Agreement and sets forth the
terms
on which the Shareholders may require Parent to register
securities of Parent owned by them under the Securities Act
(as
defined in Article I).
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 "Demand Registration" has the meaning set forth in
Section 2.1.
1.3 "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the
rules and regulations of the SEC thereunder.
1.4 "Indemnified Party" has the meaning set forth in
Section 8.2.
1.5 "Indemnifying Party" has the meaning set forth in
Section 8.2.
1.6 "Losses" has the meaning set forth in Section 8.1.
1.7 "Merger Agreement" has the meaning set forth in
Recital A.
1.8 "Merger Sub" has the meaning set forth in Recital
A.
1.9 "Parent" has the meaning set forth in the opening
statement of this Agreement.
1.10 "Parent Common Stock" has the meaning set forth in
Recital A.
1.11 "Person" means any individual, corporation,
partnership, trust, organization, association, governmental
body
or agency.
1.12 "Piggyback Registration" has the meaning set
forth
in Section 3.1.
1.13 "Pro Rata Share" has the meaning set forth in
Section 8.2.
1.14 "Registrable 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
Registrable Security shall cease to be a Registrable 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.
1.15 "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.
1.16 "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.
1.17 "SEC" means the Securities and Exchange Commission
or any other federal agency administering the Securities Act.
1.18 "Securities Act" means the Securities Act of 1933,
as amended, or any successor federal statute, and the rules
and
regulations of the SEC thereunder.
1.19 "Shareholder" and the "Shareholders" have the
meanings set forth in the opening statement of this
Agreement.
1.20 "Target" has the meaning set forth in Recital A.
ARTICLE II
DEMAND REGISTRATION
2.1 Request for Registration. At any time beginning
two
years after the date hereof, the holders of more than 40% of
the
then outstanding Registrable Securities, on one occasion, may
request registration under the Securities Act of all or part
of
their Registrable Securities. 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 (a "Demand Registration") all Registrable
Securities for which Parent has received written requests for
inclusion within 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 such registration has a fair market value at the
time of the request equal to $3,000,000 ($1,000,000 if Parent
can use Form S-3 or its equivalent to effect such
registration).
The holders of Registrable Securities will be entitled to
only
one 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
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 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 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.
2.5 Payment of Expenses by Holders. A majority of the
holders of Registrable Securities requesting registration
under
Section 2.1 may request that a Demand Registration as to
which
no sale of Registrable Securities has been made thereunder be
withdrawn by Parent. If such requesting holders elect not to
have such registration counted as a Demand Registration under
Section 2.1, the requesting holders shall pay, pro rata with
in
accordance with the number of Registrable Securities
requested
to be included in such registration, all Registration
Expenses
of such registration.
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 15 days after Parent's notice
is
given to the holders of Registrable Securities.
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, to the Registrable Securities
requested to be included in such registration and any other
securities that Parent is obligated to included in such
registration (or to such lesser number of Registrable
Securities
and other 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 and other securities owned), and (d) fourth, 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.
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 an available form 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 an available form 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 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 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.
(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 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 (other than powers of attorney) 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 and the
Shareholder then beneficially owns more than 2% of the
outstanding Parent Common Stock, such 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 6.2
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, (c) the exercise of any conversion or exchange
right
in accordance with the terms of any other outstanding
security
convertible into or exchangeable for securities of Parent,
and
(d) the terms of any business combination.
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 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 such 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
RESTRICTIONS ON TRANSFER
7.1 Legends. Each certificate representing Registrable
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 Registrable Securities who disposes of
Registrable
Securities in accordance with Section 7.2 shall be entitled
to
have Parent cause new unlegended certificates to be issued
promptly to the holder in exchange for outstanding legended
certificates representing the disposed shares if (a) the
opinion
to counsel referred to in Section 7.2 is to the further
effect
that such legend is not required in order to establish
compliance with any provisions of the Securities Act or (b)
such
Registrable Securities cease to be Registrable Securities for
any of the reasons set forth in clauses (a) or (b) of Section
1.14.
7.2 Notice of Proposed Dispositions. Prior to any
proposed disposition of any Registrable Securities (unless
there
is proposed to be in effect a Registration Statement with
respect to the sale of such securities and such securities
will
be disposed of 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 Registrable Securities may be
effected without registration of such Registrable Securities
or
(b) a "no action" letter from the SEC to the effect that such
disposition without registration of such Registrable
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 Registrable Securities shall be entitled to
transfer such Registrable Securities in accordance with the
terms of the notice delivered by the holder to Parent. The
provisions of this Section 7.2 shall not apply to any
securities
that cease to be Registrable Securities.
ARTICLE VIII
GENERAL PROVISIONS
8.1 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.
8.2 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.
8.3 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) 10 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.
8.4 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.
8.5 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:
Electronic Fab Technology Corp.
7241 West 4th Street
Greeley, Colorado 80634
Attention: Stuart W. Fuhlendorf
Facsimile No.: (303) 892-4306
(b) if to the Shareholders, to:
Charles E. Hewitson
2709 S.E. Balboa Drive
Vancouver, Washington 98683
Facsimile No.: (503) 538-6610
and
Matthew J. Hewitson
13801 S.E. 35th Street
Vancouver, Washington 98683
Facsimile No.: (360) 883-6717
and
Greg Hewitson
15905 S.W. Oswego Shore Ct.
Lake Oswego, Oregon 97034
Facsimile No.: (503) 697-3646
8.6 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.
8.7 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.
8.8 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.
8.9 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).
8.10 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.
8.11 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.
8.12 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.
8.13 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.
IN WITNESS WHEREOF, the parties hereto have duly
executed
this Registration Rights Agreement as of the date first
written
above.
Parent:
ELECTRONIC FAB TECHNOLOGY
CORP.
By:
_______________________________
Shareholders:
_____________________________________
Charles E. Hewitson
_____________________________________
Matthew J. Hewitson
_____________________________________
Greg Hewitson
The undersigned persons join in this Agreement to the
extent of any community property interest held by them and
consent hereto with respect to such interest.
_____________________________________
Christie Hewitson
_____________________________________
Marsha Hewitson
_____________________________________
Linda Hewitson
CONFORMED COPY
SHARE PURCHASE AGREEMENT
between
ELECTRONIC FAB TECHNOLOGY CORP.
and
THE SHAREHOLDERS OF
CURRENT ELECTRONICS (WASHINGTON), INC.
January 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
RECITAL. . . . . . . . . . . . . . . . . . . . . . . .1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I PURCHASE AND SALE. . . . . . . . . . . . . .1
1.1 Purchase and Sale of Stock. . . . . . .1
1.2 Purchase Price. . . . . . . . . . . . .1
1.3 The Closing . . . . . . . . . . . . . .2
ARTICLE II REPRESENTATIONS AND WARRANTIES CONCERNING THE
SHAREHOLDERS . . . . . . . . . . .3
2.1 Due Authorization. . . . . . . . . . . . . .4
2.3 Brokers' and Finders' Fees . . . . . . . . .4
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY. . . . . . . . . . . . . .5
3.1 Organization and Standing. . . . . . . . . .5
3.2 Capitalization . . . . . . . . . . . . . . .5
3.3 Subsidiaries . . . . . . . . . . . . . . . .5
3.4 No Conflicts . . . . . . . . . . . . . . . .5
3.5 Financial Statements . . . . . . . . . . . .6
3.6 Absence of Certain Changes . . . . . . . . .6
3.7 Liabilities. . . . . . . . . . . . . . . . .8
3.8 Litigation . . . . . . . . . . . . . . . . .8
3.9 Restrictions on Business Activities. . . . .8
3.10 Governmental Authorization. . . . . . .8
3.11 Contracts and Commitments . . . . . . .9
3.12 Title to Property . . . . . . . . . . .9
3.13 Intellectual Property . . . . . . . . 10
3.14 Environmental Matters . . . . . . . . 11
3.15 Taxes . . . . . . . . . . . . . . . . 12
3.16 Employee Benefit Plans. . . . . . . . 14
3.17 Employee Matters. . . . . . . . . . . 16
3.18 Interested Party Transactions . . . . 16
3.19 Insurance . . . . . . . . . . . . . . 16
3.20 Compliance With Laws. . . . . . . . . 17
3.21 Major Customers . . . . . . . . . . . 17
3.22 Suppliers . . . . . . . . . . . . . . 17
3.23 Inventory . . . . . . . . . . . . . . 17
3.24 Product Warranty and Product Liability18
Page
3.25 Minutes Books . . . . . . . . . . . . 18
3.26 Brokers' and Finders' Fees. . . . . . 18
3.28 Disclosure. . . . . . . . . . . . . . 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT19
4.1 Organization . . . . . . . . . . . . . . . 19
4.2 Due Authorization. . . . . . . . . . . . . 19
ARTICLE V CONDUCT PENDING THE CLOSING. . . . . . . . 20
5.1 Conduct of Business of the Company . . . . 20
5.2 No Solicitation; Acquisition Proposals . . 22
5.3 Notice of Breach . . . . . . . . . . . . . 22
ARTICLE VI OTHER COVENANTS . . . . . . . . . . . 22
6.1 Access to Information. . . . . . . . . . . 22
6.2 Confidentiality. . . . . . . . . . . . . . 23
6.3 Publicity. . . . . . . . . . . . . . . . . 23
6.4 Filings; Cooperation . . . . . . . . . . . 23
6.5 Employment Matters . . . . . . . . . . . . 23
6.6 Further Assurances . . . . . . . . . . . . 23
ARTICLE VI CONDITIONS PRECEDENT. . . . . . . . . 24
7.1 Conditions to Obligations of Each Party. . 24
7.2 Additional Conditions to Obligations of Shareholders24
7.3 Additional Conditions to the Obligations of Parent25
ARTICLE VIII TAX MATTERS . . . . . . . . . . . . . 26
8.1 Section 338(h)(10) Election. . . . . . . . 26
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER . . 27
9.1 Termination. . . . . . . . . . . . . . . . 27
9.2 Effect of Termination. . . . . . . . . . . 27
9.3 Amendment; Waiver. . . . . . . . . . . . . 27
ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . 28
10.1 Survival of Representations and Warranties28
10.2 Notices . . . . . . . . . . . . . . . 28
10.3 Interpretation. . . . . . . . . . . . 29
10.4 Counterparts. . . . . . . . . . . . . 30
10.5 Entire Agreement; Nonassignability; Parties in
Interest. . . . . . . . . . . . . . . 30
10.6 Severability. . . . . . . . . . . . . 30
10.7 Remedies Cumulative; No Waiver. . . . 30
10.8 Governing Law . . . . . . . . . . . . 30
Page
10.9 Rules of Construction . . . . . . . . 30
10.10 Expenses. . . . . . . . . . . . . . 30
INDEX OF DEFINED TERMS
Page
1994 Audit Fees . . . . . . . . . . . . . . . . .2
AA. . . . . . . . . . . . . . . . . . . . . . . .3
Adjusted Debt Amount. . . . . . . . . . . . . . .1
Adjusted Purchase Price . . . . . . . . . . . . .2
Adverse Consequence . . . . . . . . . . . . . . 26
Agreement . . . . . . . . . . . . . . . . . . . .1
Annual Financial Statements . . . . . . . . . . .6
CERCLA. . . . . . . . . . . . . . . . . . . . . 12
Closing . . . . . . . . . . . . . . . . . . . . .2
Closing Date. . . . . . . . . . . . . . . . . . .2
COBRA . . . . . . . . . . . . . . . . . . . . . 15
Code. . . . . . . . . . . . . . . . . . . . . . 12
Combined Equity . . . . . . . . . . . . . . . . .1
Company . . . . . . . . . . . . . . . . . . . . .1
Company Authorizations. . . . . . . . . . . . . .9
Confidential Information. . . . . . . . . . . . 11
Debt. . . . . . . . . . . . . . . . . . . . . . .1
Disclosure Schedule . . . . . . . . . . . . . . .5
Employee Plans. . . . . . . . . . . . . . . . . 14
Environmental Law . . . . . . . . . . . . . . . 11
Equity. . . . . . . . . . . . . . . . . . . . . .1
ERISA . . . . . . . . . . . . . . . . . . . . . 14
ERISA Affiliate . . . . . . . . . . . . . . . . 14
Exchange Act. . . . . . . . . . . . . . . . . . 16
environment . . . . . . . . . . . . . . . . . . 11
Governmental Entity . . . . . . . . . . . . . . .4
Indemnification Agreement . . . . . . . . . . . 26
Intellectual Property . . . . . . . . . . . . . 10
Interim Financial Statements. . . . . . . . . . .6
Inventory . . . . . . . . . . . . . . . . . . . 17
include . . . . . . . . . . . . . . . . . . . . 29
includes. . . . . . . . . . . . . . . . . . . . 29
including . . . . . . . . . . . . . . . . . . . 29
knowledge . . . . . . . . . . . . . . . . . . . 29
Lien. . . . . . . . . . . . . . . . . . . . . . .4
Material Adverse Effect . . . . . . . . . . . . 29
Materials of Environmental Concern. . . . . . . 12
Merger Agreement. . . . . . . . . . . . . . . . 26
made available. . . . . . . . . . . . . . . . . 29
material. . . . . . . . . . . . . . . . . . . . 29
Page
multiemployer plan. . . . . . . . . . . . . . . 15
prohibited transaction. . . . . . . . . . . . . 15
Parent. . . . . . . . . . . . . . . . . . . . . .1
Parent Shareholders Meeting . . . . . . . . . . 18
Proprietary Information . . . . . . . . . . . . 23
Proxy Statement . . . . . . . . . . . . . . . . 18
release . . . . . . . . . . . . . . . . . . . . 11
reportable event. . . . . . . . . . . . . . . . 15
Section 338(h)(10) Election . . . . . . . . . . 26
Securities Act. . . . . . . . . . . . . . . . . .4
Shareholder . . . . . . . . . . . . . . . . . . .1
Shareholders. . . . . . . . . . . . . . . . . . .1
Stock . . . . . . . . . . . . . . . . . . . . . .1
Target. . . . . . . . . . . . . . . . . . . . . .1
Tax . . . . . . . . . . . . . . . . . . . . . . 13
Tax authority . . . . . . . . . . . . . . . . . 13
Tax Return. . . . . . . . . . . . . . . . . . . 13
Taxable . . . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . 13
Third Party Intellectual Property Rights. . . . 10
<PAGE>
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated as of
January 15, 1997, is among ELECTRONIC FAB TECHNOLOGY CORP., a
Colorado corporation ("Parent"), and the undersigned SHAREHOLDERS
(individually a "Shareholder" and together, the "Shareholders") of
CURRENT ELECTRONICS (WASHINGTON), INC., a Washington corporation
(the "Company").
RECITAL
The Shareholders own all of the issued and outstanding
shares of Common Stock, $.01 par value, of the Company ("Stock").
Parent desires to purchase from the Shareholders, and the
Shareholders desire to sell to Parent, and Parent desires to
purchase from Shareholders, all Stock subject to the terms and
conditions set forth herein.
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
1.1 Purchase and Sale of Stock. Upon the terms and
subject to the conditions of this Agreement, the Shareholders will
sell to Parent, and Parent will purchase from the Shareholders all
shares of Stock.
1.2 Purchase Price. As payment for the purchase price of
Company Stock, Parent will pay to the Shareholders the aggregate
amount of $1,530,000, which amount will be (a) increased by the
amount by which the interest bearing indebtedness for money
borrowed of the Company ("Debt") outstanding as of the Closing
Date (as defined in Section 1.3) is less than the Adjusted Debt
Amount (as defined in this Section 1.2), (b) reduced by the amount
by which Debt as of the Closing Date exceeds the Adjusted Debt
Amount, and (c) if the total combined shareholders' equity of the
Company and Current Electronics, Inc., an Oregon corporation
("Target"), as of the Closing Date ("Combined Equity"), is less
than $4.0 million, reduced or increased, as the case may be, by
the amount by which the total shareholders' equity of the Company
as of the Closing Date ("Equity") is less or more than $285,000.
For purposes of the foregoing calculation, (x) "Adjusted Debt
Amount" shall be zero, increased by the amount of any additional
Debt outstanding as of the Closing Date that has been authorized
by Parent under Section 1.5, (y) Equity and Combined Equity shall
be determined without deduction for (i) the amount of any bonuses
(not to exceed $180,000) paid to Target's leadership team pursuant
to Section 6.1(b)(vi) of the Merger Agreement, (ii) the fees and
expenses of the accountants of conducting the audit of the 1994
fiscal year of Target and the Company requested by Parent (the
"1994 Audit Fees"), (iii) any writedown or writeoff of leasehold
improvements of Target's Newberg, Oregon facility or any reserves
relating to any move from such facility of Target's operations
that is contemplated by Parent, or (iv) such other reserves,
writedowns or adjustments as may be approved in writing by Parent,
and (z) Equity and Combined Equity shall be reduced (regardless of
when paid or accrued) by (i) the amount of any legal and
accounting fees and expenses incurred by the Company or Target, as
the case may be, with their present counsel and accountants that
relate to the transactions contemplated by this Agreement and the
Merger Agreement and any other similar expenses that relate to the
representation of the interests of the present shareholders of the
Company or Target with respect to such transactions (other than
the 1994 Audit Fees) and (ii) the amount of any fees and expenses
incurred to Pacific Crest Securities, Inc. as contemplated by the
letter agreement identified in Section 3.26 of this Agreement.
Any Debt owed by the Company to Target, and any Debt owed by
Target to the Company, shall be ignored in determining the
Adjusted Debt Amount and the amount of Debt outstanding. The
amount of Debt outstanding, the Adjusted Debt Amount and the
amount of Equity as of the Closing Date shall be determined as
provided in Section 1.4. The purchase price as so adjusted is
referred to herein as the "Adjusted Purchase Price." For the
avoidance of doubt, the term Debt shall not include the then
outstanding balances of two accounts payable owed by the Company
to Allied Signal in the approximate amounts of $676,000 and
$180,000 as of December 31, 1996.
1.3 The Closing.
(a) Subject to the terms and conditions of this
Agreement, the closing of the purchase by Parent of the Stock in
exchange for payment of the Adjusted Purchase Price (the
"Closing") shall take place (i) 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 (ii) at such other
time, date or place as the parties hereto agree. The date on
which the Closing occurs is hereinafter referred to as the
"Closing Date."
(b) At the Closing, (i) each Shareholder shall
deliver to Parent the certificates representing shares of Stock to
be sold by such Shareholder in negotiable form, duly endorsed in
blank, or with separate notarized stock transfer powers attached
thereto and signed in blank, and the various certificates and
documents described in Section 7.3, and (ii) Parent in exchange
therefor shall wire transfer to such Shareholder an amount equal
to the Adjusted Purchase Price multiplied by the number of shares
of Stock owned by such Shareholder over the total number of shares
of Stock and shall deliver the various certificates and documents
described in Section 7.2.
1.4 Determinations as of Closing Date; Subsequent
Adjustments.
(a) The Company shall prepare and submit to Parent,
not later than five days prior to the Closing Date, a written
estimate of the Adjusted Purchase Price as of the Closing Date.
The estimate shall be based upon the books and records of the
Company and shall be accompanied by (i) a statement setting forth
in reasonable detail the calculation of the estimate and (ii) a
certificate signed by the Company confirming that the estimate was
calculated in accordance with this Article I. The Company shall
also deliver to Parent such other information as may be reasonably
requested by Parent to verify the estimate of the Adjusted
Purchase Price provided. The amount paid at the Closing as the
Adjusted Purchase Price under Section 1.3 shall be equal to the
estimate provided by the Company, absent reasonable objection by
Parent, in which event the amount paid at the Closing shall be
equal to such reasonable amount as may be specified by Parent.
(b) Within 30 days after the Closing Date, Parent
shall deliver to the Shareholders a statement calculating the
Adjusted Purchase Price as of the Closing Date in accordance with
this Article I. Such calculation shall be made in accordance with
generally accepted accounting principles consistently applied,
except as otherwise specified herein. Parent's statement and
report shall be final and binding on the parties unless the
Shareholders deliver a notice to Parent disputing any matter
including in such statement and stating the Shareholders' position
with respect to the disputed matter. If the Shareholders deliver
such notice and the parties are unable to resolve all disputed
matters within 30 additional days, Parent or the Shareholders may
elect to submit the disputed matter to Arthur Andersen & Co.,
independent certified public accountants ("AA"), for
determination. The determination of all disputed matters pursuant
to the preceding sentence shall be final and binding on the
parties and the fees and expenses of AA shall be borne by Parent
and the Shareholders in proportion to the amount by which the
determination of all matters varies from the positions of Parent
and the Shareholders on all matters.
(c) Promptly following the determination of matters
by AA, Parent shall pay to the Shareholders or the Shareholders
shall pay to Parent, as appropriate, the amount, if any,
determined to have been overpaid or underpaid at the Closing.
1.5 Increase in Adjusted Debt Amount. The Shareholders
may request that Parent consent to an increase in the Adjusted
Debt Amount to permit borrowings by the Company to fund actual or
expected increased sales volumes and related working capital and
capital equipment requirements. Such request may be made by
giving written notice to Parent, accompanied by appropriate
information supporting such request. Parent shall respond to any
such request promptly, and shall not unreasonably withhold its
consent where such borrowings would be necessary to fund working
capital and capital equipment requirements prudently required in
connection with increases in product sales by the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SHAREHOLDERS
Each of the Shareholders represents and
warrants to Parent
with respect to such Shareholder as follows:
2.1 Due Authorization. The Shareholder has the full power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and has taken all
actions necessary to secure all approvals required in connection
therewith. This Agreement has been duly executed and delivered by
the Shareholder and constitutes the valid and binding obligation
of the Shareholder enforceable against the Shareholder in
accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby will not, (a) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance,
rule or regulation applicable to the Shareholder 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 Shareholder 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 Shareholder 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 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 Shareholder in connection with the
execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
2.2 Stock. The Shareholder has good and marketable title
to the number of shares of Stock set forth next to the
Shareholder's name on Schedule 2.2 of the Disclosure Schedule (as
defined in Article III), free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act of
1933, as amended (the "Securities Act") and state securities
laws); Taxes (as defined in Section 3.15); any Lien; and any
option, warrant, put, call, purchase right, equity, claim, demand,
or other commitment or agreement of any nature. The Shareholder
is not a party to any option, warrant, put, call, purchase right
or other commitment or agreement that could require the
Shareholder to sell, transfer or otherwise convey any Stock, other
than pursuant to this Agreement. Except as set forth in Schedule
2.2 of the Disclosure Schedule, the Shareholder is a competent
adult and is the record and the beneficial owner of the Stock so
listed in the Shareholder's name, with the sole right to vote,
dispose of, and receive dividends or distributions with respect to
such Stock.
2.3 Brokers' and Finders' Fees. The Shareholder has not
incurred, or 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Except as disclosed in a document of even date herewith and
delivered by Shareholders to Parent prior to the execution and
delivery of this Agreement and referring to the representations
and warranties in this Agreement (the "Disclosure Schedule"), the
Shareholders represent and warrant to Parent as follows:
3.1 Organization and Standing. The Company is a
corporation duly organized and validly existing and in good
standing under the laws of the State of Washington, 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 10.3) on the Company. The Company has delivered to Parent
a true and correct copy of it Articles of Incorporation and
Bylaws, each as amended to date. The Company is not in violation
of any of the provisions of its Articles of Incorporation or
Bylaws or equivalent organizational documents.
3.2 Capitalization. The authorized capital stock of the
Company consists of 2,000,000 shares of Stock and 1,000,000 shares
of Preferred Stock, $.01 par value, of which there are issued and
outstanding 300 shares of Stock and no shares of Preferred Stock.
There are no other outstanding shares of capital stock or other
securities of the Company and no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any
nature relating to the capital stock or other securities of the
Company, or otherwise obligating the Company to issue, transfer,
sell, purchase, redeem or otherwise acquire such stock or
securities. All outstanding shares of Stock are duly authorized,
validly issued, fully paid and non-assessable and are free and
clear of any Lien and are not subject to preemptive rights or
rights of first refusal created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement to which
the Company or any Shareholder is a party or by which it is bound.
3.3 Subsidiaries. The Company 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 No Conflicts. 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 Articles of Incorporation or Bylaws of the
Company, (b) violate or conflict with any permit, order, license,
decree, judgment, statute, law, ordinance, rule or regulation
applicable to the Company or the properties or assets of the
Company, 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 a right of termination, cancellation
or acceleration of, or result in the creation of any Lien on any
of the properties or assets of the Company 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 Company 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 have a Material Adverse Effect on the Company. No consent,
approval, order or authorization of, or registration, declaration
or filing with, any Governmental Entity is required by or with
respect to the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
3.5 Financial Statements. The Company has heretofore
delivered to Parent true and complete copies of an audited balance
sheet, and the related statements of operations and stockholders'
equity and of cash flows at September 30, 1996 on a combined basis
with Target with separate disclosure of the balance sheet and
income and retained earnings of the Company (the "Annual Financial
Statements"), with an opinion of the Company's independent public
accountants. The Company also has heretofore delivered to Parent
true copies of the unaudited balance sheet of the Company at
November 30, 1996, and the related unaudited statements of income
for the two months then ended (the "Interim Financial
Statements"). The Annual Financial Statements and the Interim
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 Financial Statements, that no notes are included) and
fairly present the financial condition and operating results of
the Company (combined with Target to the extent applicable) at the
dates and during the periods indicated therein, subject, in the
case of the Interim Financial Statements, to normal, recurring
year-end audit adjustments.
3.6 Absence of Certain Changes. Except as specifically
permitted by this Agreement or as set forth in Schedule 3.6 of the
Disclosure Schedule, since September 30, 1996, the Company has
conducted its business in the ordinary course consistent with past
practice and there has not occurred:
(a) any change, event or condition (whether covered
by insurance) that has resulted in, or might reasonably be
expected to result in, a Material Adverse Effect on the Company;
(b) any sale, lease or other transfer or disposition
of any property or asset of the Company, except for the sale of
inventory in the ordinary course of business;
(c) any change in accounting methods, practices or
policies (including any change in depreciation or amortization
policies or rates) by the Company or any revaluation by the
Company of any of its assets, except as described in the notes to
the Annual Financial Statements;
(d) any declaration, setting aside, or payment of
any dividend or other distribution to the Company's shareholders
(other than declaration or payment of dividends or other
distributions to the Shareholders in the amount of $300,000 on
December 13, 1996 and immediately prior to the Closing, the
estimated amount of federal and state income tax to be imposed on
the Shareholders on income earned by the Company from January 1,
1996 through the Closing, assuming such shareholders are subject
to the maximum effective combined Oregon and federal income tax
rates then in effect), or any direct or indirect redemption,
retirement, purchase or other acquisition by the Company of any of
its capital stock or other securities or options, warrants or
other rights to acquire capital stock;
(e) any entering into, amendment or termination of,
or default under, by the Company of any contract to which the
Company is a party or by which it or any of them is bound other
than in the ordinary course of business and as provided to Parent;
(f) any damage, destruction or loss (whether or not
covered by insurance) to the properties and assets of the Company;
(g) any commitment or transaction (including any
capital expenditure, capital financing or sale of assets) by the
Company 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;
(h) any Lien on any asset allowed to exist by the
Company;
(i) any cancellation of any debt or waiver or
release of any right or claim by the Company;
(j) any payment, discharge or satisfaction of any
claim, liability or obligation by the Company, other than as
reflected or reserved against in the Annual Financial Statements
or the Interim Financial Statements or in the ordinary course of
business consistent with past practice;
(k) to the Shareholders' knowledge, any labor
dispute, litigation or governmental investigation affecting the
business or financial condition of the Company;
(l) any issuance or sale of capital stock or other
securities, exchangeable or convertible securities, options,
warrants, puts, calls or other rights to acquire capital stock or
other securities of the Company;
(m) any indebtedness for borrowed money incurred,
assumed or guaranteed by the Company;
(n) 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;
(o) any increase in any salary, wage, benefit or
other remuneration payable or to become payable to any current or
former officer, director, employee or agent of the Company or any
bonus or severance payment or arrangement made to, for or with any
officer, director, employee or agent of the Company or any
supplemental retirement plan or other program or special
remuneration for any officer, director, employee or agent of the
Company, except for normal salary or wage increases relating to
periodic performance reviews and annual bonuses consistent with
past practices of the Company where such increases or bonuses are
not given to Shareholders or their relations or members of the
leadership team of the Company or Target.
(p) any grant of 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 the Company with respect to the granting of credit;
(q) any delay in the payment of any trade or other
payables other than in the ordinary course of business consistent
with past practice; or
(r) any agreement, whether in writing or otherwise,
by the Company to do any of the foregoing.
3.7 Liabilities. Except as set forth in the Annual
Financial Statements, the Interim Financial Statements,
Schedule 3.7 of the Disclosure Schedule or any other Schedule of
the Disclosure Schedule and except for liabilities or obligations
arising in the ordinary course and consistent with past practice
and those incurred in connection herewith, neither the Company has
any liability or obligation of any nature, whether due or to
become due, fixed or contingent.
3.8 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 any Shareholder, threatened against the
Company 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 the Company. There is no judgment, decree or
order against the Company or any Shareholder, or, to the knowledge
of any Shareholder, any of the Company's 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 the
Company.
3.9 Restrictions on Business Activities. There is no
material agreement, judgment, injunction, order or decree binding
upon the Company which has or reasonably could be expected to have
the effect of prohibiting or materially impairing any current or
proposed business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company
as currently conducted or as proposed to be conducted by the
Company.
3.10 Governmental Authorization. The Company has obtained
each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization that are
necessary for the Company to own or lease, operate and use its
assets and properties and to carry on its business as currently
conducted or as proposed to be conducted (collectively, the
"Company Authorizations"), the Company has performed and fulfilled
its obligations under the Company Authorizations, and all the
Company Authorizations are in full force and effect, except where
the failure to obtain or have any of such Company Authorizations
could not reasonably be expected to have a Material Adverse Effect
on the Company.
3.11 Contracts and Commitments. Except as set forth in
Schedule 3.11 of the Disclosure Schedule, neither the Company is 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 the Company is obligated to make or
expects to receive payments in excess of $10,000 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 limits the right of the Company
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 the Company and Target, in any
respect. True and complete copies of all agreements described in
Schedule 3.11 of the Disclosure Schedule or any other section
thereto have been delivered to Parent. The Company 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, the Company has not
received any notice of termination, cancellation or acceleration
or any notice of breach, violation or default thereof.
3.12 Title to Property. Except as set forth in
Schedule 3.12 of the Disclosure Schedule, the Company has good and
marketable title to all of their 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 the Company that are used in the
operations of their business are in good operating condition and
repair. All plants, property and equipment have been well
maintained and conform (to the Shareholders' actual knowledge as
to leased real property) with all applicable ordinances,
regulations and zoning and other laws and do not encroach on the
property of others. There is no pending or, to the knowledge of
the Shareholders, threatened change in any such ordinance,
regulation or zoning or other law, and there is no pending or, to
the knowledge of the Shareholders, threatened condemnation of any
such building, machinery or equipment. The properties and assets
of the Company include all rights, properties, interests in
properties and assets necessary to permit the Company to conduct
its business as currently conducted or as proposed to be
conducted. Schedule 3.12 of the Disclosure Schedule identifies
each parcel of real property owned or leased by the Company.
3.13 Intellectual Property.
(a) The Company owns, or is licensed or otherwise
possess 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 or proposed to be used in the business of the Company as
currently conducted or as proposed to be conducted, except to the
extent that the failure to have such rights have not and could not
reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Schedule 3.13 of the 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 the Company
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 issuance and registration has
been filed, (ii) all material licenses, sublicenses and other
agreements as to which the Company 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 the Company is a party and pursuant to which the
Company 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 the Company.
(c) To the knowledge of the Company, there is no
unauthorized use, disclosure, infringement or misappropriation of
any Intellectual Property rights of the Company, any trade secret
material to the Company, or any Third Party Intellectual Property
Right, by any third party, including any employee or former
employee of the Company. The Company 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.
(d) The Company is not, and will not as a result of
the execution and delivery of this Agreement or the performance of
the Company'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 the
Company.
(e) All patents, registered trademarks, service
marks and copyrights held by the Company are valid and subsisting.
The Company (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. The
manufacture, marketing, licensing or sale of the products and
services of the Company do not infringe any patent, trademark,
service mark, copyright, trade secret or other proprietary right
of any third party.
(f) The Company 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 the Company does not already own by
operation of law.
(g) The Company 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 the Company 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 the Company has been pursuant to the terms of a written
agreement with the owner of such Confidential Information, or is
otherwise lawful.
3.14 Environmental Matters.
(a) The Company has complied with, and is in
compliance with, all Environmental Laws (as defined in this
Section 3.14(a)) applicable to its business, properties and
assets. The Company has, and the Company 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 the Company. There is no
pending or, to the knowledge of the Shareholders, 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 the Company is a party or, to the
knowledge of the Shareholders, threatened to be made a party. For
purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, rule or regulation or the common law
relating to the environment or occupational health and safety,
including any statute, regulation or order pertaining to
(i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and
solid contamination; (iv) the release or threatened release into
the environment of industrial, toxic or hazardous substances, or
solid or hazardous waste, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine
sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and
containers; (vii) underground and other storage tanks or vessels,
abandoned, disposed or discarded barrels, containers and other
closed receptacles; (viii) health and safety of employees and
other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or
solid or hazardous waste. As used herein, the terms "release" and
"environment" have the meanings set forth in the federal
Comprehensive Environmental Compensation, Liability and Response
Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined in this Section 3.14(b)) into
the environment at any parcel of real property or any facility
presently or formerly owned by the Company or by the Company at
any parcel of real property or any facility presently or formerly
leased, operated or controlled by the Company. With respect to any
such releases of Materials of Environmental Concern, the Company
has given all required notices to government authorities, copies
of which have been provided to Parent. The Shareholders are not
aware of any releases of Materials of Environmental Concern at
parcels of real property or facilities other than those presently
or formerly owned, leased, operated or controlled by the Company
that could reasonably be expected to have an impact on the real
property or facilities owned, leased, operated or controlled by
the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or
contaminants, hazardous substances (as such term is defined under
CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the Federal Resources Conservation and Recovery
Act), toxic materials, oil or petroleum and petroleum products.
(c) Set forth in Schedule 3.14 of the Disclosure
Schedule is a list of all environmental reports, investigations
and audits in the possession of the Company with respect to the
operations of, or real property leased by the Company (whether
conducted by or on behalf of the Company or a third party and
whether done at the initiative of the Company or directed by a
Governmental Entity or other third party). True and complete
copies of each such report, or the results of each such
investigation or audit, have been provided to Parent.
(d) The Shareholders are not aware of any material
environmental liability arising out of the utilization by the
Company of any solid and hazardous waste transporter or treatment,
storage and disposal facility.
3.15 Taxes. The Company is, and has been for all taxable
periods since its formation, treated as an S Corporation as
defined in Section 1361(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). The Company, and any consolidated,
combined, unitary or aggregate group for Tax (as defined in this
Section 3.15) purposes of which the Company is or has been a
member have timely filed all Tax Returns (as defined in this
Section 3.15) required to be filed by it taking into account
extensions of due dates, have paid all Taxes shown thereon to be
due and has 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. The Company 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. The Company does
not have any liability under Treasury Regulation 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. The
Company does not do business in or derive income from any state,
local, territorial or foreign taxing jurisdiction other than those
for which Returns have been furnished to Parent. Except as
disclosed in Schedule 3.15 of the Disclosure Schedule, (a) no
material claim for Taxes has become a Lien against the property of
the Company or is being asserted against the Company other than
Liens for Taxes not yet due and payable, (b) no audit of any Tax
Return of the Company is being conducted by a Tax authority,
(c) no Tax authority is now asserting, or to the knowledge of the
Shareholders, threatening to assert against the Company 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 the Company, (d) no
extension of the statute of limitations on the assessment of any
Taxes has been granted by the Company and is currently in effect,
and (e) the Company 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 the Company from any period prior to the Effective
Date to any period after the Effective Date, (g) the Company has
never been included in an affiliated group of corporations, within
the meaning of Section 1504 of the Code, (h) the Company 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 the Company, (j) the Company has not disposed of any
property that has been accounted for under the installment method,
(k) the Company is not a party to any interest rate swap, currency
swap or similar transaction, (l) the Company is not a United
States real property holding corporation within the meaning of
Section 897(c)(2) of the Code, (m) the Company 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) the Company 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, and (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. The Company will not be required to include any material
adjustment in Taxable income for any Tax period (or portion
thereof) ending after the Closing Date attributable to adjustments
made prior to the Closing Date pursuant to Section 481 or 263A of
the Code or any comparable provision of any state or foreign Tax
law. Schedule 3.15 of the Disclosure Schedule contains accurate
and complete information with respect to: (w) all material tax
elections in effect with respect to the Company, (x) the current
tax basis of the assets of the Company, (y) the current and
accumulated earnings and profits of the Company, and (z) the tax
credit carry overs of the Company. 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. The Company 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 transaction contemplated hereby will not have any adverse
effect on the continued validity and effectiveness of such Tax
exemptions or other Tax-sharing agreement or order.
3.16 Employee Benefit Plans.
(a) Schedule 3.16 of the Disclosure Schedule lists,
with respect to the Company and any trade or business (whether or
not incorporated) which is treated as a single employer with the
Company (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 $10,000,
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
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 $10,000 remain for
the benefit of, or relating to, any present or former employee,
consultant or director (collectively, the "Employee Plans").
(b) The Company has furnished to Parent a copy of
each of the 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 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 Employee Plan intended to be
qualified under Sections 401(a) or 501(c)(9) of the Code has
either obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under the Tax
Reform Act of 1986 and subsequent legislation, or has applied to
the Internal Revenue Service for such a determination letter prior
to the expiration of the requisite period under applicable
Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any
amendments necessary to obtain a favorable determination. The
Company has also furnished Parent with the most recent Internal
Revenue Service determination letter issued with respect to each
such 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 Employee Plan subject to
Code Section 401(a)), and all prohibited transaction exemptions
(or requests for such exemptions), private letter rulings,
opinions, information letters or compliance statements issued with
respect to any plan described in Section 3.16(a) by the Internal
Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation.
(c) (i) None of the Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any
person; (ii) there has been no "prohibited transaction," as such
term is defined in Section 406 of ERISA and Section 4975 of the
Code, with respect to any Employee Plan, which could reasonably be
expected to have, in the aggregate, a Material Adverse Effect;
(iii) each Employee Plan has been administered in accordance with
its terms and 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
the Company, and the Company or ERISA Affiliate have performed all
obligations required to be performed by them under, are not in any
respect in default under or violation of, and have no knowledge of
any default or violation by any other party to, any of the
Employee Plans, which default or violation could reasonably be
expected to have a Material Adverse Effect on the Company;
(iv) neither the Company nor any ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA with respect to any of the Employee Plans
which have a Material Adverse Effect on any such parties; (v) all
material contributions required to be made by the Company or any
ERISA Affiliate to any Employee Plan have been made on or before
their due dates and a reasonable amount has been accrued for
contributions to each Employee Plan for the current plan years;
(vi) with respect to each Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such
event for which the 30-day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and
(vii) no Employee Plan is covered by, and neither the Company nor
any ERISA Affiliate has incurred or expects to incur any liability
under Title IV of ERISA or Section 412 of the Code. With respect
to each Employee Plan subject to ERISA as either an employee
pension plan within the meaning of Section 3(2) of ERISA or an
employee welfare benefit plan within the meaning of Section 3(1)
of ERISA, the Company has prepared in good faith and timely filed
all requisite governmental reports (which were true and correct as
of the date filed) and has properly and timely filed and
distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each
such Employee Plan except where the failure to timely file,
distribute or post such documents would not, in the aggregate,
have a Material Adverse Effect on the Company. No suit,
administrative proceeding, action or other litigation has been
brought, or to the knowledge of the Shareholders, is threatened,
against or with respect to any such Employee Plan, including any
audit or inquiry by the Internal Revenue Service or United States
Department of Labor. Neither the Company nor any ERISA Affiliate
is a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multiemployer plan" as defined
in Section 3(37) of ERISA.
(d) With respect to each Employee Plan, the Company
has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations
thereunder and (ii) the applicable requirements of the Family and
Medical Leave Act of 1993 and the regulations thereunder, except
to the extent that such failure to comply would not, in the
aggregate, have a Material Adverse Effect on the Company.
(e) 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 the Company 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.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by the
Company or ERISA Affiliate relating to, or change in participation
or coverage under, any 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.
3.17 Employee Matters. Schedule 3.17 of the Disclosure
Schedule lists all employees of the Company and the remuneration
and benefits to which such employees are entitled. Schedule 3.17
also lists all employment contracts and collective bargaining
agreements, and all pension, bonus, profit sharing, or other
agreements or arrangements providing for employee remuneration or
benefits to which the Company is a party or by which it is bound;
all of these contracts and arrangements are in full force and
effect, and neither the Company nor any other party is in default
under them. There have been no claims of defaults and, to the
knowledge of the Shareholders, 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 the
knowledge of the Shareholders, threatened labor dispute, strike,
or work stoppage that would have a Material Adverse Effect on the
Company. The Company is in compliance in all 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 are not engaged in any unfair labor practice.
There are no pending claims against the Company under any workers
compensation plan or policy or for long term disability. The
Company does not have any obligations under COBRA with respect to
any former employees or qualifying beneficiaries thereunder.
3.18 Interested Party Transactions. Except as disclosed in
Schedule 3.18 of the Disclosure Schedule, the Company is not
indebted to any shareholder, director, officer, employee or agent
of the Company (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such
person is indebted to the Company, 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 and
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
3.19 Insurance. The Company 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 the
Company. Schedule 3.19 of the 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 bond as to which the Company has received a denial,
or, to the knowledge of the Shareholders, 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 the Company is otherwise in
compliance in all material respects with the terms of such
policies and bonds. The Shareholders have 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.
3.20 Compliance With Laws. The Company 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 the
Company.
3.21 Major Customers. Schedule 3.21 of the Disclosure
Schedule contains a list of the customers of the Company for each
of the two most recent fiscal years, which 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. The Shareholders have no
knowledge or information of any facts indicating, nor any other
reason to believe, that any of the customers listed in such
Schedule 3.21 will not continue to be customers of the Company
after the Closing at substantially the same level of purchases.
3.22 Suppliers. As of the date hereof, no supplier of the
Company has indicated to the Company that it will stop, or
decrease the rate of, supplying materials, products or service to
the Company. The Company has not knowingly breached, so as to
provide a benefit to the Company that was not intended by the
parties, any agreement with, or engaged in any fraudulent conduct
with respect to, any customer or supplier of the Company.
3.23 Inventory. All inventories of raw materials, work-in
process and finished goods (including all such in transit) of the
Company, together with related packaging materials (collectively,
"Inventory"), reflected in the Annual and Interim 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 Schedule 3.23 of the Disclosure Schedule, all Inventory is
located on premises owned or leased by the Company. 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 the Company
with no recent history of credit problems with respect to the
Company; neither the Company nor any such customer is in material
breach of the terms of any obligation to the other, and, based on
the knowledge of the Shareholders, 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.
3.24 Product Warranty and Product Liability. Schedule 3.24
of the Disclosure Schedule contains a true and complete copy of
the Company's standard warranty or warranties for its
manufacturing services. There has been no variation from such
warranties, except as set forth in Schedule 3.24 of the Disclosure
Schedule. Except as stated therein, there are no warranties,
commitments or obligations with respect to the Company's
performance of services. Schedule 3.24 of the 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 the
knowledge of the Shareholders, threatened, or which have been
asserted or commenced against the Company 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 the Company's
manufacturing services which would adversely affect performance of
products the Company manufactures or create an unusual risk of
injury to persons or property. The Company'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 their performance.
3.25 Minutes Books. The minute books of the Company 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 the Company, and
reflect all transactions referred to in such minutes accurately in
all material respects.
3.26 Brokers' and Finders' Fees. Except for the letter
agreement, dated August 23, 1996, between Target and Pacific Crest
Securities, Inc., neither the Company nor any Shareholder has
incurred, or will 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.
3.27 Proxy Statement. The information supplied by the
Company 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 Closing Date, 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.
3.28 Disclosure. None of the representations or warranties
made by Shareholders herein or in the Disclosure Schedule, or in
any certificate furnished by Shareholders pursuant to this
Agreement, when all such documents are read together in their
entirety, contain or will contain at the Closing Date any untrue
statement of a material fact, or omit or will omit at the Closing
Date 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. The Company and
Shareholders have 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
the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Shareholders as
follows:
4.1 Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Colorado.
4.2 Due Authorization. Parent has the full corporate
power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and constitutes the valid and
binding obligation of Parent enforceable against Parent in
accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby will not, (a) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance,
rule or regulation applicable to Parent 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 Lien on any of the properties or assets of Parent
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 Parent 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 prevent 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 Parent in connection with
the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
4.3 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.
4.4 Investment. Parent is not acquiring the Stock with a
view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
ARTICLE V
CONDUCT PENDING THE CLOSING
5.1 Conduct of Business of the Company. Prior to the
Closing, except as expressly contemplated by this Agreement or as
agreed in writing by Parent:
(a) Affirmative Covenants. The Shareholders will
cause each of the Company 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 Closing;
(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 the Company; 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 the Company and such contest does not have a Material Adverse
Effect on the Company and adequate reserves therefor are reflected
on the Annual Financial Statements or the Interim Financial
Statements.
(b) Negative Covenants. The Shareholders will cause
each of the Company not to do any of the things enumerated in
Section 3.6. In addition, but without limiting the generality of
the foregoing, the Shareholders will cause each of the Company not
to:
(i) cause or permit any amendments to its
Articles of Incorporation or Bylaws or equivalent charter
documents;
(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 $10,000;
(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 for normal salary or wage increases relating
to periodic performance reviews and annual bonuses consistent with
past practices of the Company where such increases or bonuses are
not given to Shareholders or their relations or members of the
leadership team of the Company or Target.
(vii) commence a lawsuit other than (A) for the
routine collection of bills or (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;
(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; or
(xii) agree, whether in writing or otherwise, to
do any of the foregoing.
5.2 No Solicitation; Acquisition Proposals. The
Shareholders will (and the Shareholders will cause each of the
Company to) 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, the Company or any
business combination with the Company 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.
None of the Shareholders will vote their Stock in favor of any
transaction of the nature described in this Section 5.2. The
Shareholders will notify Parent immediately if any inquiries or
proposals are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated or
continued with the Company or any Shareholder, in each case in
connection with any of the foregoing. The Shareholders shall use
their 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 the Company and shall cease,
or cause the Company to cease, any negotiations conducted in
connection therewith or otherwise conducted with any such parties.
5.3 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 VI
OTHER COVENANTS
6.1 Access to Information. The Shareholders will afford,
and will cause the Company to 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 Closing to (a) all of the
Company's properties, books, contracts, commitments and records,
and (b) all other information concerning the business, properties
and personnel of the Company as Parent may reasonably request.
The Shareholders will provide, and will cause each of the Company
to provide, to Parent and its accountants, counsel and other
representatives copies of internal financial statements promptly
upon request. Parent shall cooperate with the Shareholders with
their due diligence review of Parent to the extent necessary to
confirm the accuracy of Parent's representations and warranties.
Subject to compliance with applicable law, from the date hereof
until the Closing, each of Parent and the Company 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 6.1 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 transactions contemplated
hereby.
6.2 Confidentiality. The parties hereto will treat as
confidential and hold in confidence all information concerning the
businesses and affairs of the Company and the business and affairs
of Parent 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 Confidential Information except in
furtherance of this Agreement or as required by law. For
avoidance of doubt, the letter agreement between Parent and
Pacific Crest Securities Inc., dated October 2, 1996, relating to
the disclosure of the Company's confidential information and
Section 11 of letter agreement, dated December 18, 1996, among
Current Electronics, Inc., the Company and Parent shall cease to
have any further force or effect.
6.3 Publicity. The Shareholders will not, and will cause
each of the Company 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 shall consult with the Company 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.
6.4 Filings; Cooperation. The parties hereto shall make,
and cause their affiliates to make, all necessary filings with
respect to the 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 transactions contemplated hereby.
6.5 Employment Matters. The Shareholders shall cause the
employment arrangements of each person that is related to a
Shareholder to be terminated, such terminations to be effective at
the Closing and be without liability to the Company in any
respect.
6.6 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 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 transactions contemplated hereby (and, in such case, to
proceed with the such transactions as expeditiously as possible).
(b) In case at any time after the Closing 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 Shareholders shall take all such necessary action.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of Each Party. 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 Closing
Date of each of the following conditions, any of which may be
waived, in writing, by agreement of Parent and Shareholders
holding a majority in interest of the Stock:
(a) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote
of the shareholders of Parent.
(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 transactions
contemplated hereby, 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 such transactions, which makes
the consummation of such transactions illegal.
(c) The parties hereto 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.
7.2 Additional Conditions to Obligations of Shareholders.
The obligations of the Shareholders to consummate and effect this
Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of
the following conditions, any of which may be waived, in writing,
by Shareholders holding a majority in interest of the Stock:
(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 on or prior to the Closing 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 Effect or otherwise the concept of
materiality) when made and on and as of the Closing Date as though
such representations and warranties were made on and as of such
date.
(b) The Shareholders shall have received a
certificate executed on behalf of Parent by its Chief Financial
Officer certifying that the conditions specified in Section 7.2(a)
have been fulfilled.
(c) The Shareholders shall have received a legal
opinion of Holme Roberts & Owen LLP, counsel to Parent,
substantially in the form attached to the Merger Agreement as
Exhibit 8.2(c).
7.3 Additional Conditions to the Obligations of Parent.
The obligations of Parent to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by Parent:
(a) The Shareholders 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 Closing Date and the
representations and warranties of the Shareholders 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 Closing Date 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 Closing Date, from each Shareholder certifying that the
conditions specified in Section 7.3(a) have been fulfilled.
(c) Parent shall have received a legal opinion from
Hershner, Hunter, Andrews, Neill & Smith, LLP, legal counsel to
the Shareholders, substantially in form attached to the Merger
Agreement 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
transactions contemplated hereby under any material contract of
the Company or otherwise.
(e) There shall not have occurred any Material
Adverse Effect on the Company.
(f) Parent shall have received letters of
resignation, effective as of the Closing Date, executed and
tendered by each of the then incumbent directors of the Company.
(g) All of the transactions contemplated by the
Agreement and Plan of Merger, dated as of January 15, 1997, among
Parent, Current Merger Corp. and Target (the "Merger Agreement")
shall have been completed, including the execution and delivery by
each Shareholder of an agreement with respect to indemnification
of Parent and Merger Sub with respect to breaches of terms and
conditions of this Agreement (the "Indemnification Agreement"),
which Indemnification Agreement shall be substantially in the form
attached to the Merger Agreement as Exhibit 8.3(g).
(h) The transactions hereunder shall qualify for a
Section 338(h)(10) Election (as hereinafter defined) under the
applicable provisions of the Code and the Treasury Regulations and
under the state income tax laws of the states in which the Company
is required to file tax returns.
ARTICLE VIII
TAX MATTERS
8.1 Section 338(h)(10) Election. Each Shareholder will,
if so directed by Parent, join with Parent in making an election
under Section 338(h)(10) of the Code (and any corresponding
elections under state, local or foreign tax law) (collectively, a
"Section 338(h)(10) Election") with respect to the purchase and
sale of the Stock pursuant to this Agreement. The Shareholders
will pay any Tax, including any liability of the Company for Tax
resulting from the application to it of Treasury Regulation
1.338(h)(10)-1(f)(5), attributable to the making of the Section
338(h)(10) Election and will indemnify Parent and the Company
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, Taxes, Liens, losses,
expenses and fees, including court costs and attorneys' fees and
expenses (an "Adverse Consequence") arising out of any failure to
pay such Taxes. The Shareholders shall also pay any
state, local, or foreign Taxes (and indemnify Parent
and the Company against any loss or damage arising out
of any failure to pay such Taxes) attributable to an
election under state, local or foreign law similar to
the election available under Section 338(g) of the Code
(or which results from the making of an election under
Section 338(g) of the Code) with respect to the
purchase and sale of the stock of the Company and any
such election shall be included within the term
"Section 338(h)(10) Election" for purposes of this
Agreement. Parent shall be responsible for, and control, the
preparation and filing of forms and documents with respect to the
Section 338(h)(10) Election. The Shareholders shall timely
execute and deliver to Parents such documents and forms as Parent
may request with respect to the Section 338(h)(10) Election. The
Shareholders agree not to take any action to change the election
or the contents of any forms filed with any taxing authority
without Parent's prior written consent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. At any time prior to the Closing Date,
whether before or after approval of the matters presented in
connection with this Agreement by the shareholders of Parent, this
Agreement may be terminated:
(a) by mutual consent of Parent and the Shareholders
holding a majority in interest of the Stock;
(b) by either Parent or all Shareholders, if,
without fault of the terminating party, the Closing shall not have
occurred on or before April 30, 1997, or such later date as may be
agreed upon in writing by the parties hereto;
(c) by Parent, (i) if any of the conditions
specified in Section 7.3 have not been satisfied or waived at such
time as such condition is no longer capable of satisfaction or
(ii) if any of the Shareholders shall have breached its respective
representations, warranties or other obligations under Articles
II, III, V and VI in any material respect and such breach
continues for a period of 10 days after Shareholders holding a
majority in interest of the Stock receive notice of the breach
from Parent;
(d) by Shareholders holding a majority in interest
of the Stock, if (i) any of the conditions specified in Section
7.2 have not been satisfied or waived at such time as such
condition is no longer capable of satisfaction or (ii) if Parent
shall have breached its respective representations, warranties or
other obligations under Articles IV and VI in any material respect
and such breach continues for a period of 10 days after Parent
receives notice of the breach from the Shareholders.
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 the parties hereto, 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 9.2
and Section 6.2(Confidentiality) and Article X (General
Provisions) shall remain in full force and effect and survive any
termination of this Agreement.
9.3 Amendment; Waiver. The parties hereto may cause this
Agreement to be amended at any time by execution of an instrument
in writing signed by Parent and Shareholders holding a majority in
interest of the Stock. Any agreement on the part of a party
hereto to any such 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 the Shareholders in Sections 3.1
- 3.14 and 3.16 - 3.28 shall survive the Closing and continue in
full force and effect for one year after the Closing Date. All
the other representations and warranties of the Shareholders,
including those in Article II and Sections 3.15, shall survive the
Closing and continue in full force and effect forever after the
Closing Date (subject to any applicable statute of limitations).
The representations and warranties of Parent shall not survive the
Closing.
10.2 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:
Electronic Fab Technology Corp.
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 Shareholders, to:
Christie Hewitson
2709 S.E. Balboa Drive
Vancouver, Washington 98683
Facsimile No.: (503) 538-6610
and
Marsha Hewitson
13801 S.E. 35th Street
Vancouver, Washington 98683
Facsimile No.: (360) 883-6717
and
Linda Hewitson
15905 S.W. Oswego Shore Ct.
Lake Oswego, Oregon 97034
Facsimile No.: (503) 697-3646
with a copy to:
Hershner, Hunter, Andrews,
Neill & Smith, LLP
180 East 11th Avenue
Eugene, Oregon 97440
Attention: Robert Stout, Esq.
Facsimile No.: (541) 344-2025
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 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 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 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.
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 and the 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 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. 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 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.
10.10 Expenses. Whether or not the transactions
contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and the<PAGE>
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.
11.11 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Share Purchase Agreement to be executed and delivered by their
respective officers thereunto duly authorized, all as of the date
first written above.
Parent:
ELECTRONIC FAB TECHNOLOGY CORP.
By:
Shareholders:
Christie Hewitson
Christie Hewitson
Marsha Hewitson
Marsha Hewitson
Linda Hewitson
Linda Hewitson
The undersigned persons join in this Agreement to the extent
of any community property interest held by them and consent hereto
with respect to such interest.
Charles E. Hewitson
Charles E. Hewitson
Matthew J. Hewitson
Matthew J. Hewitson
Greg Hewitson
Greg Hewitson
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated
February 24 , 1997 is among the undersigned shareholders of
Current Electronics, Inc., a Oregon corporation ("Target")
(individually, a "Target Shareholder" and, collectively, "Target
Shareholders"), the undersigned shareholders of Current
Electronics Washington, Inc. a Washington corporation (the
"Company") (individually, a "Company Shareholder" and,
collectively, the "Company Shareholders") and Electronic Fab
Technology Corp. ("Parent"), a Colorado corporation. Target
Shareholders and Company Shareholders are sometimes referred to
herein, individually, as a "Shareholder" and, collectively, as the
"Shareholders."
RECITALS
A. In accordance with the Agreement and Plan of Merger,
dated as of January 15, 1997 (the "Merger Agreement") among
Parent, Merger Sub and Target, Target Shareholders received shares
of Common Stock, $.01 par value, of Parent ("Parent Common Stock")
in exchange for their shares of Common Stock, $.01 par value, of
Target ("Target Common Stock"). In connection with the Merger
Agreement, Parent granted Target Shareholders demand and piggyback
registration rights pursuant to the Registration Rights Agreement
of even date herewith (the "Registration Rights Agreement").
B. Company Shareholders received cash in exchange for
shares of Common Stock, $.01 par value, of the Company (the
"Company Common Stock"), in accordance with the Stock Purchase
Agreement, dated as of January 15, 1997 (the "Stock Purchase
Agreement"), among Parent and the Company Shareholders.
C. In consideration of Parent entering the Merger
Agreement, the Registration Rights Agreement and the Stock
Purchase Agreement and to induce Parent to consummate the
transactions contemplated thereby, the Shareholders are making
certain representations and warranties set forth herein and
indemnifying Parent with respect to certain matters under the
Merger Agreement and the Stock Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of
the representations, covenants and agreements contained herein,
the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Due Authorization; Enforceability; No Conflict. Each
of the Shareholders represents and warrants to Parent with respect
to such Shareholder that the Shareholder 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. The
Shareholder is a competent adult. This Agreement has been duly
executed and delivered by the Shareholder and constitutes the
valid and binding obligation of the Shareholder enforceable
against the Shareholder in accordance with its terms. The
execution and delivery of this Agreement do 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 Shareholder 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 Shareholder 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 Shareholder 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 Shareholder in
connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
1.2 Other Representations and Warranties of Target
Shareholders. Each of the Target Shareholders represents and
warrants to Parent with respect to such Target Shareholder that
the representations and warranties in Sections 1(c) and 1(d) of
the Voting Agreement, dated as of January 15, 1997, among the
Target Shareholders and Parent are true and correct in all
respects. The Target Shareholder has not incurred, or 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.
ARTICLE II
SURVIVAL; INDEMNIFICATION
2.1 Indemnities by Shareholders.
(a) If Target breaches any covenant in the Merger
Agreement, the Company Shareholders breach any covenant in the
Stock Purchase Agreement (other than the covenant under Section
1.1 (Purchase and Sale of Stock) of the Stock Purchase Agreement),
any representation or warranty of Target in the Merger Agreement
is inaccurate (and if there is an applicable survival period
pursuant to Section 11.1 (Survival of Representations and
Warranties) of the Merger Agreement, provided Parent makes a
written claim for indemnification against any Shareholder within
the applicable survival period) or any representation or warranty
of the Company Shareholders in Article III (Representations and
Warranties Concerning the Company and its Subsidiaries) of the
Stock Purchase Agreement is inaccurate (and if there is an
applicable survival period pursuant to Section 10.1 (Survival of
Representations and Warranties) of the Stock Purchase Agreement,
provided Parent makes a written claim for indemnification against
any Company Shareholder within the applicable survival period),
then each Shareholder shall indemnify and hold Parent harmless
from and against the Shareholder'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
Shareholders 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 point the Shareholders will indemnify Parent
relating back to the first 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
$750,000 aggregate ceiling (after which the Shareholders 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
inaccuracy of which the Shareholder (or his or her spouse on the
date hereof) had actual knowledge at the time the representation
was made or deemed made, in which case an aggregate ceiling shall
apply to such Shareholder and spouse in an amount equal to the
Consideration (as defined below) received by such Shareholder and
spouse plus their Pro Rata Share of the amount of cash received
pursuant to the Merger Agreement by other shareholders of Target
who are not parties to this Agreement. Such $100,000 aggregate
threshold shall be increased and the amount of Losses to be paid
by the Shareholders hereunder shall be reduced by the amount of
any net recovery by Target above the book value at the Effective
Time (as defined in the Merger Agreement) for Target's account
receivable from Tapistron International, Inc. If any Shareholder
breaches any of such Shareholder's covenants herein, any
representation or warranty of the Shareholder herein is
inaccurate, any Company Shareholder breaches the covenants in
Section 1.1 of the Stock Purchase Agreement or any representation
or warranty of the Company Shareholder in Article II
(Representations and Warranties Concerning the Shareholders) of
the Stock Purchase Agreement is inaccurate, then each Shareholder
shall indemnify Parent from and against the Shareholder's Pro Rata
Share of the entirety of any Losses Parent or its subsidiaries may
suffer through and after the date of the claim for indemnification
caused by or arising out of any such breach or inaccuracy.
(b) The "Shareholder's Pro Rata Share" means that
fraction equal to the amount of Consideration received by the
Shareholder over the Total Consideration, where "Consideration"
with respect to any Company Shareholder means the amount of cash
received by the Company Shareholder pursuant to the Stock Purchase
Agreement and, with respect to any Target Shareholder means the
number of shares of Parent Common Stock received by the Target
Shareholder times the last sale price of Parent Common Stock on
the Nasdaq National Market on the date hereof, plus the amount of
cash, if any, received by the Target Shareholder pursuant to the
Merger Agreement and, "Total Consideration" means the sum of the
Consideration received by all Shareholders.
(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 Shareholders 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 shall notify Parent with
respect to any matter (a "Third Party Claim") that may give rise
to a claim for indemnification against any Shareholder under this
Article II, then Parent shall promptly notify the Representative
thereof in writing (a "Claim Notice"). 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 10 days after
Parent has given notice of the Third Party Claim that the
Shareholders 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
Shareholders will have the financial resources to defend against
the Third Party Claim and fulfill its 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 precedential 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 in accordance herewith, (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 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 Shareholders could not reasonably object, (iii) each
Shareholder will reimburse Parent the Shareholder'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 Shareholders 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 Shareholders and the Representative agree to
consent to any entry of judgment or the entering into of any
settlement under clause (ii) reasonably appropriate in the
circumstances.
2.3 Representative.
(a) To the fullest extent permitted by law, each
Shareholder hereby irrevocably constitutes and appoints Charles E.
Hewitson as its 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 Shareholder 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
Shareholder of any Third Party Claim or Losses, and (ii) executing
and delivering on behalf of any Shareholder all instruments and
documents of every kind the Representative may deem necessary or
advisable to accomplish the foregoing. Each Shareholder hereby
ratifies and confirms, as the Shareholder'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
Shareholder 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 the
Shareholders 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 Shareholders.
(c) Each Shareholder 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 Shareholder if delivered by
registered, certified or first class mail, postage prepaid to the
Representative at such person's address set forth in Section 4.1,
whom each Shareholder irrevocably appoints as its authorized agent
for service of process.
(d) The death or incapacity of any Shareholder shall
not terminate the authority and agency of the Representative.
(e) Each Shareholder 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
Shareholders shall pay Parent interest thereon for each day from
the date the amount became due until the date of payment in full,
payable on demand, 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 Shareholders 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. Any amount 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 Shareholder and the 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:
Electronic Fab Technology Corp.
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 Shareholders, to the Representative:
Charles E. Hewitson
2709 S.E. Balboa Drive
Vancouver, Washington 98683
Facsimile No.: (503) 538-6610
with a copy to:
Hershner, Hunter, Andrews,
Neill & Smith, LLP
180 East 11th Avenue
Eugene, Oregon 97440
Attention: Robert Stout, Esq.
Facsimile: (541) 344-2025
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 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 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be executed and delivered as of the
date first written above.
Parent:
ELECTRONIC FAB TECHNOLOGY CORP.
By:
Shareholders:
_____Charles E. Hewitson
_____________
Charles E. Hewitson
______Matthew J.
Hewitson______________
Matthew J. Hewitson
______Greg
Hewitson__________________
Greg Hewitson
______Christie
Hewitson________________
Christie Hewitson
______Marsha
Hewitson_________________
Marsha Hewitson
______Linda
Hewitson___________________
Linda Hewitson
Representative:
______Charles E.
Hewitson_______________
Charles E. Hewitson
