-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Swvb+HblWoYg/p2xji6bjgo4BYJWSJJvgCCx1JwhpS2ai01y4Nqkub826z1CDIyA D8mrGsNVs1evFtNZHnSGDg== 0000899733-97-000090.txt : 19971016 0000899733-97-000090.hdr.sgml : 19971016 ACCESSION NUMBER: 0000899733-97-000090 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19970930 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRONIC FAB TECHNOLOGY CORP CENTRAL INDEX KEY: 0000916797 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 840854616 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-23332 FILM NUMBER: 97695903 BUSINESS ADDRESS: STREET 1: 7251 WEST 4TH ST CITY: GREELEY STATE: CO ZIP: 80634-9763 BUSINESS PHONE: 3033533100 8-K 1 9/30/97 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 September 9, 1997 (Date of earliest event reported) EFTC CORPORATION (Exact name of registrant as specified in its charter) Commission file number: 0-23332 Colorado 84-0854616 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Horizon Terrace 9351 Grant Street, Sixth Floor Denver, Colorado 80229 (Address of principal executive offices) (303) 451-8200 (Registrant's telephone number, including area code) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On September 30, 1997, pursuant to an Agreement and Plan of Reorganization (the "Merger Agreement"), dated as of July 9, 1997, among EFTC Corporation, a Colorado corporation (the "Company"), CTI Acquisition Corp., a Florida corporation and wholly owned subsidiary of the Company ("CTI Acquisition"), and Circuit Test, Inc., a Florida corporation ("Circuit Test"), CTI Acquisition was merged with and into Circuit Test with Circuit Test being the surviving corporation (the "Merger"). Pursuant to the Merger Agreement, the Company, upon the effectiveness of the Merger, issued 1,858,975 shares of its common stock to the former shareholders of Circuit Test. The issuance of the common stock pursuant to the Merger Agreement was approved by the requisite votes of the Company's stockholders at a special meeting held on September 30, 1997. In addition, also on September 30, 1997, the Company consummated a certain Limited Liability Company Unit Purchase Agreement dated as of July 9, 1997 (the "Purchase Agreement"), among the Company, CT LLC Acquisition Corp., a Florida corporation and wholly owned subsidiary of the Company ("CT Acquisition"), Airhub Services Group, L.C., a Kentucky limited liability company ("Airhub"), and Circuit Test International, L.C., a Florida limited liability company ("CTLLC," and, together with CTI and Airhub, the "CTI Companies"). Pursuant to the Purchase Agreement, in exchange for all of the membership interests of Airhub and CTLLC, the Company and CT Acquisition paid the respective members of Airhub and CTLLC an aggregate of $19,500,000 in cash. In connection with the acquisition of the CTI Companies: (a) pursuant to a Registration Rights Agreement, dated as of September 30, 1997 (the "Registration Rights Agreement"), the Company agreed, subject to certain terms and conditions, to register under the Securities Act of 1933 the resale of the shares of the Company's common stock issued pursuant to the Merger Agreement to the prior owners of CTI, (b) pursuant to an Indemnification Agreement, dated as of September 30, 1997 (the "Indemnification Agreement"), certain shareholders of CTI, the members of Airhub and the members of CTLLC agreed to indemnify the Company against certain damages that could result from breaches of representations and warranties and covenants set forth in the Merger Agreement and the Purchase Agreement, (c) pursuant to an agreement, dated as of September 30, 1997 (the "Earnout Agreement"), the Company agreed to make certain payments totaling $6 million to the members of Airhub and CTLLC upon the first to occur of (i) the completion, prior to December 31, 1999, by the Company of a private placement of common stock, or securities convertible into or exchangeable for common stock, yielding net proceeds to the Company of $40 million or more, (ii) the registration and underwritten sale of shares of the Company's common stock or securities convertible into or exchangeable for the Company's common stock for the account of the Company or (iii) the achievement by the CTI Companies of certain earnings thresholds in 1997, 1998 and 1999, and (d) pursuant to separate Employment Agreements, each dated as of September 30, 1997 (the "Employment Agreements"), the Company agreed for a term of three years to employ Allen S. Braswell Jr., Richard Strott, Andrew Hatch and Dennis Ayo, each of whom was an employee of the CTI Companies prior to their acquisition by the Company. In addition, as part of the acquisition of the CTI Companies, the Company paid the CTI Companies immediately prior to the closing of the acquisition $9.2 million in cash: $5.7 million to pay certain debts of the CTI Companies and $3.5 million for certain bonus payments made by the CTI Companies prior to the consummation of the acquisition. The acquisitions pursuant to the Merger Agreement and Purchase Agreement will be accounted for using the purchase method of accounting. Mr. Allen S. Braswell, Sr. and Allen S. Braswell, Jr., who were the principal shareholders and members of the CTI Companies, have been appointed to the Company's Board of Directors. Prior to the acquisition by the Company, the CTI Companies were an independent electronic component repair and warranty service organization focused on the computer and communications industries. One of the CTI Companies' principal strategies is to compete through the effective use of "hub-based" repair services, which the CTI Companies pioneered. As used in the transportation industry, the term "hub-based" is used to denote the place where the primary package sorting center of a package transportation and delivery service provider is located. The CTI Companies are the only provider with its operations inside the hub infrastructure of both of the largest transportation/logistics companies in the United States (in terms of usage of handling of time sensitive, express air service), as compared to those companies that provide ground-based, less time sensitive, freight transportation. The location of the CTI Companies at the transportation providers' airport hubs enables the CTI Companies to effectively provide "end-of-runway" repair and warranty services, which allow faster turnaround of replacement units, minimizing the inventory assets needed by the CTI Companies' customers to support the end-users of their products. The Company intends to continue providing such repair and warranty services through the CTI Companies. As of December 31, 1996, the CTI Companies employed 850 persons, of whom 502 were engaged in repair services and operations, 76 in material handling and procurement, 4 in marketing and sales and 25 in finance and administration, and engaged the full-time services of 243 temporary laborers through employment agencies in manufacturing and operations. Also in connection with the acquisition of the CTI Companies, the Company entered into a Credit Agreement, dated as of September 30, 1997 (the "Credit Agreement"), with Bank One, Colorado, N.A. ("Bank One") comprised of a $25 million revolving line of credit, maturing on September 30, 2000 and a $20 million term loan maturing on September 30, 2002 (collectively, the "Bank One Loan"). The Bank One Loan bears interest at a rate based on either the LIBOR or Bank One prime rate plus applicable margins ranging from 3.25% to 0.50% for the term facility and 2.75% to 0.00% for the revolving facility. Borrowings on the revolving facility are subject to limitation based on the value of the available collateral. The Bank One Loan is collateralized by substantially all of the Company's assets, including real estate, whether now owned or later acquired. The terms of the security interests granted by the Company pursuant to the Credit Agreement are governed by: (a) a Pledge and Security Agreement by the Company to Bank One (the "Pledge"); (b) a Security Agreement and Assignment between the Company and Bank One (the "Security Agreement"); (c) a Deed of Trust and Security Agreement among the Company as Grantor, Bank One, as Agent and Beneficiary, and Northwest Title Company as Trustee (the "Deed of Trust"); and (d) a Deed of Trust and Security Agreement and Financing Statement from the Company to the Public Trustee of Weld County for Bank One (the "Deed and Financing Statement"). The foregoing discussion of the Merger Agreement, the Purchase Agreement, the Registration Rights Agreement, the Indemnification Agreement, the Earnout Agreement, the Employment Agreements, the Credit Agreement, the Pledge, the Security Agreement, the Deed of Trust and the Deed and Financing Statement are hereby qualified in their entirety by reference to the terms thereof, which constitute exhibits hereto and are incorporated herein by this reference. ITEM 5. OTHER EVENTS On September 9, 1997, the Company issued a subordinated note (the "Note") in the aggregate principal amount of $15 million, the form of which is attached as an exhibit to the Note Agreement, dated as of September 5, 1997 (the "Note Agreement"), among the Company and Mr. Richard L. Monfort, a director of the Company. The Note has a maturity date of December 31, 2002 and bears a rate of LIBOR plus 2.00%. The proceeds of the Subordinated Note were used to repay existing indebtedness of the Company and to pay a portion of the purchase price of certain assets acquired from AlliedSignal Inc. The outstanding principal amount of the Note is payable in four annual installments of $50,000 and one final payment of $14.8 million at maturity, but may be prepaid in whole or in part at the option of the Company at any time, or, pursuant to the Note Agreement, if certain conditions are met, at the request of 100% of the holders of the Notes. All payments and prepayments in respect of the Notes are fully subordinated to all payments in respect of the Company's obligations arising under or in connection with the Credit Agreement. The Note Agreement required the Company to issue warrants for 500,000 shares of the Company's Common Stock at an exercise price of $8.00. Pursuant to the Note Agreement, such warrants were issued on October 6, 1997. The terms of such warrants are governed by a Warrant to Purchase Common Stock of EFTC Corporation, dated as of October 6, 1997 (the "Warrant Agreement") and such warrants were exercised on October 9, 1997. The foregoing discussion of the Note Agreement, the Note and the Warrant Agreement are hereby qualified in their entirety by reference to the terms thereof, which constitute exhibits hereto and are incorporated herein by this reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired: The following financial statements of the CTI Companies (together with the related independent auditors' report) will be filed on or prior to the 60th day after the date that this initial report on Form 8-K was required to be filed. i. Combined Statements of Income and Retained Earnings for the nine months ended September 30, 1997 and the three years ended December 31, 1996, 1995, and 1994; ii. Combined Balance Sheets as of September 30, 1997 and December 31, 1996 and 1995; iii. Combined Statement of Cash Flows for the nine months ended September 30, 1997 and the three years ended December 31, 1996, 1995, and 1994. (b) Pro forma financial information The following unaudited pro forma condensed financial statements of the Company and related notes to unaudited pro forma condensed financial statements are incorporated by reference from the section captioned "Unaudited Pro Forma Condensed Financial Information" of the Company's definitive proxy statement filed September 22, 1997 relating to the special meeting of the Company's shareholders held on September 30, 1997: i. Unaudited Pro Forma Condensed Statement of Operations for the Six Months Ended June 30, 1997; ii. Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31,1996; iii. Unaudited Pro Forma Condensed Balance Sheet as of June 30, 1997. (c) Exhibits The following exhibits are filed herewith or incorporated by reference: 2.1 Agreement and Plan of Reorganization, dated as of July 9, 1997, among EFTC Corporation, CTI Acquisition, Inc., and Circuit Test, Inc. July 9, 1997. (Pursuant to Item 601(b)(2) of Regulation S-K, the Company hereby agrees to furnish supplementally to the Commission upon request a copy of any schedule or exhibit omitted from such Agreement and Plan of Reorganization as filed herewith.) 2.2 Limited Liability Company Unit Purchase Agreement, dated as of July 9, 1997 (the "Purchase Agreement") among EFTC Corporation, CT LLC Acquisition Corp., a Florida corporation and wholly owned subsidiary of the Company, Airhub Services Group, L.C., a Kentucky limited liability company, and Circuit Test International, L.C., a Florida limited liability company. (Pursuant to Item 601(b)(2) of Regulation S-K, the Company hereby agrees to furnish supplementally to the Commission upon request a copy of any schedule or exhibit omitted from such Limited Liability Company Unit Purchase Agreement as filed herewith.) 2.3 Indemnification Agreement, dated September 30, 1997, among certain shareholders of Circuit Test, Inc., certain members of Airhub Services Group, L.C., certain members of Circuit Test International, L.C. and EFTC Corporation. 2.4 Registration Rights Agreement, dated as of September 30, 1997, is among EFTC Corporation and certain former shareholders of Circuit Test, Inc. 2.5 Earnout Agreement, dated as of September 30, 1997, among EFTC Corporation and the former members of Airhub Services Group, L.C. and Circuit Test International, L.C. 2.6 Form of the separate Employment Agreements, each dated as of September 30, 1997, entered into by EFTC Corporation and Circuit Test, Inc. with Allen S. Braswell Jr., Richard Strott, Andrew Hatch and Dennis Ayo. 99.1 Credit Agreement, dated September 30, 1997 between EFTC Corporation and Bank One, Colorado, N.A. 99.2 Pledge and Security Agreement, dated as of September 30, 1997, by EFTC Corporation to Bank One, Colorado, N.A. 99.3 Security Agreement and Assignment dated as of September 30, 1997 between EFTC Corporation and Bank One, Colorado, N.A. 99.4 Deed of Trust and Security Agreement dated as of September 30, 1997, among EFTC Corporation as Grantor, Bank One, Colorado, N.A., as Agent and Beneficiary, and Northwest Title Company as Trustee. 99.5 Deed of Trust and Security Agreement and Financing Statement from EFTC Corporation to The Public Trustee of Weld County for Bank One, Colorado, N.A., dated as of September 30, 1997. 99.6 Note Agreement, dated as of September 5, 1997, including the form of Floating Rate Subordinated Note attached as Exhibit A thereto, between EFTC Corporation and Richard L. Monfort. 99.7 Warrant to Purchase 500,000 shares of the common stock, par value $.01 per share, of EFTC Corporation, dated as of October 6, 1997, issued by EFTC Corporation to Richard L. Monfort. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: October 15, 1997 EFTC Corporation By /s/ Stuart Fuhlendorf Chief Financial Officer EX-2.1 2 PLAN OF REORGANIZATION (CTI) APPENDIX A CONFORMED COPY - ----------------------------------------------------------------- AGREEMENT AND PLAN OF REORGANIZATION among EFTC CORPORATION CTI ACQUISITION CORP. and CIRCUIT TEST, INC. dated as of July 9, 1997 - -------------------------------------------------------------------------------- A-1
Page TABLE OF CONTENTS RECITALS .........................................................................................................1 AGREEMENT.........................................................................................................1 ARTICLE I THE MERGER......................................................................................2 1.1 The Merger......................................................................................2 1.2 The Closing.....................................................................................2 1.3 Effective Time..................................................................................2 1.4 Certain Tax Positions...........................................................................2 ARTICLE II SURVIVING CORPORATION...........................................................................2 2.1 Articles of Incorporation.......................................................................2 2.2 Bylaws..........................................................................................3 2.3 Directors.......................................................................................3 2.4 Officers........................................................................................3 ARTICLE III EFFECT OF MERGER ON CAPITAL STOCK...............................................................3 3.1 Effect on Capital Stock.........................................................................3 3.2 Exchange of Certificates........................................................................4 3.3 No Further Ownership Rights in Circuit Test Common Stock........................................5 3.4 Lost, Stolen or Destroyed Certificates..........................................................5 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CIRCUIT TEST..................................................5 4.1 Organization, Standing and Power................................................................5 4.2 Capitalization; Shareholders....................................................................6 4.3 Subsidiaries....................................................................................7 4.4 Due Authorization...............................................................................7 4.5 Financial Statements............................................................................8 4.6 Absence of Certain Changes......................................................................8 4.7 Liabilities.....................................................................................8 4.8 Accounts Receivable.............................................................................9 4.9 Litigation......................................................................................9 4.10 Restrictions on Business Activities.............................................................9 4.11 Governmental Authorization......................................................................9 4.12 Contracts and Commitments.......................................................................9 4.13 Title to Property..............................................................................10 4.14 Intellectual Property..........................................................................10 4.15 Environmental Matters..........................................................................12 4.16 Taxes..........................................................................................13 4.17 S Corporation and Other Matters................................................................14 A-2 Page 4.18 Employee Benefit Plans.........................................................................14 4.19 Employee Matters...............................................................................16 4.20 Interested Party Transactions..................................................................16 4.21 Insurance......................................................................................16 4.22 Compliance With Laws...........................................................................17 4.23 Major Customers................................................................................17 4.24 Suppliers......................................................................................17 4.25 Inventory......................................................................................17 4.26 Product Warranty and Product Liability.........................................................18 4.27 Minute Books...................................................................................18 4.28 Brokers' and Finders' Fees.....................................................................18 4.29 Proxy Statement................................................................................18 4.30 Regulation D Offering..........................................................................18 4.31 Disclosure.....................................................................................19 4.32 Hart-Scott-Rodino..............................................................................19 4.33 Reliance.......................................................................................19 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................................................................................19 5.1 Organization, Standing and Power...............................................................19 5.2 Capitalization.................................................................................20 5.3 Due Authorization..............................................................................20 5.4 SEC Documents; Financial Statements............................................................21 5.5 Absence of Certain Changes.....................................................................21 5.6 Compliance with Laws...........................................................................22 5.7 Board Approval.................................................................................22 5.8 Litigation.....................................................................................22 5.9 Title to Property..............................................................................22 5.10 Intellectual Property..........................................................................22 5.11 Taxes..........................................................................................23 5.12 Employee Benefit Plans; ERISA..................................................................23 5.13 Compliance With Laws...........................................................................24 5.14 Major Customers................................................................................24 5.15 Suppliers......................................................................................24 5.16 Brokers' and Finders' Fees.....................................................................24 5.17 Disclosure.....................................................................................24 5.18 Hart-Scott-Rodino..............................................................................24 5.19 Reliance.......................................................................................24 ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME................................................................25 A-3 Page 6.1 Conduct of Business of Circuit Test............................................................25 6.2 No Solicitation; Acquisition Proposals.........................................................28 6.3 Conduct of Business of Parent..................................................................28 6.4 Notice of Breach...............................................................................29 ARTICLE VII ADDITIONAL COVENANTS................................................................................29 7.1 Proxy Statement................................................................................29 7.2 Meetings of Shareholders.......................................................................29 7.3 Access to Information..........................................................................30 7.4 Confidentiality................................................................................30 7.5 Publicity......................................................................................30 7.6 Filings; Cooperation...........................................................................30 7.7 Employment Matters.............................................................................31 7.8 Stock Options..................................................................................31 7.9 Director Nominees..............................................................................31 7.10 Further Assurances.............................................................................31 7.11 Certain Tax Matters............................................................................31 7.12 Audited Financial Statements...................................................................32 7.13 Additional Agreements..........................................................................32 7.14 Deferred Compensation..........................................................................32 ARTICLE VIII CONDITIONS PRECEDENT...............................................................................32 8.1 Conditions to Obligations of Each Party to Effect the Merger...................................32 8.2 Additional Conditions to Obligations of Circuit Test to Effect the Merger......................33 8.3 Additional Conditions to the Obligations of Parent and Merger Sub to Effect the Merger..............................................................................33 ARTICLE IX RESTRICTIONS ON TRANSFER.......................................................................35 9.1 Legends........................................................................................35 9.2 Notice of Proposed Dispositions................................................................36 ARTICLE X TERMINATION, AMENDMENT AND WAIVER..............................................................36 10.1 Termination....................................................................................36 10.2 Effect of Termination..........................................................................37 10.3 Amendment......................................................................................37 10.4 Extension; Waiver..............................................................................37 A-4 Page ARTICLE XI GENERAL PROVISIONS.............................................................................37 11.1 Survival of Representations and Warranties.....................................................37 11.2 Indemnification by Parent......................................................................38 11.3 Notices........................................................................................38 11.4 Interpretation.................................................................................39 11.5 Counterparts...................................................................................40 11.6 Entire Agreement; Nonassignability; Parties in Interest........................................40 11.7 Severability...................................................................................40 11.8 Remedies Cumulative; No Waiver.................................................................40 11.9 Governing Law..................................................................................40 11.10 Rules of Construction..........................................................................40 11.11 Expenses. ....................................................................................41 11.12 Attorneys Fees.................................................................................41 A-5 EXHIBITS Exhibit 1.3 (A) Articles of Merger Exhibit 1.3 (B) Plan of Merger Exhibit 7.7 Form of Employment Agreement Exhibit 7.13 Form of Voting Letter Agreement Exhibit 8.2(c) Opinion of Counsel to Parent Exhibit 8.2(d) Registration Rights Agreement Exhibit 8.3(c) Opinion of Counsel to Circuit Test Exhibit 8.3(h) Indemnification Agreement SCHEDULES Schedule 3.1 Circuit Test Common Stock and Pro Forma Conversions to Parent Common Stock Schedule 7.8 Options Issuable by Parent to Management of Circuit Test Target Disclosure Schedule Parent Disclosure Schedule A-6 INDEX OF DEFINED TERMS Page 1989 Act ................................................................................................2 Agreement ................................................................................................1 Airhub ................................................................................................1 Annual Financial Statements.......................................................................................8 CERCLA ...............................................................................................12 Certificates ................................................................................................4 Circuit Test ................................................................................................1 Circuit Test Authorizations.......................................................................................9 Circuit Test Common Stock.........................................................................................6 Circuit Test Disclosure Schedule..................................................................................5 Circuit Test Employee Plans......................................................................................15 Class A Common ................................................................................................6 Class B Common ................................................................................................6 Closing ................................................................................................2 Closing Date ................................................................................................2 COBRA ...............................................................................................16 Code ................................................................................................1 Confidential Information.........................................................................................11 controlled group ...............................................................................................23 CT Shareholders ................................................................................................1 Deferred Compensation............................................................................................32 Designees ...............................................................................................31 Effective Time ................................................................................................2 Employment Agreements............................................................................................31 environment ...............................................................................................12 Environmental Law ...............................................................................................12 ERISA ...............................................................................................14 ERISA Affiliate ...............................................................................................14 Governmental Entity...............................................................................................7 Hazardous Substance..............................................................................................12 Holder ...............................................................................................35 HSR Act ...............................................................................................19 include ...............................................................................................39 includes ...............................................................................................39 including ...............................................................................................39 Indemnification Agreement........................................................................................34 Indemnification Threshold........................................................................................38 Intellectual Property............................................................................................10 Interim Circuit Test Financial Statements.........................................................................8 Inventory ...............................................................................................17 knowledge ...............................................................................................39 A-7 Lien ................................................................................................6 LLC ................................................................................................1 LLC Agreement ................................................................................................1 Losses ...............................................................................................38 made available ...............................................................................................39 material ...............................................................................................39 Material Adverse Effect..........................................................................................39 Merger ................................................................................................2 Merger Sub ................................................................................................1 Merger Sub Common Stock...........................................................................................3 NASD ...............................................................................................21 no action ...............................................................................................36 Parent ................................................................................................1 Parent Balance Sheet Date........................................................................................21 Parent Common Stock...............................................................................................3 Parent SEC Documents.............................................................................................21 Parent Shareholders Meeting......................................................................................18 Parent Stock Option Plans........................................................................................20 plan of reorganization............................................................................................1 Proprietary Information..........................................................................................30 Proxy Statement ...............................................................................................18 Registration Rights Agreement....................................................................................33 release ...............................................................................................12 Representatives ...............................................................................................30 Restricted Securities............................................................................................35 SEC ...............................................................................................21 SECURITIES ACT ...............................................................................................35 Shareholder Indemnity Claim......................................................................................38 Surviving Corporation.............................................................................................2 Tax ...............................................................................................14 Tax authority ...............................................................................................14 Tax Return ...............................................................................................14 Taxable ...............................................................................................14 Taxes ...............................................................................................14 Third Party Intellectual Property Rights.........................................................................11 Transaction ................................................................................................1 ultimate parent entity...........................................................................................19 unrealized built in gain.........................................................................................14 Voting Agreement ...............................................................................................34 without limitation...............................................................................................39
A-8 AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as of July 9, 1997, is among EFTC Corporation, a Colorado corporation ("Parent"), CTI ACQUISITION CORP., a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and CIRCUIT TEST, INC., a Florida corporation ("Circuit Test"). RECITALS A. The Boards of Directors of Parent and Circuit Test have determined that a business combination between Parent and Circuit Test is in the best interests of their respective companies and shareholders, and accordingly have approved this Agreement and the merger provided for herein whereupon Merger Sub shall merge with and into Circuit Test upon the terms, and subject to the conditions, set forth herein. In addition, each of the shareholders of Circuit Test (the "CT Shareholders") has approved this Agreement and the merger provided for herein. B. In addition to the transactions contemplated by this Agreement, Parent intends to acquire certain other entities which are closely affiliated with Circuit Test. As a result, simultaneous with the execution of this Agreement, Parent is entering into that certain Limited Liability Company Unit Purchase Agreement (the "Purchase Agreement") with Circuit Test International, L.C., a Florida limited liability company ("LLC"), and Airhub Services Group, L.C., a Kentucky limited liability company ("Airhub"). This Agreement, the Purchase Agreement, and the exhibits and schedules contained therein represent the entire transaction by which Parent is acquiring control of the business conducted by Circuit Test, LLC and Airhub (the "Transaction"). C. The merger is intended to qualify, for federal income tax purposes, as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is intended to be a "plan of reorganization" within the meaning of the regulations promulgated under Section 368 of the Code. D. Parent, Merger Sub and Circuit Test desire to make certain representations, warranties and agreements in connection with the merger. A-9 AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into Circuit Test in accordance herewith and the separate corporate existence of Merger Sub shall thereupon cease (the "Merger"). Circuit Test shall be the surviving corporation in the Merger, and therefore is sometimes hereinafter referred to as "Surviving Corporation." The Merger shall have the effects specified in Section 607.1106 of the Florida 1989 Business Corporation Act (the "1989 Act"). 1.2 The Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing") shall take place (a) at the offices of Holme Roberts & Owen LLP, 1700 Lincoln Street, Suite 4100, Denver, Colorado 80203, at 10:00 a.m., local time, within three business days following the day on which the conditions set forth in Article VIII shall be fulfilled or waived in accordance herewith or (b) at such other time, date or place as Parent and Circuit Test agree. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." 1.3 Effective Time. If all the conditions to the Merger set forth in Article VIII shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in Article X, the parties hereto shall cause Articles of Merger and a Plan of Merger meeting the requirements of Section 607.1101 and 607.1105 of the 1989 Act to be properly executed and duly filed in accordance with the 1989 Act on the Closing Date. Forms of the Articles of Merger and Plan of Merger are set forth hereto as Exhibits 1.3 (A) and (B). The Merger shall become effective at the time when the Articles of Merger and Plan of Merger are so filed with the Department of State of the State of Florida or at such later time that the parties hereto agree and is designated in such Articles of Merger (the "Effective Time"). 1.4 Certain Tax Positions. The parties hereto intend the Merger to qualify, and will take the position for tax purposes that the Merger qualifies, as a non-taxable reorganization under Sections 368(a)(1)(A) and (a)(2)(E) of the Code. Neither party hereto nor any affiliate thereof will take any action that would cause the Merger not to qualify as a reorganization under those sections or regulations promulgated thereunder. A-10 ARTICLE II SURVIVING CORPORATION 2.1 Articles of Incorporation. The Articles of Incorporation of Merger Sub in effect immediately prior to the Effective Time shall be the Articles of Incorporation of Surviving Corporation until duly amended in accordance with applicable law. 2.2 Bylaws. At the Effective Time, Surviving Corporation shall take such actions as may be necessary to amend and restate the Bylaws of Surviving Corporation to be the same as the Bylaws of Merger Sub, until duly amended in accordance with applicable law. 2.3 Directors. The directors of the Surviving Corporation shall be Jack Calderon, Stuart W. Fuhlendorf, and Allen S. Braswell, Jr. 2.4 Officers. The officers the of Surviving Corporation shall be Allen S. Braswell, Jr., President, Stuart W. Fuhlendorf, Treasurer, and Jack Calderon, Vice President and Secretary, or as the parties hereto may otherwise agree prior to the Effective Time. ARTICLE III EFFECT OF MERGER ON CAPITAL STOCK 3.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, Circuit Test or the holders of any of the following securities all of the following shall occur: (a) Conversion of Circuit Test Common Stock. (i) Each issued and outstanding share of Circuit Test Common Stock (as defined in Section 4.2) shall no longer be outstanding but instead converted into the right to receive 152.788 shares of Common Stock, $.01 par value, of Parent (the "Parent Common Stock"). (ii) Schedule 3.1 sets forth all shares of Circuit Test Common Stock outstanding as of the date of this Agreement, along with a calculation of the shares of Parent Common Stock issuable as of the Effective Time. (b) Fractional Shares. No fraction of a share of Parent Common Stock will be issued in the Merger. In lieu of such issuance, all shares of Parent Common Stock issued to the Circuit Test shareholders pursuant to this Agreement shall be rounded to the closest whole share of Parent Common Stock. A-11 (c) Capital Stock of Merger Sub. At the Effective Time, by virtue of the Merger and without any action on the part of any holder of any capital stock of Parent, Merger Sub or Circuit Test, each issued and outstanding share of Common Stock, $.01 par value, of Merger Sub ("Merger Sub Common Stock") shall be converted into one (1) share of Circuit Test Common Stock. 3.2 Exchange of Certificates. (a) Exchange. As soon as practicable after the Closing and against surrender to Parent by any holder of record of a certificate or certificates that prior to the Effective Time represented shares of Circuit Test Common Stock (the "Certificates"), Parent shall cause to be delivered to the holder of record of such Certificates the Merger Consideration to be received by such holder as specified in Section 3.1. Until such Certificates are so surrendered, Parent shall not cause to be delivered to the holder of record of such Certificates the shares referred to in the previous sentence. Each outstanding Certificate that prior to the Effective Time represented shares of Circuit Test Common Stock will be deemed from and after the Effective Time, for all corporate purposes, other than the payment of dividends, to evidence the right to receive the Merger Consideration and the right to receive unpaid dividends and distributions, if any, that such holder has the right to receive in respect of such Parent Common Stock, after giving effect to any required withholding tax, in each case without interest thereon. The shares represented by the Certificates surrendered to Parent shall forthwith be canceled. The risk of loss and title to the Certificates shall pass only upon receipt by Parent of the Certificates. (b) Distributions with Respect to Unexchanged Shares. No dividends or other distributions with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holder of any Certificate until such Certificate is surrendered for exchange as provided herein. Subject to applicable law, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore payable (but for the provisions of this Section 3.2(b)) with respect to such shares of Parent Common Stock and not paid, less the amount of any withholding taxes that may be required thereon. (c) Transfers. At or after the Effective Time, there shall be no transfers on the stock transfer books of Circuit Test of the shares of Circuit Test Common Stock that were outstanding immediately prior to the Effective Time. If, at or after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for certificates representing the shares of Parent Common Stock deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Article III. Certificates surrendered for exchange by any person shall not be exchanged until Parent has received confirmation of the continued accuracy and effectiveness of the Investor Questionnaire and the Investor Letter, Indemnification Agreement and Registration Rights Agreement (each as defined in Section 8.3) executed and delivered by such person. A-12 (d) No Liability. Notwithstanding anything to the contrary in this Section 3.2, neither the Surviving Corporation nor any party hereto shall be liable to any person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. 3.3 No Further Ownership Rights in Circuit Test Common Stock. All shares of Parent Common Stock issued upon surrender for exchange of shares of Circuit Test Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Circuit Test Common Stock, and there shall be no further registration of transfers on the records of Surviving Corporation of shares of Circuit Test Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article III. 3.4 Lost, Stolen or Destroyed Certificates. If any Certificate is lost, stolen or destroyed, the Parent's exchange agent shall issue in exchange for such lost, stolen or destroyed Certificate, upon the making of an affidavit of that fact by the holder thereof, such shares of Parent Common Stock (and cash in lieu of fractional shares) as may be required pursuant to Section 3.1, except that Parent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent, Surviving Corporation or the exchange agent with respect to the Certificates alleged to have been lost, stolen or destroyed. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CIRCUIT TEST Except as disclosed in a document of even date herewith and delivered by Circuit Test to Parent prior to the execution and delivery of this Agreement and referring to the section number and subsection of the representations and warranties in this Agreement, subject to its subsequent revision from time to time prior to the Effective Time (with the prior written consent of Parent), (the "Circuit Test Disclosure Schedule"), Circuit Test represents and warrants to Parent and Merger Sub as follows: 4.1 Organization, Standing and Power. Circuit Test is a corporation duly organized and validly existing under the laws of the State of Florida, has the full corporate power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a Material Adverse Effect (as defined in Section 11.3) on Circuit Test. Circuit Test has delivered to Parent a true and correct copy of its Articles of Incorporation and Bylaws, each as amended to date. Circuit Test is not in violation of any of the provisions of its Articles of Incorporation or Bylaws or equivalent organizational A-13 documents. The Circuit Test Disclosure Schedule lists a complete and correct list of the officers and directors of Circuit Test. 4.2 Capitalization; Shareholders. (a) The authorized capital stock of Circuit Test consists of 50,000 shares of Circuit Test Class A Common Stock par value $.01 per share (the "Class A Common"), of which there are issued and outstanding five (5) shares of Class A Common and 50,000 shares of Circuit Test Class B Common Stock par value $.01 per share (the "Class B Common"), of which there are issued and outstanding 12,162 shares of Class B Common. The Class A Common and the Class B Common are collectively referred to herein as the "Circuit Test Common Stock." There are no other outstanding shares of capital stock or other securities of Circuit Test and no outstanding subscriptions, options, warrants, puts, calls, purchase or sale rights, exchangeable or convertible securities or other commitments or agreements of any nature relating to the capital stock or other securities of Circuit Test, or otherwise obligating Circuit Test to issue, transfer, sell, purchase, redeem or otherwise acquire such stock or securities. All outstanding shares of Circuit Test Common Stock are duly authorized, validly issued, fully paid and non-assessable, are free and clear of any mortgage, pledge, lien, encumbrance, charge or other security interest (a "Lien"), except Liens created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Articles of Incorporation or Bylaws of Circuit Test or any agreement to which Circuit Test is a party or by which it is bound. There are not any options, warrants, calls, conversion rights, commitments, agreements, contracts, understandings, restrictions, arrangements or rights of any character to which Circuit Test is a party or by which Circuit Test may be bound obligating Circuit Test to issue, deliver, or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of Circuit Test or obligating Circuit Test to enter into such an option, warrant, call, conversion right, commitment, agreement, contract, understanding, restriction, arrangement or right. There are no contracts, commitments or agreements relating to voting, purchase or sale of Circuit Test's capital stock (i) between or among Circuit Test and any of its shareholders and (ii) to the Circuit Test's knowledge, between or among any of Circuit Test's shareholders, except for the shareholders named in the Circuit Test Disclosure Schedule. Circuit Test does not have any outstanding bonds, debentures, notes or other indebtedness the holders of which have the right to vote (or convertible or exercisable into securities having the right to vote) with holders of shares of Circuit Test Common Stock on any matter. (b) Schedule 3.1 sets forth a true and complete list of the names of all the record holders of Circuit Test Common Stock, together with the number of shares of Circuit Test Common Stock held by each such holder. Except as set forth in Schedule 3.1, each holder so listed that is an individual is a competent adult and is the record and the beneficial owner of all shares or other equity securities so listed in his or her name, with the sole right to vote, dispose of, and receive dividends or distributions with respect to such shares. Each holder so listed on Schedule 3.1 that is an entity is the record and beneficial owner, or if a trust, its beneficiaries are the beneficial owners of, all shares or other equity securities so listed in its name, has the sole right to vote, dispose of, and receive dividends or distributions with respect to such shares, has A-14 the full power and authority, and has or will be fully empowered and authorized as of the Effective Time, to consummate the matters contemplated to be consummated by such holder herein. 4.3 Subsidiaries. Circuit Test does not directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. 4.4 Due Authorization. (a) Circuit Test has the full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Circuit Test, subject only to the approval of the Merger by Circuit Test's shareholders as contemplated by Section 7.2. This Agreement has been duly executed and delivered by Circuit Test and constitutes the valid and binding obligation of Circuit Test enforceable against Circuit Test in accordance with its terms. The execution and delivery of this Agreement by Circuit Test do not, and the consummation of the transactions contemplated hereby will not: (i) conflict with or violate any provision of the Articles of Incorporation or Bylaws of Circuit Test, (ii) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to Circuit Test or the properties or assets of Circuit Test, or (iii) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of, or result in the creation of any Lien on any of the properties or assets of Circuit Test pursuant to or require the consent or approval of any party to any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to Circuit Test or any of its properties or assets, except, in the case of this clause (iii) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to have a Material Adverse Effect on Circuit Test or prevent the consummation of the transactions contemplated hereby. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to Circuit Test in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for the filing of the Plan of Merger and the Articles of Merger as provided in Section 1.3 and such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a Material Adverse Effect on Circuit Test or prevent the consummation of transactions contemplated hereby. (b) All holders of Circuit Test Common Stock have approved, by written consent or otherwise, this Agreement and the Merger in accordance with applicable law, and no other consent or approval of any holder of Circuit Test Common Stock or other equity securities of Circuit Test is required for Circuit Test to execute and deliver this Agreement and consummate the transaction contemplated hereby. By virtue of such approval, no holder of A-15 Circuit Test Common Stock or other equity securities of Circuit Test has any right to dissent and obtain payment for such holder's shares under applicable law. 4.5 Financial Statements. Circuit Test has heretofore delivered to Parent true and complete copies of (i) the unaudited balance sheet, and the related statements of operations and stockholders' equity and of cash flows for each of the years ended December 31, 1995 and 1994, and (ii) unaudited balance sheet, and the related statements of operations and stockholders' equity and of cash flows at December 31, 1996 (collectively, the "Annual Financial Statements"). Circuit Test also has heretofore delivered to Parent true copies of the unaudited balance sheet of Circuit Test at May 31, 1997 and the related unaudited statements of income for the five (5) months then ended (the "Interim Circuit Test Financial Statements"). The Annual Financial Statements and the Interim Circuit Test Financial Statements were prepared in accordance with generally accepted accounting principles applied on a basis consistent throughout the periods indicated and consistent with each other (except as indicated in the notes thereto and, in the case of the Interim Circuit Test Financial Statements, that no notes are included) and fairly present the consolidated financial condition and operating results of Circuit Test at the dates and during the periods indicated therein, subject, in the case of the Interim Circuit Test Financial Statements, to normal, recurring year-end audit adjustments. Upon delivery of the audited financial statements to be delivered to Parent pursuant to Section 7.12, such audited financial statements will be deemed to be the Annual Financial Statements as to which representations and warranties are made herein, and such representations and warranties will be deemed to have been made by Circuit Test with respect to such financial statements as of the date of such delivery. 4.6 Absence of Certain Changes. Except as specifically permitted by this Agreement or as set forth in Schedule 4.6 of the Circuit Test Disclosure Schedule, since December 31, 1996, Circuit Test has conducted its business in the ordinary course consistent with past practice and there has not occurred: (i) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect on Circuit Test; (ii) any action by or with respect to Circuit Test that would have constituted a breach of any of the covenants contained in Section 6.1(b); or (iii) any of the following matters: (a) any material damage, destruction or loss (whether or not covered by insurance) to the properties and assets of Circuit Test; (b) any Lien on any asset other than those otherwise permitted by this Agreement; (c) any labor dispute, litigation or governmental investigation affecting the business or financial condition of Circuit Test; 4.7 Liabilities. Except as set forth in the Annual Financial Statements, the Interim Circuit Test Financial Statements, the Circuit Test Disclosure Schedule and except for liabilities or obligations arising in the ordinary course and consistent with past practice and those incurred A-16 in connection herewith, Circuit Test does not have any liability or obligation of any nature, whether due or to become due, fixed or contingent. 4.8 Accounts Receivable. All of the accounts receivable shown on the balance sheet included in the Interim Circuit Test Financial Statements as of May 31, 1997 have been collected or are good and collectible in the aggregate recorded amounts thereof (less the allowance for doubtful accounts also appearing in such May 31, 1997 balance sheet and net of returns and payment discounts allowable by Circuit Test's policies) and can reasonably be anticipated to be paid in full in the ordinary course of business consistent with past practice without outside collection efforts, subject to no counterclaims or setoffs. 4.9 Litigation. There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of Circuit Test, threatened against Circuit Test or any of its assets and properties or any of its officers or directors (in their capacities as such) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on Circuit Test. There is no judgment, decree or order against Circuit Test, or, to the knowledge of Circuit Test, any of its directors or officers (in their capacities as such), that could prevent consummation of the transactions contemplated by this Agreement, or that could reasonably be expected to have a Material Adverse Effect on Circuit Test. 4.10 Restrictions on Business Activities. There is no material agreement, judgment, injunction, order or decree binding upon Circuit Test which has or reasonably could be expected to have the effect of prohibiting or materially impairing any current or proposed business practice of Circuit Test, any acquisition of property by Circuit Test or the conduct of business by Circuit Test as currently conducted or as proposed to be conducted by Circuit Test. 4.11 Governmental Authorization. Circuit Test has obtained each federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization that is necessary for Circuit Test to own or lease, operate and use its respective assets and properties and to carry on business as currently conducted or as proposed to be conducted (collectively "Circuit Test Authorizations"), Circuit Test has performed and fulfilled its obligations under the Circuit Test Authorizations, and all the Circuit Test Authorizations are in full force and effect, except where the failure to obtain or have any of such Circuit Test Authorizations could not reasonably be expected to have a Material Adverse Effect on Circuit Test. 4.12 Contracts and Commitments. Circuit Test is not a party to any oral or written (a)(i) obligation for borrowed money, (ii) obligation evidenced by bonds, debentures, notes or other similar instruments, (iii) obligation to pay the deferred purchase price of property or services (other than trade accounts arising in the ordinary course of business), (iv) obligation under capital leases, (v) debt of others secured by a Lien on its property, (vi) guaranty of liabilities or obligations of others, (vii) agreement under which Circuit Test is obligated to make or expects to receive payments in excess of $50,000 or (viii) agreement granting any person a Lien on any of its properties or assets (except purchase money security interests created in the A-17 ordinary course of business consistent with past practice); (b)(i) employment agreement or collective bargaining agreement or (ii) agreements that limit the right of Circuit Test, or any of its employees to compete in any line of business; or (c) agreement which, after giving effect to the transactions contemplated hereby, purports to restrict or bind Parent or any of its subsidiaries, other than Surviving Corporation, in any respect. True and complete copies of all agreements described in the Circuit Test Disclosure Schedule have been delivered to Parent. Circuit Test has fulfilled, or taken all actions necessary to enable it to fulfill when due, its obligations under each of such agreements. All parties thereto have complied in all material respects with the provisions thereof and no party is in breach or violation of, or in default (with or without notice or lapse of time, or both) under such agreements. With respect to such agreements, Circuit Test has not received any notice of termination, cancellation or acceleration or any notice of breach, violation or default thereof. 4.13 Title to Property. Circuit Test has good and marketable title to all of its respective properties and assets, or in the case of leased properties and assets, valid leasehold interests in such properties, free and clear of any Lien. The plants, property and equipment of Circuit Test that are used in the operations of its business are in good operating condition and repair. All plants, property and equipment owned by Circuit Test conform (to Circuit Test's knowledge) with all applicable ordinances, regulations and zoning and other laws and do not encroach on the property of others, the failure to conform with which would have a Material Adverse Effect on Circuit Test. There is no pending or, to Circuit Test's knowledge, threatened change in any such ordinance, regulation or zoning or other law, and there is no pending or, to Circuit Test's knowledge, threatened condemnation of any such building, machinery or equipment. The properties and assets of Circuit Test include all rights, properties, interests in properties and assets necessary to permit Surviving Corporation to conduct its business as currently conducted. The Circuit Test Disclosure Schedule identifies each parcel of real property owned or leased by Circuit Test. 4.14 Intellectual Property. (a) Circuit Test owns, or is licensed or otherwise possesses legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, maskworks, net lists, schematics, technology, know-how, trade secrets, inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material ("Intellectual Property") that are used in the business of Circuit Test as currently conducted, except to the extent that the failure to have such rights has not and could not reasonably be expected to have a Material Adverse Effect on Circuit Test. (b) The Circuit Test Disclosure Schedule lists: (i) all patents and patent applications and all registered and unregistered trademarks, trade names and service marks, registered and unregistered copyrights, and maskworks, which Circuit Test considers to be material to its business and included in the Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any A-18 application for such issuance and registration has been filed, (ii) all material licenses, sublicenses and other agreements as to which Circuit Test is a party and pursuant to which any person is authorized to use any Intellectual Property, and (iii) all material licenses, sublicenses and other agreements as to which Circuit Test is a party and pursuant to which Circuit Test is authorized to use any third party patents, trademarks or copyrights, including software ("Third Party Intellectual Property Rights"), in each case which are incorporated in, are, or form a part of any product or service of Circuit Test. (c) To the knowledge of Circuit Test, there is no unauthorized use, disclosure, infringement or misappropriation of any Intellectual Property rights of Circuit Test, any trade secret material to Circuit Test, or any Third Party Intellectual Property Right, by any third party, including any employee or former employee of Circuit Test. Circuit Test has not entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in purchase orders arising in the ordinary course of business, or contained in license agreements relating to Intellectual Property licensed to Circuit Test in the ordinary course of business. (d) Circuit Test is not, and will not be as a result of the execution and delivery of this Agreement or the performance of Circuit Test's obligations under this Agreement be, in breach of any license, sublicense or other agreement relating to the Intellectual Property or Third Party Intellectual Property Rights, the breach of which could have a Material Adverse Effect on Circuit Test. (e) All patents, registered trademarks, service marks and copyrights held by Circuit Test are valid and subsisting. Circuit Test (i) has not been sued in any suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary right of any third party or (ii) has not brought any action, suit or proceeding for infringement of Intellectual Property or breach of any license or agreement involving Intellectual Property against any third party. To the knowledge of Circuit Test, the manufacture, marketing, licensing or sale of the products and services of Circuit Test does not infringe any patent, trademark, service mark, copyright, trade secret or other proprietary right of any third party. (f) Circuit Test has secured valid written assignments from all consultants and employees who contributed to the creation or development of Intellectual Property of the rights to such contributions that Circuit Test does not already own by operation of law. (g) Circuit Test has taken all reasonable and appropriate steps to protect and preserve the confidentiality of all Intellectual Property not otherwise protected by patents, or patent applications or copyright ("Confidential Information"). All use, disclosure or appropriation of Confidential Information owned by Circuit Test by or to a third party has been pursuant to the terms of a written agreement with such third party. All use, disclosure or appropriation of Confidential Information not owned by Circuit Test has been pursuant to the A-19 terms of a written agreement with the owner of such Confidential Information, or is otherwise lawful. 4.15 Environmental Matters. (a) Circuit Test has complied with, and is in compliance with, all Environmental Laws (as defined in this Section 4.15(a)) applicable to its current and prior business, properties and assets. Circuit Test has, and Circuit Test has provided to Parent, true and complete copies of, all permits, approvals, registrations, licenses and other authorizations required by any Governmental Entity pursuant to any Environmental Law applicable to its business, properties and assets, the absence of which would have a Material Adverse Effect on Circuit Test and all such permits, approvals, registrations, licenses and other authorization are listed on the Circuit Test Disclosure Schedule. There is no pending or, to Circuit Test's knowledge, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law to which Circuit Test is a party or, to Circuit Test's knowledge, threatened to be made a party. For purposes of this Agreement, "Environmental Law" means any federal, state or local law, statute, ordinance, rule, regulation, order or judgment or the common law relating to protection of public health, safety or the environment or occupational health and safety, or that regulates, or creates liability for, releases or threatened releases of any Hazardous Substance. As used in this Section 4.15, the terms "release" and "environment" have the meanings set forth in the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), and "Hazardous Substance" means any substance regulated by, or the presence of which creates liability under, any Environmental Law (including without limitation CERCLA) and includes without limitation industrial, toxic or hazardous substances, pollutants and contaminants, oil or petroleum products, solid or hazardous waste, chemicals and asbestos. (b) There have been no releases or threatened releases of any Hazardous Substance in violation of Environmental Law at any parcel of real property or any facility currently or formerly owned, leased, operated or controlled by Circuit Test. With respect to any such releases of or threatened releases of Hazardous Substance, Circuit Test has given all required notices to government authorities, copies of which have been provided to Parent. Circuit Test is not aware of any releases of Hazardous Substance at parcels of real property or facilities other than those presently or formerly owned, leased, operated or controlled by Circuit Test that could reasonably be expected to have an impact on the real property or facilities owned, leased, operated or controlled by Circuit Test. (c) The Circuit Test Disclosure Schedule lists all environmental reports, investigations, audits or similar environmental documents in the possession of Circuit Test with respect to the operations of, or real property owned, leased, operated or controlled by Circuit Test (whether conducted by or on behalf of Circuit Test or a third party and whether done at the initiative of Circuit Test or directed by a Governmental Entity or other third party). True and complete copies of each such document have been provided to Parent. A-20 (d) Circuit Test is not subject to, and is not reasonably expected to be subject to any material environmental liability, including without limitation liability arising out of the utilization by Circuit Test of any transporter or facility used for treatment, recycling, storage or disposal. 4.16 Taxes. Circuit Test, and any consolidated, combined, unitary or aggregate group for Tax (as defined in this Section 4.16) purposes of which Circuit Test is or has been a member have timely filed all Tax Returns (as defined in this Section 4.16) required to be filed by it taking into account extensions of due dates, have paid all Taxes shown thereon to be due and have provided adequate accruals in accordance with generally accepted accounting principles in its financial statements for any Taxes that have not been paid, whether shown as being due on any Tax returns. Circuit Test has withheld and paid over all Taxes required to have been withheld and paid over (including any estimated taxes), and has complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. Circuit Test does not have any liability under Treasury Regulation ss. 1.1502-6 or any analogous state, local or foreign law by reason of having been a member of any consolidated, combined or unitary group. Except as disclosed in the Circuit Test Disclosure Schedule: (a) no material claim for Taxes has become a Lien against the property of Circuit Test or is being asserted against Circuit Test other than Liens for Taxes not yet due and payable, (b) no audit of any Tax Return of Circuit Test is being conducted by a Tax authority, (c) no Tax authority is now asserting, or to the knowledge of Circuit Test, threatening to assert against Circuit Test any deficiency or claim for additional Taxes, and there are no requests for information from a Tax authority currently outstanding that could affect the Taxes of Circuit Test, (d) no extension of the statute of limitations on the assessment of any Taxes has been granted by Circuit Test and is currently in effect, (e) Circuit Test has not entered into any compensatory agreements with respect to the performance of services which payment thereunder would result in a nondeductible expense pursuant to Sections 162(m) or 280G of the Code, (f) no action has been taken that would have the effect of deferring any liability for Taxes for Circuit Test from any period prior to the Effective Date to any period after the Effective Date, (g) Circuit Test has never been included in an affiliated group of corporations, within the meaning of Section 1504 of the Code, (h) Circuit Test is not (nor has it ever been) a party to any Tax sharing agreement, (i) no consent under Section 341(f) of the Code has been filed with respect to Circuit Test, (j) Circuit Test has not disposed of any property that has been accounted for under the installment method, (k) Circuit Test is not a party to any interest rate swap, currency swap or similar transaction, (l) Circuit Test is not a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code, (m) Circuit Test is not subject to any joint venture, partnership or other arrangement or contract that is treated as a partnership for federal income tax purposes, (n) Circuit Test has not made any of the foregoing elections and is not required to apply any of the foregoing rules under any comparable state or local income tax provisions, (o) the transactions contemplated herein are not subject to the tax withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code, or of any other provision of law and (p) Circuit Test is not required to treat any asset as owned by another person for federal income tax purposes or as tax exempt bond financed property or tax exempt use property within A-21 the meaning of section 168 of the Code. Circuit Test will not be required to include any material adjustment in Taxable income for any Tax period (or portion thereof) ending after the Effective Time attributable to adjustments made prior to the Merger pursuant to Section 481 or 263A of the Code or any comparable provision of any state or foreign Tax law. The Circuit Test Disclosure Schedule contains accurate and complete information with respect to: (w) all material tax elections in effect with respect to Circuit Test, (x) the current tax basis of the assets of Circuit Test, (y) the current and accumulated earnings and profits of Circuit Test, and (z) the tax credit carry overs of Circuit Test. As used herein, "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, business and occupations, occupation, premium, property, environmental or windfall profit tax, custom, duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity (a "Tax authority") responsible for the imposition of any such tax (domestic or foreign), (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) as a result of any express or implied obligation to indemnify any other person. As used herein, "Tax Return" shall mean any return, statement, report or form (including, without limitation,) estimated Tax returns and reports, withholding Tax returns and reports and information reports and returns required to be filed with respect to Taxes. Circuit Test is in full compliance with all terms and conditions of any Tax exemptions or other Tax-sharing agreement or order of a foreign government and the consummation of the Merger shall not have any adverse effect on the continued validity and effectiveness of such Tax exemptions or other Tax-sharing agreement or order. 4.17 S Corporation and Other Matters. Circuit Test is, and at all times since 1984 has been, an S Corporation within the meaning of Section 1361 of the code for federal income tax purposes. Each Circuit Test shareholder is an individual U.S. citizen or resident or an estate or trust described in Section 1361 (c)(2) of the Code. The amount of Circuit Test's "unrealized built in gain" (as such term is defined in Section 1374(d) of the Code) prior to the Closing is, and as of the Closing will be, zero. The Circuit Test Disclosure Schedule contains a true list of those states where Circuit Test has filed as an S Corporation for applicable state income tax purposes. 4.18 Employee Benefit Plans. (a) The Circuit Test Disclosure Schedule lists, with respect to Circuit Test, and any trade or business (whether or not incorporated) which is treated as a single employer with Circuit Test (an "ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code: (i) all material employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in excess of $50,000, loans to officers and directors and any stock option, stock purchase, phantom stock, stock appreciation right, supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Code A-22 Section 125) or dependent care (Code Section 129), life insurance or accident insurance plans, programs or arrangements, (iii) all bonus, pension, profit sharing, savings, deferred compensation or incentive plans, programs or arrangements, (iv) other fringe or employee benefit plans, programs or arrangements that apply to senior management and that do not generally apply to all employees, and (v) any current or former employment or executive compensation or severance agreements, written or otherwise, as to which unsatisfied obligations of greater than $50,000 remain for the benefit of, or relating to, any present or former employee, consultant or director (collectively, the "Circuit Test Employee Plans"). (b) Circuit Test has furnished to Parent a copy of each of the Circuit Test Employee Plans and related plan documents (including trust documents, insurance policies or contracts, employee booklets, summary plan descriptions and other authorizing documents, and, to the extent still in its possession, any material employee communications relating thereto) and has, with respect to each Circuit Test Employee Plan which is subject to ERISA reporting requirements, provided copies of the Form 5500, including all schedules attached thereto and actuarial reports, if any, filed for the last three Plan years. Any Circuit Test Employee Plan intended to be qualified under Sections 401(a) or 501(c)(9) of the Code is so qualified. Circuit Test has furnished Parent with the most recent Internal Revenue Service determination letter issued with respect to each such Circuit Test Employee Plan (and nothing has occurred since the issuance of each such letter which could reasonably be expected to cause the loss of the tax-qualified status of any Circuit Test Employee Plan subject to Code Section 401(a)), and all communications with respect to any plan described in Section 4.18(a) with the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation. (c) (i) None of the Circuit Test Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person; (ii) there have been no violations of applicable provisions of the Code or ERISA with respect to any Circuit Test Employee Plan that could reasonably be expected to have, in the aggregate, a Material Adverse Effect; (iii) each Circuit Test Employee Plan is in compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), except as would not have a Material Adverse Effect on Circuit Test, and Circuit Test and each ERISA Affiliate have no knowledge of any default or violation by any other party to any of the Circuit Test Employee Plans, which default or violation could reasonably be expected to have a Material Adverse Effect on Circuit Test; (iv) all material contributions required to be made by Circuit Test or any ERISA Affiliate to any Circuit Test Employee Plan have been made on or before its due dates and a reasonable amount has been accrued for contributions to each Circuit Test Employee Plan for the current plan years; and (v) neither Circuit Test no any ERISA Affiliate has ever maintained or otherwise incurred any obligation under any plan subject to Title IV of ERISA. No suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of Circuit Test, is threatened, against or with respect to any such Circuit Test Employee Plan, including any audit or inquiry by the Internal Revenue Service or United States Department of Labor. A-23 (d) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not: (i) entitle any current or former employee or other service provider or any director of Circuit Test, or any ERISA Affiliate to severance benefits or any other payment (including unemployment compensation, golden parachute, bonus or otherwise), (ii) increase any benefits otherwise payable or (iii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee, service provider or director. (e) There has been no amendment to, written interpretation or announcement (whether or not written) by Circuit Test, or any ERISA Affiliate relating to, or change in participation or coverage under, any Circuit Test Employee Plan which would materially increase the expense of maintaining such Plan above the level of expense incurred with respect to that Plan for the most recent fiscal year included in the Annual Financial Statements. 4.19 Employee Matters. The Circuit Test Disclosure Schedule lists all employees of Circuit Test and the remuneration and benefits to which such employees are entitled. The Circuit Test Disclosure Schedule also lists all employment contracts and collective bargaining agreements, and all pension, bonus, profit sharing, or other agreements or arrangements not otherwise described in Section 4.18 providing for employee remuneration or benefits to which Circuit Test is a party or by which it is bound; all of these contracts and arrangements are in full force and effect, and neither Circuit Test nor any other party is in default under them. There have been no claims of defaults and, to Circuit Test's knowledge there are no facts or conditions which if continued, or on notice, will result in a default under these contracts or arrangements. There is no pending or, to Circuit Test's knowledge, threatened labor dispute, strike, or work stoppage that would have a Material Adverse Effect on Circuit Test. Circuit Test is in compliance in all material respects with all current applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. There are no pending claims against Circuit Test under any workers compensation plan or policy or for long term disability. Circuit Test does not have any obligations under The Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") with respect to any former employees or qualifying beneficiaries thereunder. 4.20 Interested Party Transactions. Circuit Test is not indebted to any shareholder, director, officer, employee or agent of Circuit Test (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses), and no such person is indebted to Circuit Test, and there have been no other transactions of the type required to be disclosed pursuant to Items 402 and 404 of Regulation S-K under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. 4.21 Insurance. Circuit Test has policies of insurance and bonds of the type and in amounts customarily carried by persons conducting businesses or owning assets similar to those of Circuit Test. The Circuit Test Disclosure Schedule sets forth a true and complete listing of all such policies, including in each case applicable coverage limits, deductibles and policy A-24 expiration dates. There is no material claim pending under any of such policies or bonds as to which Circuit Test has received a denial, or, to Circuit Test's knowledge, as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and Circuit Test is otherwise in compliance in all material respects with the terms of such policies and bonds. Circuit Test has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. Each policy or bond is legal, valid, binding, enforceable and in full force and effect and will continue to be legal, valid, binding, enforceable and in full force and effect following the consummation of the transactions contemplated hereby. 4.22 Compliance With Laws. Circuit Test has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state, local or foreign statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for such violations or failures to comply as could not be reasonably expected to have a Material Adverse Effect on Circuit Test. 4.23 Major Customers. The Circuit Test Disclosure Schedule contains a list of the customers of Circuit Test for each of the two most recent fiscal years, that individually accounted for more than five percent of the total dollar amount of net sales, showing the total dollar amount of net sales to each such customer during each such year. Circuit Test has no knowledge nor has it received notice from any of the customers listed on the Circuit Test Disclosure Schedule, that any of the customers listed in the Circuit Test Disclosure Schedule will not continue to be customers of Circuit Test after the Closing at substantially the same level of purchases. 4.24 Suppliers. As of the date hereof, no supplier of Circuit Test has indicated to Circuit Test that it will stop, or decrease the rate of, supplying materials, products or service to Circuit Test. Circuit Test has not knowingly breached, so as to provide a benefit to Circuit Test that was not intended by the parties, any agreement with, or engaged in any fraudulent conduct with respect to, any customer or supplier of Circuit Test. 4.25 Inventory. All inventories of raw materials, work-in process and finished goods (including all such in transit) of Circuit Test, together with related packaging materials (collectively, "Inventory"), reflected in the Interim Circuit Test Financial Statements consist of a quality and quantity usable and saleable in the ordinary course of business, have commercial values at least equal to the value shown on such balance sheet or are subject to purchase obligations by customers or suppliers at such value and is valued in accordance with generally accepted accounting principles at the lower of cost (on a first in first out basis) or market. All Inventory purchased since the date of such balance sheet consists of a quality and quantity usable and saleable in the ordinary course of business. Except as set forth in the Circuit Test Disclosure Schedule, all Inventory is located on premises owned or leased by Circuit Test. All work-in process contained in Inventory constitutes items in process of production pursuant to contracts or open orders taken in the ordinary course of business, from regular customers of Circuit Test with no recent history of credit problems with respect to Circuit Test; neither Circuit Test nor any such customer is in material breach of the terms of any obligation to the other, and, based on Circuit A-25 Test's knowledge or what Circuit Test reasonably should know, valid grounds exist for any counterclaim or set-off of amounts billable to such customers upon the completion of orders to which work-in-process relates. All work-in process is of a quality ordinarily produced in accordance with the requirements of the orders to which such work-in-process is identified, and will require no rework with respect to work performed prior to Closing. 4.26 Product Warranty and Product Liability. The Circuit Test Disclosure Schedule contains a true and complete copy of Circuit Test's standard warranty or warranties for its manufacturing services. There has been no variation from such warranties, except as set forth in the Circuit Test Disclosure Schedule. Except as stated therein, there are no warranties, commitments or obligations with respect to Circuit Test's performance of services. The Circuit Test Disclosure Schedule contains a description of all product liability claims and similar claims, actions, litigation and other proceedings relating to services rendered, which are presently pending or, to Circuit Test's knowledge, threatened, or which have been asserted or commenced against Circuit Test within the last five years, in which a party thereto either requests injunctive relief (whether temporary or permanent) or alleges damages (whether or not covered by insurance). There are no defects in Circuit Test's manufacturing services that would adversely affect performance of products Circuit Test manufactures or create an unusual risk of injury to persons or property. Circuit Test's manufacturing services have been designed or performed so as to meet and comply with all governmental standards and specifications currently in effect, and have received all governmental approvals necessary to allow its performance. 4.27 Minute Books. The minute books of Circuit Test made available to Parent contain true and complete summaries of all meetings of directors and shareholders or actions by written consent since the time of incorporation of Circuit Test, and reflect all transactions referred to in such minutes accurately in all material respects. 4.28 Brokers' and Finders' Fees. Except for commissions or fees payable to Broadview Associates, LLC, Circuit Test has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 4.29 Proxy Statement. The information supplied by Circuit Test for inclusion in the proxy statement to be sent to the shareholders of Parent in connection with the meeting of Parent's shareholders (the "Parent Shareholders Meeting") to consider the Merger (such proxy statement as amended or supplemented is referred to herein as the "Proxy Statement") shall not, on the date the Proxy Statement is first mailed, at the time of the Parent Shareholders Meeting and at the Effective Time, contain any statement which, at such time, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Parent Shareholders Meeting which has become false or misleading. A-26 4.30 Regulation D Offering. To Circuit Test's knowledge, the information provided to Parent by the holders of shares of Circuit Test Common Stock, which information is set forth in each such holder's Voting Agreement (as defined in Section 8.3(g)) delivered to Parent, is true and correct in all material respects. 4.31 Disclosure. None of the representations or warranties made by Circuit Test herein or in the Circuit Test Disclosure Schedule, or in any certificate furnished by Circuit Test pursuant to this Agreement, when all such documents are read together in their entirety, contain or will contain at the Effective Time any untrue statement of a material fact, or omit or will omit at the Effective Time to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. Circuit Test has delivered or made available true and complete copies of each document that has been requested by Parent or its counsel in connection with their legal and accounting review of Circuit Test. 4.32 Hart-Scott-Rodino. None of Circuit Test, its shareholders or any of their respective affiliates is an "ultimate parent entity" within the meaning of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations promulgated thereunder (the "HSR Act"), that has $100,000,000 of total assets or sales (as determined under the HSR Act), as of the date of any such ultimate parent entity's last regularly prepared balance sheet or as of the date hereof. 4.33 Reliance. The foregoing representations and warranties are being made by Circuit Test with the knowledge and expectation that Parent and Merger Sub are placing reliance thereon. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Except as disclosed in a document of even date herewith and delivered by Parent to Circuit Test prior to the execution and delivery of this Agreement and referring to the sections and subsections of the representations and warranties in this Agreement (the "Parent Disclosure Schedule"), subject to its subsequent revision from time to time to the Effective Time (with the prior written consent of Circuit Test) Parent and Merger Sub represent and warrant to Circuit Test as follows: 5.1 Organization, Standing and Power. Each of Parent and its subsidiaries, including Merger Sub, is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has the full corporate power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and A-27 in good standing would have a Material Adverse Effect on Parent. Merger Sub has not engaged in any business (other than certain organizational matters) since the date of its incorporation. 5.2 Capitalization. As of March 31, 1997, the authorized capital stock of Parent consisted of 45,000,000 shares of Parent Common Stock and 5,000,000 shares of Preferred Stock, $.01 par value, of which there were issued and outstanding 5,928,060 shares of Parent Common Stock and no shares of Preferred Stock. There are no other outstanding shares of capital stock or other securities of Parent other than shares of Parent Common Stock issued after March 31, 1997 upon the exercise of options issued under Parent's 1993 Incentive Stock Option Plan and its Stock Option Plan for Non-Employee Directors (collectively, the "Parent Stock Option Plans") and other outstanding stock options granted by Parent to its employees. The authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock, all of which are issued and outstanding and are held by Parent. All outstanding shares of Parent and Merger Sub have been duly authorized, validly issued, fully paid and are non-assessable and free and clear of any Lien, except Liens created by or imposed upon the holders thereof. As of March 31, 1997, Parent has reserved (a) 1,155,000 shares of Parent Common Stock for issuance to employees, directors and independent contractors pursuant to the Parent Stock Option Plans, (b) 243,800 shares of Parent Common Stock for issuance pursuant to other outstanding stock options granted to its employees. Other than this Agreement, as disclosed in the immediately preceding sentence or as to additional shares to be authorized under employee benefit plans of Parent, there are no other options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements of any nature to which Parent or Merger Sub is a party or by which either of them is bound obligating Parent or Merger Sub to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, or repurchased, any shares of the capital stock of Parent or Merger Sub or obligating Parent or Merger Sub to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. The shares of Parent Common Stock to be issued pursuant to the Merger will, when issued, be duly authorized, validly issued, fully paid, and non-assessable. 5.3 Due Authorization. Parent and Merger Sub have the full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub, subject only to the approval of the Merger by Parent's shareholders as contemplated by Section 7.2. This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes the valid and binding obligations of Parent and Merger Sub. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not: (a) conflict with or violate any provision of the Amended and Restated Articles of Incorporation or Amended and Restated Bylaws of Parent, as amended, the Articles of Incorporation or Bylaws of Merger Sub, or equivalent charter documents of any of Parent's subsidiaries, as amended, (b) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to Parent or any of its subsidiaries or the properties or assets of Parent or any of its subsidiaries, or (c) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or A-28 give rise to any right of termination, cancellation or acceleration of, or result in the creation of any Lien on any of the properties or assets of Parent or any of its subsidiaries pursuant to any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to Parent or any of its subsidiaries or their properties or assets, except, in the case of this clause (c) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to have a Material Adverse Effect on Parent. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent or any of its subsidiaries in connection with the execution and delivery of this Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub of the transactions contemplated hereby, except for (i) the filing of the Articles of Merger and Plan of Merger as provided in Section 1.3, (ii) the filing with the Securities and Exchange Commission (the "SEC") and the National Association of Securities Dealers, Inc. ("NASD") of the Proxy Statement relating to the Parent Shareholders Meeting, (iii) the filing of a Form 8-K with the SEC and NASD within 15 days after the Closing Date, (iv) any filings as may be required under applicable state securities laws and the securities laws of any foreign country, and (v) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a Material Adverse Effect on Parent or would not prevent or materially alter or delay any of the transactions contemplated by this Agreement. 5.4 SEC Documents; Financial Statements. Parent has furnished Circuit Test with true and complete copies of its (a) Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as filed with the SEC, (b) Quarterly Reports on Form 10-Q for the quarter ended March 31, 1997, as filed with the SEC, (c) proxy statements related to all meetings of its shareholders (whether annual or special) since December 31, 1995, and (d) all other reports and registration statements filed by Parent with the SEC since December 31, 1995, except registration statements on Form S-8 relating to employee benefit plans (collectively, the "Parent SEC Documents"). As of their respective filing dates, the Parent SEC Documents prepared in all material respects in accordance with the requirements of the Exchange Act or the Securities Act, as applicable, and the rules and regulations of the SEC thereunder applicable to such Parent SEC Documents. The annual and interim financial statements included in the Parent SEC Documents were prepared in accordance with generally accepted accounting principles applied on a basis consistent throughout the periods indicated and consistent with each other (except as indicated in the notes thereto) and fairly present the consolidated financial condition and operating results of Parent and its consolidated subsidiaries at the dates and during the periods indicated therein, subject, in the case of interim financial statements, to normal, recurring year-end audit adjustments. 5.5 Absence of Certain Changes. Except as disclosed in the Parent SEC Documents filed with the SEC prior to the date hereof, since March 31, 1997 (the "Parent Balance Sheet Date"), each of Parent and its subsidiaries has conducted its business in the ordinary course consistent with past practice and there has not occurred: (a) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect on Parent or (b) any declaration, setting aside, or payment of A-29 a dividend or other distribution with respect to the shares of Parent, or any direct or indirect redemption, retirement, purchase or other acquisition by Parent of any of its capital stock. Except as disclosed in such Parent SEC Documents, Parent is not aware of any facts which are reasonably likely to have a Material Adverse Effect on Parent. 5.6 Compliance with Laws. Each of Parent and its subsidiaries has complied with, is not in violation of, and have not received any notices of violation with respect to, any federal, state, local or foreign statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for such violations or failures to comply as could not be reasonably expected to have a Material Adverse Effect on Parent. 5.7 Board Approval. The Boards of Directors of Parent and Merger Sub have (a) approved this Agreement and the Merger, (b) determined that the Merger is in the best interests of their respective shareholders and is on terms that are fair to such shareholders and (c) recommended that the shareholders of Parent and Merger Sub approve this Agreement and the Merger. 5.8 Litigation. There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of Parent, threatened against Parent, any of its subsidiaries, or any of their respective assets and properties or any of Parent's officers or directors (in their capacities as such) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on Parent. There is no judgment, decree or order against Parent, or, to the knowledge of Parent, any of its directors or officers (in their capacities as such), that could prevent consummation of the transactions contemplated by this Agreement, or that could reasonably be expected to have a Material Adverse Effect on Parent. 5.9 Title to Property. Parent and each of its subsidiaries has good and marketable title to all of its respective properties and assets, or in the case of leased properties and assets, valid leasehold interests in such properties, free and clear of any Lien. The plants, property and equipment of Parent that are used in the operations of its business are in good operating condition and repair. All plants, property and equipment owned by Parent conform (to Parent's knowledge) with all applicable ordinances, regulations and zoning and other laws and do not encroach on the property of others, the failure to conform with which would have a Material Adverse Effect on Parent. 5.10 Intellectual Property. (a) Parent and its subsidiaries own, or are licensed or otherwise possess legally enforceable rights to use, all Intellectual Property used in the business of Parent and its subsidiaries as currently conducted, except to the extent that the failure to have such rights has not and could not reasonably be expected to have a Material Adverse Effect on Parent. A-30 (b) To the knowledge of Parent, there is no unauthorized use, disclosure, infringement or misappropriation of any Intellectual Property rights of Parent or its subsidiaries, any trade secret material to Parent, or any Third Party Intellectual Property Right, by any third party, including any employee or former employee of Parent or its subsidiaries. Neither Parent nor any subsidiary of Parent has entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in purchase orders arising in the ordinary course of business, or contained in license agreements relating to Intellectual Property licensed to Parent or its subsidiaries in the ordinary course of business. (c) All patents, registered trademarks, service marks and copyrights held by Parent and its subsidiaries are valid and subsisting. Neither Parent nor any subsidiary of Parent (i) has been sued in any suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary right of any third party or (ii) has brought any action, suit or proceeding for infringement of Intellectual Property or breach of any license or agreement involving Intellectual Property against any third party. To the knowledge of Parent, the manufacture, marketing, licensing or sale of the products and services of Parent does not infringe any patent, trademark, service mark, copyright, trade secret or other proprietary right of any third party. (d) Parent has taken all reasonable and appropriate steps to protect and preserve the confidentiality of all Confidential Information. All use, disclosure or appropriation of Confidential Information owned by Parent or any of its subsidiaries by or to a third party has been pursuant to the terms of a written agreement with such third party. All use, disclosure or appropriation of Confidential Information not owned by Parent or its subsidiaries has been pursuant to the terms of a written agreement with the owner of such Confidential Information, or is otherwise lawful. 5.11 Taxes. Except matters as would not have a Material Adverse Effect on Parent: (i) Parent and its subsidiaries have (a) filed (or there have been filed on their behalf) with appropriate governmental authorities all Tax Returns required to be filed by them and such Tax Returns were true, correct and complete, and (b) duly paid in full or made provision in accordance with GAAP for the payment of all Taxes for all periods ending though the date of this Agreement; and (ii) Parent and its subsidiaries have complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes and had, within the time and manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all amounts required to be so withheld and paid over under applicable laws. 5.12 Employee Benefit Plans; ERISA. Except matters as would not have a Material Adverse Effect on Parent: the material employee benefit plans, arrangements, practices, contracts and agreements (including, without limitation, employment agreement, change of control agreement and severance agreements, incentive compensation, bonus, stock option, stock appreciation rights and stock purchase plans, and including, but not limited to, plans described in A-31 section 3(3) of ERISA, maintained by Parent, any of its subsidiaries or any trade or business, whether or not incorporated, that together with Parent would be deemed a "controlled group" within the meaning section 4001(a)(14) or ERISA, or with respect to which Parent or any of its subsidiaries has or may have a liability were in substantial compliance with applicable laws, including ERISA and the Code. 5.13 Compliance With Laws. Parent and its subsidiaries have complied with, are not in violation of, and have not received any notices of violation with respect to, any federal, state, local or foreign statute, law or regulation with respect to the conduct of their respective businesses, or the ownership or operation of their respective businesses, except for such violations or failures to comply as could not be reasonably expected to have a Material Adverse Effect on Parent. 5.14 Major Customers. Parent has no knowledge or information of any facts indicating, nor any other reason to believe, that any of the principal customers of Parent and its subsidiaries will not continue to be customers of Parent or such subsidiaries after the Closing at substantially the same level of purchases. 5.15 Suppliers. As of the date hereof, no supplier of Parent has indicated to Parent that it will stop, or decrease the rate of, supplying materials, products or service to Parent. Parent has not knowingly breached, so as to provide a benefit to Parent that was not intended by the parties, any agreement with, or engaged in any fraudulent conduct with respect to, any customer or supplier of Parent. 5.16 Brokers' and Finders' Fees. Parent has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 5.17 Disclosure. None of the representations or warranties made by Parent herein or in the Parent Disclosure Schedule, or in any certificate furnished by Parent pursuant to this Agreement, when all such documents are read together in their entirety, contain or will contain at the Effective Time any untrue statement of a material fact, or omit or will omit at the Effective Time to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. Parent has delivered or made available true and complete copies of each document that has been requested by Circuit Test or its counsel in connection with their legal and accounting review of Parent. 5.18 Hart-Scott-Rodino. Neither Parent nor any of its subsidiaries is an "ultimate parent entity" within the meaning of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations promulgated thereunder (the "HSR Act"), that has $100,000,000 of total assets or sales (as determined under the HSR Act), as of the date of any such ultimate parent entity's last regularly prepared balance sheet or as of the date hereof. A-32 5.19 Reliance. The foregoing representations and warranties are being made by Parent and Merger Sub with the knowledge and expectation that Circuit Test is placing reliance thereon. ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME 6.1 Conduct of Business of Circuit Test. Prior to the Effective Time, except as expressly contemplated by this Agreement or as agreed in writing by Parent: (a) Affirmative Covenants. Circuit Test will: (i) carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use its best efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the Effective Time; (ii) maintain insurance coverages and its books, accounts and records in the usual manner consistent with past practice; (iii) comply in all material respects with all laws and regulations of any Governmental Entity applicable to it; (iv) maintain and keep its plants, property and equipment in good repair, working order and condition, ordinary wear and tear excepted; (v) perform in all material respects its obligations under all contracts and commitments to which it is a party or by which it is bound; (vi) notify Parent of any event or occurrence not in the ordinary course of its business, and of any event which could have a Material Adverse Effect on Circuit Test; or (vii) pay, consistent with past practice, all accounts payable that arise in the ordinary course of its business. (b) Negative Covenants. Circuit Test will not: (i) cause or permit any amendments to its Articles of Incorporation or Bylaws or equivalent charter documents; A-33 (ii) accelerate, amend or change the period of exercisability or vesting of options or other rights granted under its employee stock plans or director stock plans or authorize cash payments in exchange for any options or other rights granted under any of such plans; (iii) transfer to any person or entity any rights to its Intellectual Property; (iv) enter into or amend any agreements pursuant to which any other party is granted exclusive marketing or other exclusive rights of any type or scope with respect to any of its products or technology; (v) enter into any operating lease providing for payments in excess of an aggregate of $50,000; (vi) adopt or amend any employee benefit or stock purchase or option plan, or hire any new director level or officer level employee (other than in the ordinary course of business), pay any special bonus or special remuneration to any employee or director, or increase the salaries or wage rates of its employees, except as set forth in Section 6.1(b) of the Circuit Test Disclosure Schedule; (vii) commence a lawsuit other than (A) for the routine collection of bills, (B) in such cases where it in good faith determines that failure to commence suit would result in the material impairment of a valuable aspect of its business, provided that it consults with Parent prior to the filing of such a suit, or (C) for a breach of this Agreement; (viii) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, other than in the ordinary course of business consistent with past practice; (ix) other than in the ordinary course of business, make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, file any material Tax Return or any amendment to a material Tax Return, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (x) revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (xi) take, or agree in writing or otherwise to take, any other action that would make any of its representations or warranties contained in this Agreement untrue; A-34 (xii) delay in the payment of any trade or other payables other than in the ordinary course of business consistent with past practice; (xiii) sell, lease or otherwise transfer or dispose of any property or asset of Circuit Test, other than in the ordinary course of business consistent with past practice; (xiv) change its accounting methods, practices or policies (including any change in depreciation or amortization policies or rates) by Circuit Test or revalue any of its assets, except as described in the notes to the Annual Financial Statements; (xv) declare, set aside, or pay any dividend or other distribution to Circuit Test's shareholders, or any direct or indirect redemption, retirement, purchase or other acquisition by Circuit Test of any of its capital stock or other securities or options, warrants or other rights to acquire capital stock, except as set forth on Schedule 6.1(b); (xvi) enter into commitment or transaction (including any capital expenditure, capital financing or sale of assets) for any amount that requires or could require payments in excess of $50,000 with respect to any individual contract or a series of related contracts; (xvii) cancel any debt or waive or release of any right or claim by Circuit Test, other than in the ordinary course of business; (xviii) make any payment, or discharge or satisfy any claim, liability or obligation by Circuit Test, other than as reflected or reserved against in the Annual Financial Statements or the Interim Circuit Test Financial Statements or in the ordinary course of business consistent with past practice; (xix) issue or sell any capital stock or other securities, exchangeable or convertible securities, options, warrants, puts, calls or other rights to acquire capital stock or other securities of Circuit Test; (xx) incur any indebtedness for borrowed money, or guarantee or otherwise assume any such indebtedness, except as set forth in Schedule 6.1(b); (xxi) make any loan or advance (other than advances to employees in the ordinary course of business for travel and entertainment in accordance with past practice) to any person; (xxii ) increase in any salary, wage, benefit or other remuneration payable or to become payable to any current or former officer, director, employee, independent contractor or agent of Circuit Test or pay or agree to pay any bonus or severance payment or arrangement made to, for or with any officer, director, employee or agent of Circuit Test or provide for any supplemental retirement plan or other program or special remuneration for any officer, director, A-35 employee or agent of Circuit Test, except for normal salary or wage increases relating to periodic performance reviews and annual bonuses consistent with past practice of Circuit Test; (xxiii) grant credit to any customer on terms or in amounts more favorable than those which have been extended to such customer in the past, any other change in the terms of any credit heretofore extended or any other change in the policies or practices of Circuit Test with respect to the granting of credit; or (xiv) agree, whether in writing or otherwise, to do any of the foregoing. 6.2 No Solicitation; Acquisition Proposals. Subject to the fiduciary duties of Circuit Test's Board of Directors under applicable law, as advised by counsel, Circuit Test shall not, directly or indirectly, through any officer, director, employee, representative, agent, financial advisor or otherwise, solicit, initiate or encourage inquiries or submission of proposals or offers from any person relating to any sale of all or any portion of the assets, business, properties of (other than immaterial or insubstantial assets or inventory in the ordinary course of business), or any equity interest in, Circuit Test or any business combination with Circuit Test whether by merger, purchase of assets, tender offer or otherwise or participate in any negotiation regarding, or furnishing to any other person any information with respect to, or otherwise cooperate in any way with, or assist in, facilitate or encourage, any effort or attempt by any other person to do or seek to do any of the foregoing. Circuit Test shall use its best efforts to cause all confidential materials previously furnished to any third parties in connection with any of the foregoing to be promptly returned to Circuit Test and shall cease any negotiations conducted in connection therewith or otherwise conducted with any such parties. 6.3 Conduct of Business of Parent. Prior to the Effective Time, except as expressly contemplated by this Agreement or as agreed in writing by Circuit Test, Parent will, and will cause each of its subsidiaries to: (a) carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use its best efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the Effective Time; (b) maintain insurance coverages and its books, accounts and records in the usual manner consistent with past practice; (c) comply in all material respects with all laws and regulations of any Governmental Entity applicable to it; (d) maintain and keep its plants, property and equipment in good repair, working order and condition, ordinary wear and tear excepted; A-36 (e) perform in all material respects its obligations under all contracts and commitments to which it is a party or by which it is bound; (f) notify Circuit Test of any event or occurrence not in the ordinary course of its business, and of any event which could have a Material Adverse Effect on Parent; or (g) pay, consistent with past practice, all accounts payable that arise in the ordinary course of its business except to the extent that the amount owing is being duly contested by Parent and such contest does not have a Material Adverse Effect on Parent and adequate reserves therefor are reflected on the Annual Financial Statements or the Interim Financial Statements for Parent. 6.4 Notice of Breach. Each party hereto shall promptly give written notice to the others upon becoming aware of the occurrence or, to its knowledge, impending or threatened occurrence, of any event that could cause or constitute a breach of any of its representations, warranties or covenants hereunder. ARTICLE VII ADDITIONAL COVENANTS 7.1 Proxy Statement. As promptly as practicable after the execution of this Agreement, Parent shall prepare and file with the SEC preliminary proxy materials relating to the approval of the Merger and the transactions contemplated hereby by the shareholders of Parent. 7.2 Meetings of Shareholders. (a) Parent Shareholders Meeting. As promptly as practicable after the date hereof, Parent shall take all action necessary in accordance with applicable law and its Articles of Incorporation and Bylaws to convene the Parent Shareholders Meeting. Subject to Section 7.1, Parent shall use its reasonable efforts to solicit from shareholders proxies in favor of the Merger and shall take all other action necessary or advisable to secure the vote or consent of shareholders required to effect the Merger, and subject to the fiduciary duties of Parent's Board of Directors under applicable law, as advised by counsel, the Board of Directors of Parent shall recommend a vote in favor of the Merger. (b) Circuit Test Shareholders Meeting. Circuit Test shall take all action necessary in accordance with applicable law and its Articles of Incorporation and Bylaws within ten (10) days after the date hereof either (i) to obtain the written consent of the shareholders of Circuit Test to this Agreement and the transactions contemplated hereby or (ii) to convene a special meeting of its shareholders and solicit from shareholders proxies in favor of the Merger. In any event, Circuit Test shall take all action necessary or advisable to secure the vote or consent of shareholders required to effect the Merger, and subject to the fiduciary duties of Circuit Test's A-37 Board of Directors under applicable law, as advised by counsel, the Board of Directors of Circuit Test shall recommend a consent or vote in favor of the Merger. 7.3 Access to Information. Each party shall afford the other and its accountants, counsel and other representatives (collectively, "Representatives") full access during normal business hours (and at such other times as the parties hereto agree) during the period prior to the Effective Time to: (a) all of such party's properties, books, contracts, commitments and records, and (b) all other information concerning the business, properties and personnel of such party as the other party may reasonably request. Each party agrees to provide to the other and its accountants, counsel and other representatives copies of internal financial statements promptly upon request. Subject to compliance with applicable law, from the date hereof until the Effective Time, each of Parent and Circuit Test shall confer on a regular and frequent basis with one or more representatives of the other party to report operational matters of materiality and the general status of ongoing operations. No information or knowledge obtained in any investigation pursuant to this Section 7.3 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties hereto to consummate the Merger. 7.4 Confidentiality. Each party hereto and its Representatives will treat as confidential and hold in confidence all information concerning the businesses and affairs of the other that is not already generally available to the public and is not otherwise known to the party to whom it was disclosed on a non-confidential basis ("Proprietary Information") and refrain from using any Proprietary Information except in furtherance of this Agreement or as required by law. 7.5 Publicity. Circuit Test shall not, and shall use its reasonable efforts to cause its shareholders not to, issue, or cause or permit to be issued, any press release or otherwise make any public statement regarding the terms of this Agreement or the transactions contemplated hereby without Parent's prior written consent. Parent and Merger Sub shall consult with Circuit Test before issuing any press release or otherwise making any public statement regarding the terms of this Agreement or the transactions contemplated hereby, except as required by law or its other legal obligations. 7.6 Filings; Cooperation. Parent and Circuit Test shall make, and cause their affiliates to make, all necessary filings with respect to the Merger and the other transactions contemplated hereby including those required under the Securities Act and the Exchange Act and the rules and regulations thereunder, and under applicable Blue Sky or similar securities laws, and shall use all reasonable efforts to obtain required approvals and clearances with respect thereto to (a) comply as promptly as practicable with all governmental requirements applicable to the transaction and (b) obtain promptly all necessary permits, orders and other consents of Governmental Entities and consents of third parties necessary for the consummation of the Merger. 7.7 Employment Matters. At the Effective Time, Parent will enter into employment agreements with each of Messrs. Allen S. Braswell, Jr., Richard Strott, Andrew Hatch and A-38 Dennis Ayo (the "Employment Agreements"), which Employment Agreements shall be substantially in the form attached hereto as Exhibit 7.7. 7.8 Stock Options. At the Effective Time, Parent will issue stock options to certain employees of Circuit Test. Such stock options will be issued and exercisable under Parent's Equity Incentive Plan. Schedule 7.8 hereto sets forth the names of the grantees, the number of options to be granted and the manner in which such options will vest. The exercise price of the options shall be the last closing sale price of the Parent Common Stock on the date of grant. 7.9 Director Nominees. At or prior the Effective Time, Parent shall take such action as may be necessary such that two persons designated by Circuit Test will be elected to Parent's Board of Directors (the "Designees"), effective at the Effective Time. Circuit Test has selected as the Designees Messrs. Allen S. Braswell, Sr. and Allen S. Braswell, Jr. Unless waived by the Designees, Parent also shall take such action as may be necessary to nominate the Designees for election to the Board of Directors at Parent's Annual Meeting of Shareholders held next following the Effective Time. 7.10 Further Assurances. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals, to effect all necessary registrations and filings (including, but not limited to, filings with all applicable Governmental Entities) and to lift any injunction or other legal bar to the Merger (and, in such case, to proceed with the Merger as expeditiously as possible). (b) In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent and the Surviving Corporation shall take all such necessary action. (c) Circuit Test and its shareholders shall confirm and represent to Parent, by signed certificates, such factual matters as Parent may reasonably request in order for Parent to confirm that the Merger will qualify as a nontaxable reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. 7.11 Certain Tax Matters. Parent shall continue at least one significant historical business line of Circuit Test, or shall use at least a significant portion of Circuit Test's historical business assets in a business, in each case within the meaning of Treasury Regulation Section 1.368-1(d). 7.12 Audited Financial Statements. On or before July 16, 1997, Circuit Test shall deliver or cause to be delivered to Parent the consolidated audited balance sheet, and the related A-39 statements of operations, stockholders' and members' equity and of cash flows of Circuit Test, LLC and Airhub for the year ended December 31, 1996. 7.13 Additional Agreements. On or before July 16, 1997: (a) Parent shall deliver or cause to be delivered to Circuit Test executed Voting Letter Agreements (the form of which is attached as Exhibit 7.13 hereto) from each of the directors of Parent who is also a shareholder of Parent; (b) Circuit Test shall deliver or cause to be delivered to Parent a Voting Agreement executed by all of the CT Shareholders (other than the Allen S. Braswell, Sr. Grantor Retained Income Trust and Allen S. Braswell, Jr. who shall execute such Voting Agreement as of the date hereof). 7.14 Deferred Compensation. The parties hereto agree that after the Effective Time Circuit Test shall be authorized to pay up to an aggregate of $500,000 to its employees as "Deferred Compensation", less the amount of any Deferred Compensation paid by Airhub and CTLLC pursuant to Section 7.8 of the Purchase Agreement. ARTICLE VIII CONDITIONS PRECEDENT 8.1 Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party hereto to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by agreement of the parties hereto: (a) This Agreement and the Merger shall have been approved and adopted by the requisite vote of the holders of Parent Common Stock and by the requisite vote of the holders of Circuit Test Common Stock. (b) No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger, nor any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing, shall be pending; nor shall there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Merger, which makes the consummation of the Merger illegal. (c) Parent, Circuit Test and Merger Sub and their respective subsidiaries, if any, shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for consummation of or in connection with the Merger and the several transactions contemplated hereby, including such approvals, waivers and consents as may be required under the federal securities and state Blue Sky laws. A-40 (d) Simultaneous with the occurrence of the Closing hereunder, the Closing shall have occurred under the Purchase Agreement. 8.2 Additional Conditions to Obligations of Circuit Test to Effect the Merger. The obligations of Circuit Test to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by Circuit Test: (a) Parent and Merger Sub shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by them on or prior to the Effective Time and the representations and warranties of Parent and Merger Sub in this Agreement shall be true and correct in all material respects (or in all respects in the case of any representation or warranty that is qualified by its terms by a reference to Material Adverse Effect or otherwise the concept of materiality) when made and on and as of the Effective Time as though such representations and warranties were made on and as of such date. (b) Circuit Test shall have received a certificate executed on behalf of Parent by its Chief Financial Officer certifying that the conditions specified in Section 8.2(a) have been fulfilled. (c) Circuit Test shall have received a legal opinion of Holme Roberts & Owen LLP, counsel to Parent, substantially in the form attached hereto as Exhibit 8.2(c). (d) Parent shall have executed and delivered to the holders of Circuit Test Common Stock an agreement with respect to demand and piggyback registration rights of such holders (the "Registration Rights Agreement"), which Registration Rights Agreement shall be substantially in the form of Exhibit 8.2(d) attached hereto. (e) Parent shall have agreed to grant, as of the Effective Time, to the members of Circuit Test's management identified on Schedule 8.2(e), the employee stock options specified in such schedule. (f) There shall not have occurred any Material Adverse Effect on Parent. (g) Parent shall have executed and delivered to the other parties thereto, all Employment Agreements to be entered into at the Effective Time, which Employment Agreements shall be substantially in the form attached hereto as Exhibit 7.7. 8.3 Additional Conditions to the Obligations of Parent and Merger Sub to Effect the Merger. The obligations of Parent and Merger Sub to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by Parent: A-41 (a) Circuit Test shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it on or prior to the Effective Time and the representations and warranties of Circuit Test in this Agreement shall be true and correct in all material respects (or in all respects in the case of any representation or warranty that is qualified by its terms by a reference to Material Adverse Effect or otherwise by the concept of materiality) when made and on and as of the Effective Time as though such representations and warranties were made on and as of such time. (b) Parent shall have received a certificate, dated as of the Effective Time, executed on behalf of Circuit Test by its President and its Chief Financial Officer certifying that the conditions specified in Section 8.3(a) have been fulfilled. (c) Parent shall have received a legal opinion from Burch, Porter & Johnson, PLLC, legal counsel to Circuit Test, substantially in form attached hereto as Exhibit 8.3(c). (d) Parent shall have been furnished with evidence satisfactory to it of the consent or approval of those persons whose consent or approval shall be required in connection with the Merger under any material contract of Circuit Test otherwise. (e) There shall not have occurred any Material Adverse Effect on Circuit Test. (f) Parent shall have received letters of resignation, effective as of the Effective Time, executed and tendered by each of the then incumbent directors of Circuit Test. (g) The Voting Agreement, dated the date hereof (the "Voting Agreement"), among the CT Shareholders and Parent shall be in full force and effect as of the Effective Time and the parties to the Voting Agreement other than Parent shall have performed and complied in all material respects with all covenants, obligations and conditions of the Voting Agreement required to be performed or complied with by them. The CT Shareholders shall have executed and delivered to Parent: (i) a certificate confirming the continued accuracy of the representations and warranties given by them under the Voting Agreement; and (ii) the Registration Rights Agreement. (h) The parties to the Voting Agreement, other than Parent, and Bruce A. Braswell, Amy A. Braswell, and Anita B. Murman shall have entered into an agreement regarding the indemnification of Parent and Merger Sub with respect to the representations, warranties and covenants of this Agreement (the "Indemnification Agreement"), which Indemnification Agreement shall be substantially in the form of Exhibit 8.3(h) attached hereto; (i) Each employee who is to be party thereto shall have executed and delivered to Parent, all Employment Agreements to be entered into at the Effective Time, which Employment Agreements shall be substantially in the form attached hereto as Exhibit 7.7. A-42 (j) Parent shall have received from each of the holders of Circuit Test Common Stock who are receiving Parent Common Stock in the Merger a letter substantially in the form of Exhibit 8.3(j) attached hereto, and Parent shall have confirmed, to its reasonable satisfaction, that the Merger will qualify as a nontaxable reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. (k) There shall be no material variation between the audited financial statements for the year ended December 31, 1996 delivered to Parent pursuant to Section 7.12 and the unaudited financial statements for such period previously delivered to Parent. (l) For matters from its inception until the Closing, all corporate actions of Circuit Test, other than those that require no Board approval, shall have been approved or otherwise ratified by the Circuit Test Board of Directors as the valid and duly authorized actions of Circuit Test. (m) Parent shall have received such clearance certificate or shall have received or filed such other documents that may be required by any state taxing authority in order to relieve Parent of any obligation to withhold any portion of the consideration payable. (n) Circuit Test shall deliver to Parent at Closing a "Certificate of Nonforeign Status" under section 1445 of the Code in a form reasonably satisfactory to Parent. ARTICLE IX RESTRICTIONS ON TRANSFER 9.1 Legends. Each certificate representing shares of Parent Common Stock issued in connection with the Merger (the "Restricted Securities") shall bear a legend to the following effect: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH RESTRICTIONS ON THE TRANSFERABILITY CONTAINED IN AN AGREEMENT RELATING TO THE SECURITIES AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND NO TRANSFER WILL BE RECOGNIZED UNLESS MADE IN COMPLIANCE WITH SUCH LAWS." Any holder of Restricted Securities (a "Holder") who disposes of Restricted Securities in accordance with Section 9.2 shall be entitled to have Parent cause new unlegended certificates to be issued promptly to the Holder in exchange for outstanding legended certificates representing A-43 the disposed shares if: (a) the opinion to counsel referred to in Section 9.2 is to the further effect that such legend is not required in order to establish compliance with any provisions of the Securities Act; (b) the transfer is in connection with a transaction intended to comply with Rule 144 and Rule 145 as promulgated by the SEC under the Securities Act, as such Rules may be amended from time to time, or any similar successor rule that may be promulgated by the SEC, or (c) an appropriate registration statement with respect to such Restricted Securities has been filed by Parent with the SEC and has been declared effective by the SEC. 9.2 Notice of Proposed Dispositions. Each Holder of Restricted Securities by acceptance thereof shall agree to comply in all respects with the provisions of this Section 9.2. Prior to any proposed disposition of any Restricted Securities (unless there is in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement) the holder thereof shall give written notice to Parent of such Holder's intention to effect such disposition. Each such notice shall describe the manner and circumstances of the proposed disposition and shall be accompanied by either (a) a written opinion of legal counsel addressed to Parent and reasonably satisfactory in form and substance to Parent, to the effect that the proposed disposition of Restricted Securities may be effected without registration of such Restricted Securities or (b) a "no action" letter from the SEC to the effect that such disposition without registration of such Restricted Securities will not result in recommendation by the staff of the SEC that enforcement action be taken with respect thereto, whereupon the Holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to Parent. The provisions of this Section 9.2 shall not apply to Restricted Securities that are then freely tradeable pursuant to Rule 144(k) under the Securities Act, as amended from time to time, or any similar successor rule that may be promulgated by the SEC. ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 Termination. At any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the shareholders of Circuit Test and Parent, this Agreement may be terminated: (a) by mutual consent of Parent and Circuit Test; (b) by either Parent or Circuit Test, if, without fault of the terminating party, the Closing shall not have occurred on or before the later of (i) 30 days after the date the Proxy Statement is mailed, but in no event later than November 30, 1997, or (ii) such later date as may be agreed upon in writing by the parties hereto; (c) by Parent, if any of the conditions specified in Section 8.3 have not been satisfied or waived at such time as such condition is no longer capable of satisfaction; A-44 (d) by Circuit Test, if any of the conditions specified in Section 8.2 have not been satisfied or waived at such time as such condition is no longer capable of satisfaction; (e) by either Parent or Circuit Test if the other shall have breached its respective representations, warranties or other obligations under Articles IV through VII in any material respect and such breach continues for a period of 10 days after receipt of notice of the breach from the non-breaching party hereto. 10.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 10.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub or Circuit Test or their respective officers, directors, shareholders or affiliates, except to the extent that such termination results from the breach by a party hereto of any of its representations, warranties or covenants set forth in this Agreement; provided that, the provisions of this Section 10.2 and Section 7.4 (Confidentiality) and Article XI (General Provisions) shall remain in full force and effect and survive any termination of this Agreement. 10.3 Amendment. The respective Boards of Directors of the parties hereto may cause this Agreement to be amended at any time by execution of an instrument in writing signed on behalf of each of the parties hereto; provided that an amendment made subsequent to adoption of the Agreement by the shareholders of Circuit Test or Merger Sub shall not (a) alter or change the amount or kind of consideration to be received on conversion of the Circuit Test Common Stock, (b) alter or change any term of the Articles of Incorporation of Surviving Corporation to be effected by the Merger, or (c) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of Circuit Test Common Stock or Parent. 10.4 Extension; Waiver. At any time prior to the Effective Time any party hereto may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE XI GENERAL PROVISIONS 11.1 Survival of Representations and Warranties. The representations and warranties of Circuit Test in Article IV shall survive the Merger and continue in full force and effect for two years after the Effective Time, except for those contained in Section 4.16 and 4.17 shall survive the Merger and continue in full force and effect after the Effective Time for the applicable statute A-45 of limitations period. The Shareholders of Circuit Test have agreed to indemnify Parent pursuant to the Indemnification Agreement, subject to the limitations contained therein. The representations and warranties of Parent and Merger Sub shall survive the Merger and continue in full force and effect for two years after the Effective Time and Parent shall indemnify the Shareholders of Circuit Test pursuant to Section 11.2, in each case subject to the limitations contained therein. 11.2 Indemnification by Parent. (a) Indemnity Obligation of Parent. Parent hereby agrees to indemnify and hold harmless each of the CT Shareholders harmless from, and to reimburse each of the CT Shareholders for, any Shareholder Indemnity Claims arising under the terms and conditions of this Agreement. For purpose of this Agreement, the term "Shareholder Indemnity Claim" shall mean any loss, damage, deficiency, claim, liability, suit, action, fee, cost or expense of any nature whatsoever ("Losses") incurred by the CT Shareholders resulting from any breach of representation or warranty of Parent or Merger Sub that is contained in this Agreement. (b) Limitation on Indemnification. Notwithstanding the foregoing, any claim for indemnification or breach of representation and warranty against Parent hereunder shall be payable by Parent only in the event, and to the extent, that the accumulated amount of claims in respect of such indemnifying party's obligations to indemnify hereunder shall exceed the amount of $100,000 in the aggregate (the "Indemnification Threshold"). In addition, the aggregate liability of Parent for amounts in excess of the Indemnification Threshold shall not exceed an aggregate of $2.5 million unless such Losses are caused by or arise out of any breach of which Parent had actual knowledge at the time of the related representation was made or deemed made, in which case an aggregate ceiling of $14.5 million shall apply. 11.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail, return receipt requested, or sent via facsimile, with confirmation of receipt, to the parties at the following address or at such other address for a party as shall be specified by notice hereunder: (a) if to Parent or Merger Sub, to: EFTC Corporation 7241 West 4th Street Greeley, Colorado 80634 Attention: Stuart W. Fuhlendorf Facsimile No.: (303) 892-4306 A-46 with a copy to: Holme Roberts & Owen LLP 1700 Lincoln, Suite 4100 Denver, Colorado 80203 Attention: Francis R. Wheeler Facsimile No.: (303) 866-0200 (b) if to Circuit Test, to: Circuit Test, Inc. 4601 Cromwell Avenue Memphis, Tennessee 38118 Attention: Allen S. Braswell, Jr. Facsimile No.: (901) 795-5305 with a copy to: Burch, Porter & Johnson, PLLC 50 North Front Street Suite 800 Memphis, Tennessee 38103 Attention: Warner B. Rodda Facsimile No.: (901) 524-5026 11.4 Interpretation. When a reference is made in this Agreement to Exhibits, Articles or Sections, such reference shall be to an Exhibit, Article or Section to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party hereto to whom such information is to be made available. The table of contents, index of defined terms and Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, any reference to any event, change, condition or effect being "material" with respect to any entity or group of entities means any material event, change, condition or effect related to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, operations or results of operations of such entity or group of entities. In this Agreement, any reference to a "Material Adverse Effect" with respect to any entity or group of entities means any event, change or effect that is materially adverse to the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of such entity and its subsidiaries, taken as a whole. In this Agreement, any reference to a party's "knowledge" means such party's actual knowledge of a particular fact or matter after due and diligent inquiry of officers, directors and other employees of such party reasonably A-47 believed to have knowledge of such matters. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. 11.5 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. 11.6 Entire Agreement; Nonassignability; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the Exhibits, the Circuit Test Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof; (b) are not intended to confer upon any other person any rights or remedies hereunder; and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided. 11.7 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 11.8 Remedies Cumulative; No Waiver. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. 11.9 Governing Law. The Merger shall be governed by the laws of the state of Florida. All other aspects of this Agreement shall be governed by and construed in accordance with the laws of the State of Colorado (without regard to the principles of conflicts of law thereof). 11.10 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. A-48 11.11 Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, the fees and expenses of its advisers, accountants and legal counsel) shall be paid by the party incurring such expense. 11.12 Attorneys Fees. In the event of any proceeding to enforce this Agreement, the prevailing party shall be entitled to receive from the losing party all reasonable costs and expenses, including the reasonable fees of attorneys, accountants and other experts, incurred by the prevailing party in investigating and prosecuting (or defending) such action at trial or upon any appeal. A-49 SIGNATURE PAGE--AGREEMENT AND PLAN OF REORGANIZATION IN WITNESS WHEREOF, Circuit Test, Parent and Merger Sub have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above. EFTC CORPORATION, a Colorado corporation By: /s/ Stuart Fuhlendorf CTI ACQUISITION CORP., a Florida corporation By: /s/ Stuart Fuhlendorf CIRCUIT TEST, INC. a Florida corporation By: /s/ Allen S. Braswell, Jr. A-50 EX-2.2 3 CTI UNIT PURCHASE AGREEMENT - -------------------------------------------------------------------------------- LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT among EFTC CORPORATION, CTLLC ACQUISITION CORP., CIRCUIT TEST INTERNATIONAL, L.C., AIRHUB SERVICES GROUP, L.C., and the MEMBERS OF AIRHUB SERVICES GROUP, L.C. AND CIRCUIT TEST INTERNATIONAL, L.C. July 9, 1997 - --------------------------------------------------------------------------------
TABLE OF CONTENTS Page RECITALS .........................................................................................................1 AGREEMENT.........................................................................................................2 ARTICLE I PURCHASE AND SALE OF UNITS OF AIRHUB............................................................2 1.1 Transfer of Units...............................................................................2 1.2 Purchase Price..................................................................................2 1.3 The Airhub Transfer.............................................................................2 1.4 The Closing.....................................................................................2 1.5 The LLC Consideration...........................................................................2 ARTICLE II PURCHASE AND SALE OF UNITS OF CTLLC.............................................................3 2.1 Transfer of Units...............................................................................3 2.2 Purchase Price..................................................................................3 2.3 The CTLLC Transfer..............................................................................3 ARTICLE III REPRESENTATIONS AND WARRANTIES OF AIRHUB........................................................3 3.1 Organization, Standing and Power................................................................3 3.2 Capitalization; Unitholders.....................................................................4 3.3 Subsidiaries....................................................................................4 3.4 Due Authorization; No Conflict..................................................................4 3.5 Information Supplied............................................................................6 3.6 Absence of Certain Changes......................................................................6 3.7 Liabilities.....................................................................................6 3.8 Accounts Receivable.............................................................................6 3.9 Litigation......................................................................................7 3.10 Restrictions on Business Activities.............................................................7 3.11 Governmental Authorization......................................................................7 3.12 Contracts and Commitments.......................................................................7 3.13 Title to Property...............................................................................8 3.14 Intellectual Property...........................................................................8 3.15 Environmental Matters...........................................................................9 3.16 Taxes..........................................................................................10 3.17 Tax Classification as a Partnership............................................................12 3.18 Employee Benefit Plans.........................................................................12 3.19 Employee Matters...............................................................................13 3.20 Interested Party Transactions..................................................................14 3.21 Insurance......................................................................................14 -i- 3.22 Compliance With Laws...........................................................................14 3.23 Major Customers................................................................................14 3.24 Suppliers......................................................................................14 3.25 Inventory......................................................................................15 3.26 Product Warranty and Product Liability.........................................................15 3.27 Minute Books...................................................................................15 3.28 Brokers' and Finders' Fees.....................................................................15 3.29 Disclosure.....................................................................................16 3.30 Reliance.......................................................................................16 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CTLLC........................................................16 4.1 Organization, Standing and Power...............................................................16 4.2 Capitalization; Unitholders....................................................................16 4.3 Subsidiaries...................................................................................17 4.4 Due Authorization..............................................................................17 4.5 Information Supplied...........................................................................18 4.6 Absence of Certain Changes.....................................................................19 4.7 Liabilities....................................................................................19 4.8 Accounts Receivable............................................................................19 4.9 Litigation.....................................................................................19 4.10 Restrictions on Business Activities............................................................19 4.11 Governmental Authorization.....................................................................20 4.12 Contracts and Commitments......................................................................20 4.13 Title to Property..............................................................................20 4.14 CTLLC Intellectual Property....................................................................21 4.15 Environmental Matters..........................................................................22 4.16 Taxes..........................................................................................23 4.17 Tax Classification as a Partnership............................................................24 4.18 Employee Benefit Plans.........................................................................24 4.19 Employee Matters...............................................................................25 4.20 Interested Party Transactions..................................................................26 4.21 Insurance......................................................................................26 4.22 Compliance With Laws...........................................................................26 4.23 Major Customers................................................................................26 4.24 Suppliers......................................................................................26 4.25 Inventory......................................................................................27 4.26 Product Warranty and Product Liability.........................................................27 4.27 Minute Books...................................................................................27 4.28 Brokers' and Finders' Fees.....................................................................28 4.29 Disclosure.....................................................................................28 4.30 Reliance.......................................................................................28 -ii- ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND LLC ACQUISITION................................................................................28 5.1 Organization, Standing and Power...............................................................28 5.2 Due Authorization..............................................................................28 5.3 Absence of Certain Changes.....................................................................29 5.4 Compliance with Laws...........................................................................29 5.5 Board Approval.................................................................................30 5.6 Brokers' and Finders' Fees.....................................................................30 5.7 Reliance.......................................................................................30 ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME................................................................30 6.1 Conduct of Business of Circuit Test............................................................30 6.2 No Solicitation; Acquisition Proposals.........................................................33 6.3 Conduct of Business of Parent..................................................................33 6.4 Notice of Breach...............................................................................34 ARTICLE VII ADDITIONAL COVENANTS................................................................................34 7.1 Access to Information..........................................................................34 7.2 Confidentiality................................................................................35 7.3 Publicity......................................................................................35 7.4 Filings; Cooperation...........................................................................35 7.5 Earnout Agreements. ..........................................................................35 7.6 Further Assurances.............................................................................36 7.7 Indemnification Agreement......................................................................36 7.8 Deferred Compensation..........................................................................36 ARTICLE VIII CONDITIONS PRECEDENT...............................................................................36 8.1 Conditions to Obligations of Each Party to Effect the LLC Transfer.............................36 8.2 Additional Conditions to Obligations of Airhub to Effect the Airhub Transfer................................................................................37 8.3 Additional Conditions to Obligations of CTLLC to Effect the CTLLC Transfer.................................................................................37 8.4 Additional Conditions to the Obligations of Parent and LLC Acquisition to Effect the LLC Transfer.....................................................................38 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..............................................................39 9.1 Termination....................................................................................39 9.2 Effect of Termination..........................................................................39 9.3 Amendment......................................................................................39 9.4 Extension; Waiver..............................................................................39 -iii- ARTICLE X GENERAL PROVISIONS.............................................................................40 10.1 Survival of Representations and Warranties.....................................................40 10.2 Notices........................................................................................40 10.3 Interpretation.................................................................................41 10.4 Counterparts...................................................................................41 10.5 Entire Agreement; Nonassignability; Parties in Interest........................................42 10.6 Severability...................................................................................42 10.7 Remedies Cumulative; No Waiver.................................................................42 10.8 Governing Law..................................................................................42 10.9 Rules of Construction..........................................................................42 10.10 Expenses. ....................................................................................42 10.11 Attorneys Fees.................................................................................43 -iv- INDEX OF DEFINED TERMS Page Airhub Authorizations.............................................................................................7 Agreement ................................................................................................1 Airhub ................................................................................................1 Airhub Disclosure Schedule........................................................................................3 Airhub Employee Plans............................................................................................12 Airhub Inventory ...............................................................................................15 Airhub Members ................................................................................................1 Airhub Transfer ................................................................................................2 Airhub Units ................................................................................................2 Assignment of Units...............................................................................................2 CERCLA ...............................................................................................10 Circuit Test ................................................................................................1 Closing ................................................................................................2 Closing Balance Sheet.............................................................................................2 Closing Date ................................................................................................2 COBRA ...............................................................................................14 Confidential Information..........................................................................................9 CTI Group ................................................................................................2 CTLLC ................................................................................................1 CTLLC Authorizations.............................................................................................20 CTLLC Confidential Information...................................................................................22 CTLLC Disclosure Schedule........................................................................................16 CTLLC Employee Plans.............................................................................................24 CTLLC Intellectual Property......................................................................................21 CTLLC Inventory ...............................................................................................27 CTLLC Members ................................................................................................1 CTLLC Transfer ................................................................................................3 CTLLC Units ................................................................................................3 Debt ................................................................................................2 Deferred Compensation............................................................................................36 Earnout Agreement ...............................................................................................35 environment ...............................................................................................10 Environmental Law ...............................................................................................10 ERISA ...............................................................................................12 ERISA Affiliate ...............................................................................................12 Governmental Entity...............................................................................................5 Hazardous Substance..............................................................................................10 include ...............................................................................................41 -v- includes ...............................................................................................41 including ...............................................................................................41 Indemnification Agreement........................................................................................36 Intellectual Property.............................................................................................8 knowledge ...............................................................................................41 Lien ................................................................................................5 LLC Acquisition ................................................................................................1 LLC Consideration ................................................................................................2 LLC Transfer ................................................................................................3 made available ...............................................................................................41 material ...............................................................................................41 Material Adverse Effect..........................................................................................41 Merger Sub ................................................................................................1 NASD ...............................................................................................29 Parent ................................................................................................1 Parent Balance Sheet Date........................................................................................29 Parent Disclosure Schedule.......................................................................................28 Parent SEC Documents.............................................................................................29 partnership ...............................................................................................12 Proprietary Information..........................................................................................35 release ...............................................................................................10 Reorganization Agreement..........................................................................................1 SEC ................................................................................................6 Tax ...............................................................................................11 Tax authority ...............................................................................................11 Tax Return ...............................................................................................11 Taxable ...............................................................................................11 Taxes ...............................................................................................11 Third Party Intellectual Property Rights..........................................................................8 Transaction ................................................................................................1 Waiving Party ...............................................................................................39
-vi- LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT THIS LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT (this "Agreement"), dated as of July 9, 1997, is among EFTC CORPORATION, a Colorado corporation ("Parent"), CTLLC ACQUISITION CORP., a Florida corporation and wholly-owned subsidiary of Parent ("LLC Acquisition"), AIRHUB SERVICES GROUP, L.C., a Kentucky limited liability company ("Airhub"), the MEMBERS of Airhub (the "Airhub Members"), CIRCUIT TEST INTERNATIONAL, L.C., a Florida limited liability company ("CTLLC"), and the MEMBERS of CTLLC (the "CTLLC Members"). RECITALS A. The Board of Directors of Parent and the Airhub Members have determined that a business combination between Parent and Airhub is in the best interests of their respective companies, shareholders and members and accordingly have approved this Agreement and the acquisition whereby Parent will acquire all of the ownership interest in Airhub from the Airhub Members. B. The Board of Directors of Parent and LLC Acquisition and the CTLLC Members have determined that a business combination between Parent, LLC Acquisition and CTLLC is in the best interests of their respective companies and shareholders or members and accordingly have approved this Agreement and the acquisition whereby Parent and LLC Acquisition will acquire all of the ownership interest in CTLLC from the CTLLC Members. C. The transactions contemplated by this Agreement are part of the acquisition by Parent (the "Transaction") of the businesses presently conducted by Airhub, CTLLC and Circuit Test, Inc., a Florida corporation ("Circuit Test"). Accordingly, in addition to, and simultaneous with the execution of, this Agreement, Parent is entering into an Agreement and Plan of Reorganization (the "Reorganization Agreement") among Parent, CTI Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and Circuit Test. This Agreement, the Reorganization Agreement, and the exhibits and schedules contained therein represent the entire agreement among such parties with respect to the Transaction. D. Parent, LLC Acquisition, Airhub, CTLLC, the Airhub Members and the CTLLC Members desire to make certain representations, warranties and agreements in connection with the transactions described herein. -1- AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF UNITS OF AIRHUB 1.1 Transfer of Units. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in the Reorganization Agreement), each of the Airhub Members will assign, sell, convey, transfer, and deliver to Parent (the "Airhub Transfer") all of their ownership interests of Airhub (the "Airhub Units"), such that, at the Effective Time, Parent will become the sole holder of Airhub Units. 1.2 Purchase Price. In exchange for the Airhub Units, Parent will pay each of the Airhub Members twenty-five percent (25%) of the LLC Consideration (as defined below in Section 1.5). Such payment shall be in the form of immediately available funds, as of the Closing, as defined in Section 1.4 below, or in such form as the parties shall mutually agree. 1.3 The Airhub Transfer. At the Closing, each of the Airhub Members will deliver to Parent an "Assignment of Units", together with any certificates or other instruments that represent their respective Airhub Units. A form of the Assignment of Units is attached hereto as Exhibit 1.3. 1.4 The Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place: (a) at the offices of Holme Roberts & Owen LLP, 1700 Lincoln Street, Suite 4100, Denver, Colorado 80203, at 10:00 a.m., local time, within three business days following the day on which the conditions set forth in Article VIII shall be fulfilled or waived in accordance herewith or (b) at such other time, date or place as all of the parties to this Agreement agree. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." 1.5 The LLC Consideration. For purposes of this Agreement, the aggregate payments made for the LLC interests acquired hereby shall include the LLC Consideration, as defined in this Section 1.5, and the payments contemplated by a certain Earnout Agreement, described in Section 7.5 herein. For purposes of this Agreement, the "LLC Consideration" shall be Nineteen Million Five Hundred Thousand Dollars ($19,500,000) adjusted as follows: (a) the LLC Consideration shall be decreased by the amount, if any, the Debt of the CTI Group, as set forth on the CTI Group Closing Balance Sheet, exceeds $5.7 million; or (b) the LLC Consideration shall be increased by the amount, if any, the Debt of the CTI Group, as set forth on the CTI Group Closing Balance Sheet, is less than $5.7 million. For purposes of this Section 1.5, "Debt" shall mean interest bearing indebtedness, excluding any obligations incurred pursuant to Section -2- 6.1(b)(v) and 7.8 of this Agreement and Sections 6.1(b)(vi) and 7.14 of the Reorganization Agreement, and net of cash, "CTI Group" shall mean Airhub, CTLLC and Circuit Test, and "Closing Balance Sheet" shall be that balance sheet delivered by the CTI Group to Parent two days prior to Closing dated as of a date two days prior to Closing. As soon as practicable following the Closing, Parent shall notify the Airhub Members and the CTLLC Members of any discrepancy between the Closing Balance Sheet and the actual amount of Debt of the CTI Group as of the Closing Date. The amount payable by, or refundable to, Parent in respect of any such discrepancy shall be promptly paid by the appropriate party and such payment or refund (when so paid, or, if applicable, upon recovery thereof pursuant to the Indemnification Agreement, as defined in Section 7.7 hereto) shall not be deemed to be subject to the threshold or aggregate limitations on indemnification specified in Section 2.1 of the Indemnification Agreement. Parent's post-Closing determination of Debt shall be based on the definition herein of Debt and computed in accordance with GAAP. Such determination shall be conclusive absent manifest error. ARTICLE II PURCHASE AND SALE OF UNITS OF CTLLC 2.1 Transfer of Units. Subject to the terms and conditions of this Agreement, at the Effective Time: (i) the Allen S. Braswell, Jr. Revocable Living Trust, will assign, sell, convey, transfer, and deliver to Parent all of its ownership interests of CTLLC (the "CTLLC Units"), and (ii) Circuit Test International Family Limited Partnership will assign, sell, convey, transfer, and deliver to LLC Acquisition all of its CTLLC Units (together, the "CTLLC Transfer"), such that, at the Effective Time, Parent and LLC Acquisition will become the sole holders of CTLLC Units. For purposes of this Agreement, the Airhub Transfer and the CTLLC Transfer together shall collectively be referred to as the "LLC Transfer". 2.2 Purchase Price. In exchange for the CTLLC Units, Parent will pay the Allen S. Braswell, Jr. Revocable Living Trust and LLC Acquisition will pay Circuit Test International Family Limited Partnership twenty-five percent (25%) of the LLC Consideration. Such payment shall be in the form of immediately available funds, as of the Closing, or in such form as the parties shall mutually agree. 2.3 The CTLLC Transfer. At the Closing, Allen S. Braswell, Jr. will deliver to Parent and Circuit Test International Family Limited Partnership will deliver to LLC Acquisition an Assignment of Units, defined above, together with any certificates or other instruments that represent their respective CTLLC Units. -3- ARTICLE III REPRESENTATIONS AND WARRANTIES OF AIRHUB Except as disclosed in a document of even date herewith and delivered by Airhub and the Airhub Members to Parent prior to the execution and delivery of this Agreement and referring to -4- the section number and subsection of the representations and warranties in this Agreement, subject to its subsequent revision from time to time prior to the Effective Time (but only with the prior written consent of Parent), (the "Airhub Disclosure Schedule"), Airhub and each of the Airhub Members, jointly and severally, represent and warrant to Parent as follows: 3.1 Organization, Standing and Power. Airhub is a limited liability company duly organized and validly existing under the laws of the Commonwealth of Kentucky, has the full power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a Material Adverse Effect (as defined in Section 10.3) on Airhub or its operations. Airhub has delivered to Parent a true and correct copy of its Articles of Organization and Operating Agreement, each as amended to date. Neither Airhub nor any Airhub Members is in violation of any of the provisions of its Articles of Organization or Operating Agreement or other equivalent organizational documents. The Airhub Disclosure Schedule lists a complete and correct list of the Airhub Members, interest holders of Airhub, and the managers of Airhub. 3.2 Capitalization; Unitholders. (a) There are currently two Airhub Units owned by the Airhub Members. There are no other outstanding Airhub Units or other securities of Airhub and no outstanding subscriptions, options, rights of first refusal, puts, calls, purchase or sale rights, exchangeable or convertible securities or other commitments or agreements of any nature relating to the Airhub Units or other securities of Airhub, or otherwise obligating Airhub to issue, transfer, sell, purchase, redeem or otherwise acquire any such Airhub Units or securities. There are not any options, warrants, calls, conversion rights, commitments, agreements, contracts, understandings, restrictions, arrangements or rights of any character to which Airhub or any of the Airhub Members is a party or by which Airhub may be bound obligating Airhub or any of the Airhub Members to issue, deliver, or sell, or cause to be issued, delivered or sold, additional Airhub Units or obligating Airhub or any of the Airhub Members to enter into such an option, right of first refusal, call, conversion right, commitment, agreement, contract, understanding, restriction, arrangement or right. There are no contracts, commitments or agreements relating to voting, purchase or sale of Airhub Units (i) between or among Airhub and any of the Airhub Members or (ii) by or among any of the Airhub Members. (b) Schedule 3.2 sets forth a true and complete list of the names of all owners of Airhub Units, together with the number of Airhub Units held by each such holder. Except as set forth in Schedule 3.2, each holder so listed is the record and the beneficial owner of all Airhub Units so listed in its name, has the full power and authority, and has or will be fully empowered and authorized as of the Effective Time, to consummate the matters contemplated to be consummated by such holder herein. -5- 3.3 Subsidiaries. Airhub does not directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. 3.4 Due Authorization; No Conflict. (a) Airhub has the full power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Airhub and the Airhub Members. This Agreement has been duly executed and delivered by Airhub and constitutes the valid and binding obligation of Airhub enforceable against Airhub in accordance with its terms. The execution and delivery of this Agreement by Airhub do not, and the consummation of the transactions contemplated hereby will not: (i) conflict with or violate any provision of the Articles of Organization or Operating Agreement of Airhub, (ii) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to Airhub or the properties or assets of Airhub or the Airhub Units, or (iii) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of, or result in the creation of any mortgage, pledge, lien, encumbrance, charge or other security interest (a "Lien") on any of the properties or assets of Airhub or the Airhub Units pursuant to, or require the consent or approval of any party to any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to Airhub or any of its properties or assets, except, in the case of this clause (iii) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to have a Material Adverse Effect on Airhub or materially affect the consummation of the transactions contemplated hereby. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to Airhub in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than any consents, approvals, orders and registrations that, if not obtained or made, would not have a Material Adverse Effect on Airhub or materially affect the consummation of transactions contemplated hereby. (b) Each Airhub Member represents and warrants that such Airhub Member is competent, and has the full power and authority, to execute, deliver and enter into this Agreement and to perform such Airhub Member's obligations, including the delivery of the Airhub Units, hereunder and has taken all actions necessary to secure all approvals required in connection therewith. This Agreement has been duly executed and delivered by each Airhub Member and constitutes the valid and binding obligation of such Airhub Member enforceable against such Airhub Member in accordance with its terms. The execution and delivery of this Agreement by the Airhub Members does not, and the performance will not: (i) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to any Airhub Member or the properties or assets of such Airhub Member or (ii) result -6- in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of, or result in the creation of any Lien on any of the properties or assets of such Airhub Member pursuant to, or require the consent or approval of any party to, any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to such Airhub Member or any of its properties or assets, except, in the case of this clause (b) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to materially affect the consummation of the transactions contemplated hereby. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to any Airhub Member in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than any consents, approvals, orders and registrations that, if not obtained or made, would not have a Material Adverse Effect on Airhub or materially affect the consummation of transactions contemplated hereby. 3.5 Information Supplied. None of the information supplied or to be supplied by Airhub, the Airhub Members, or their auditors, attorneys, financial advisors, other consultants or advisors for inclusion in any document relating to the Transaction to be filed by Parent with the Securities and Exchange Commission (the "SEC"), will, at the time of the particular filing and any amendment or supplement thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading or necessary to correct any statement in any earlier filing with the SEC or any amendment or supplement thereto or any earlier communication to shareholders of Company with respect to the Transaction. 3.6 Absence of Certain Changes. Except as specifically permitted by this Agreement or as set forth in Schedule 3.6 of the Airhub Disclosure Schedule, since December 31, 1996, Airhub has conducted its business in the ordinary course consistent with past practice and there has not occurred: (i) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect on Airhub; (ii) any action by or with respect to Airhub that would have constituted a breach of any of the covenants contained in Section 6.1(b); or (iii) any of the following matters: (a) any material damage, destruction or loss (whether or not covered by insurance) to the properties and assets of Airhub; (b) any Lien on any asset other than those otherwise permitted by this Agreement; (c) any labor dispute, litigation or governmental investigation affecting the business or financial condition of Airhub; 3.7 Liabilities. Except as set forth in the Annual Financial Statements, the Interim Circuit Test Financial Statements (both as defined in the Reorganization Agreement), the Airhub -7- Disclosure Schedule and except for liabilities or obligations arising in the ordinary course and consistent with past practice and those incurred in connection herewith, Airhub does not have any liability or obligation of any nature, whether due or to become due, fixed or contingent. 3.8 Accounts Receivable. All of the accounts receivable of Airhub shown on the balance sheet included in the Interim Circuit Test Financial Statements as of May 31, 1997 have been collected or are good and collectible in the aggregate recorded amounts thereof (less the allowance for doubtful accounts also appearing in such May 31, 1997 balance sheet and net of returns and payment discounts allowable by Airhub's policies) and can reasonably be anticipated to be paid in full in the ordinary course of business consistent with past practice without outside collection efforts, subject to no counterclaims or setoffs. 3.9 Litigation. There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of Airhub, threatened against Airhub or any of its assets and properties or any of its officers or directors (in their capacities as such) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on Airhub. There is no judgment, decree or order against Airhub, or, to the knowledge of Airhub, any of its directors or officers (in their capacities as such), that could prevent consummation of the transactions contemplated by this Agreement, or that could reasonably be expected to have a Material Adverse Effect on Airhub. 3.10 Restrictions on Business Activities. There is no material agreement, judgment, injunction, order or decree binding upon Airhub which has or reasonably could be expected to have the effect of prohibiting or materially impairing any current or proposed business practice of Airhub, any acquisition of property by Airhub or the conduct of business by Airhub as currently conducted or as proposed to be conducted by Airhub. 3.11 Governmental Authorization. Airhub has obtained each federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization that is necessary for Airhub to own or lease, operate and use its respective assets and properties and to carry on business as currently conducted or as proposed to be conducted (collectively "Airhub Authorizations"), Airhub has performed and fulfilled its obligations under the Airhub Authorizations, and all the Airhub Authorizations are in full force and effect, except where the failure to obtain or have any of such Airhub Authorizations could not reasonably be expected to have a Material Adverse Effect on Airhub. 3.12 Contracts and Commitments. Airhub is not a party to any oral or written (a)(i) obligation for borrowed money, (ii) obligation evidenced by bonds, debentures, notes or other similar instruments, (iii) obligation to pay the deferred purchase price of property or services (other than trade accounts arising in the ordinary course of business), (iv) obligation under capital leases, (v) debt of others secured by a Lien on its property, (vi) guaranty of liabilities or obligations of others, (vii) agreement under which Airhub is obligated to make or expects to receive payments in excess of $50,000 or (viii) agreement granting any person a Lien -8- on any of its properties or assets (except purchase money security interests created in the ordinary course of business consistent with past practice); (b)(i) employment agreement or collective bargaining agreement or (ii) agreements that limit the right of Airhub, or any of its employees to compete in any line of business; or (c) agreement which, after giving effect to the transactions contemplated hereby, purports to restrict or bind Parent or any of its subsidiaries, other than Surviving Corporation, in any respect. True and complete copies of all agreements described in the Airhub Disclosure Schedule or any other section thereto have been delivered to Parent. Airhub has fulfilled, or taken all actions necessary to enable it to fulfill when due, its obligations under each of such agreements. All parties thereto have complied in all material respects with the provisions thereof and no party is in breach or violation of, or in default (with or without notice or lapse of time, or both) under such agreements. With respect to such agreements, Airhub has not received any notice of termination, cancellation or acceleration or any notice of breach, violation or default thereof. 3.13 Title to Property. Airhub has good and marketable title to all of its respective properties and assets, or in the case of leased properties and assets, valid leasehold interests in such properties, free and clear of any Lien. The plants, property and equipment of Airhub that are used in the operations of its business are in good operating condition and repair. All plants, property and equipment owned by Airhub conform (to Airhub's knowledge) with all applicable ordinances, regulations and zoning and other laws and do not encroach on the property of others, the failure to conform with which would have a Material Adverse Effect on Airhub. There is no pending or, to Airhub's knowledge, threatened change in any such ordinance, regulation or zoning or other law, and there is no pending or, to Airhub's knowledge, threatened condemnation of any such building, machinery or equipment. The properties and assets of Airhub include all rights, properties, interests in properties and assets necessary to permit Surviving Corporation to conduct its business as currently conducted. The Airhub Disclosure Schedule identifies each parcel of real property owned or leased by Airhub. 3.14 Intellectual Property. (a) Airhub owns, or is licensed or otherwise possesses legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, maskworks, net lists, schematics, technology, know-how, trade secrets, inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material ("Intellectual Property") that are used in the business of Airhub as currently conducted, except to the extent that the failure to have such rights has not and could not reasonably be expected to have a Material Adverse Effect on Airhub. (b) The Airhub Disclosure Schedule lists: (i) all patents and patent applications and all registered and unregistered trademarks, trade names and service marks, registered and unregistered copyrights, and maskworks, which Airhub considers to be material to its business and included in the Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any application for such -9- issuance and registration has been filed, (ii) all material licenses, sublicenses and other agreements as to which Airhub is a party and pursuant to which any person is authorized to use any Intellectual Property, and (iii) all material licenses, sublicenses and other agreements as to which Airhub is a party and pursuant to which Airhub is authorized to use any third party patents, trademarks or copyrights, including software ("Third Party Intellectual Property Rights"), in each case which are incorporated in, are, or form a part of any product or service of Airhub. (c) To the knowledge of Airhub, there is no unauthorized use, disclosure, infringement or misappropriation of any Intellectual Property rights of Airhub, any trade secret material to Airhub, or any Third Party Intellectual Property Right, by any third party, including any employee or former employee of Airhub. Airhub has not entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in purchase orders arising in the ordinary course of business, or contained in license agreements relating to Intellectual Property licensed to Airhub in the ordinary course of business. (d) Airhub is not, and will not be as a result of the execution and delivery of this Agreement or the performance of Airhub's obligations under this Agreement be, in breach of any license, sublicense or other agreement relating to the Intellectual Property or Third Party Intellectual Property Rights, the breach of which could have a Material Adverse Effect on Airhub. (e) All patents, registered trademarks, service marks and copyrights held by Airhub are valid and subsisting. Airhub (i) has not been sued in any suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary right of any third party or (ii) has not brought any action, suit or proceeding for infringement of Intellectual Property or breach of any license or agreement involving Intellectual Property against any third party. To the knowledge of Airhub, the manufacture, marketing, licensing or sale of the products and services of Airhub does not infringe any patent, trademark, service mark, copyright, trade secret or other proprietary right of any third party. (f) Airhub has secured valid written assignments from all consultants and employees who contributed to the creation or development of Intellectual Property of the rights to such contributions that Airhub does not already own by operation of law. (g) Airhub has taken all reasonable and appropriate steps to protect and preserve the confidentiality of all Intellectual Property not otherwise protected by patents, or patent applications or copyright ("Confidential Information"). All use, disclosure or appropriation of Confidential Information owned by Airhub by or to a third party has been pursuant to the terms of a written agreement with such third party. All use, disclosure or appropriation of Confidential Information not owned by Airhub has been pursuant to the terms of a written agreement with the owner of such Confidential Information, or is otherwise lawful. -10- 3.15 Environmental Matters. (a) Airhub has complied with, and is in compliance with, all Environmental Laws (as defined in this Section 3.15(a)) applicable to its current and prior business, properties and assets. Airhub has, and Airhub has provided to Parent, true and complete copies of, all permits, approvals, registrations, licenses and other authorizations required by any Governmental Entity pursuant to any Environmental Law applicable to its business, properties and assets, the absence of which would have a Material Adverse Effect on Airhub and all such permits, approvals, registrations, licenses and other authorization are listed on the Airhub Disclosure Schedule. There is no pending or, to Airhub's knowledge, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law to which Airhub is a party or, to Airhub's knowledge, threatened to be made a party. For purposes of this Agreement, "Environmental Law" means any federal, state or local law, statute, ordinance, rule, regulation, order or judgment or the common law relating to protection of public health, safety or the environment or occupational health and safety, or that regulates, or creates liability for, releases or threatened releases of any Hazardous Substance. As used in Sections 3.15 and 4.15, the terms "release" and "environment" have the meanings set forth in the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), and "Hazardous Substance" means any substance regulated by, or the presence of which creates liability under, any Environmental Law (including without limitation CERCLA) and includes without limitation industrial, toxic or hazardous substances, pollutants and contaminants, oil or petroleum products, solid or hazardous waste, chemicals and asbestos. (b) There have been no releases or threatened releases of any Hazardous Substance in violation of Environmental Law at any parcel of real property or any facility currently or formerly owned, leased, operated or controlled by Airhub. With respect to any such releases of or threatened releases of Hazardous Substance, Airhub has given all required notices to government authorities, copies of which have been provided to Parent. Airhub is not aware of any releases of Hazardous Substance at parcels of real property or facilities other than those presently or formerly owned, leased, operated or controlled by Airhub that could reasonably be expected to have an impact on the real property or facilities owned, leased, operated or controlled by Airhub. (c) The Airhub Disclosure Schedule lists all environmental reports, investigations, audits or similar environmental documents in the possession of Airhub with respect to the operations of, or real property owned, leased, operated or controlled by Airhub (whether conducted by or on behalf of Airhub or a third party and whether done at the initiative of Airhub or directed by a Governmental Entity or other third party). True and complete copies of each such document have been provided to Parent. (d) Airhub is not subject to, and is not reasonably expected to be subject to any material environmental liability, including without limitation liability arising out of the -11- utilization by Airhub of any transporter or facility used for treatment, recycling, storage or disposal. 3.16 Taxes. Airhub, and any combined, unitary or aggregate group for Tax (as defined in this Section 3.16) purposes of which Airhub is or has been a member have timely filed all Tax Returns (as defined in this Section 3.16) required to be filed by it taking into account extensions of due dates and the information included in those returns is true, correct and complete, have paid all Taxes shown thereon to be due and have provided adequate accruals in accordance with generally accepted accounting principles in its financial statements for any Taxes that have not been paid, whether shown as being due on any Tax returns. Airhub has withheld and paid over all Taxes required to have been withheld and paid over (including any estimated taxes), and has complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. Airhub does not have any liability for Taxes of any other entity or person under any federal, state, local or foreign law by reason of having been a member of any consolidated, combined or unitary group. Except as disclosed in the Airhub Disclosure Schedule: (a) no material claim for Taxes has become a Lien against the property of Airhub or is being asserted against Airhub other than Liens for Taxes not yet due and payable, (b) no audit of any Tax Return of Airhub is being conducted by a Tax authority, (c) no Tax authority is now asserting, or to the knowledge of Airhub, threatening to assert against Airhub any deficiency or claim for additional Taxes, and there are no requests for information from a Tax authority currently outstanding that could affect the Taxes of Airhub, (d) no extension of the statute of limitations on the assessment of any Taxes has been granted by Airhub and is currently in effect, (e) no action has been taken that would have the effect of deferring any liability for Taxes for Airhub from any period prior to the Effective Date to any period after the Effective Date, (f) Airhub is not (nor has it ever been) a party to any Tax sharing agreement, (g) Airhub has not disposed of any property that has been accounted for under the installment method, (h) Airhub is not a party to any interest rate swap, currency swap or similar transaction, (i) Airhub is not a member of any joint venture, partnership or other arrangement that is treated as a partnership for federal income tax purposes, (j) Airhub has not made any of the foregoing elections and is not required to apply any of the foregoing rules under any comparable state or local income tax provisions, (k) the transactions contemplated herein are not subject to the tax withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code, or of any other provision, and (l) Airhub is not required to treat any asset as owned by another person for federal income tax purposes or as tax exempt bond financed property or tax exempt use property within the meaning of Section 168 of the Code. Airhub will not be required to include any material adjustment in Taxable income for any Tax period (or portion thereof) ending after the Effective Time attributable to adjustments made prior to the Effective Time pursuant to Section 481 or 263A of the Code or any comparable provision of any state or foreign Tax law. The Airhub Disclosure Schedule contains accurate and complete information with respect to: (w) all material tax elections in effect with respect to Airhub, and (x) the current tax basis of the assets of Airhub. As used in this Agreement, "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, -12- license, withholding, payroll, employment, excise, severance, stamp, business and occupations, occupation, premium, property, environmental or windfall profit tax, custom, duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity (a "Tax authority") responsible for the imposition of any such tax (domestic or foreign), (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) as a result of any express or implied obligation to indemnify any other person. As used in this Agreement, "Tax Return" shall mean any return, statement, report or form (including, without limitation,) estimated Tax returns and reports, withholding Tax returns and reports and information reports and returns required to be filed with respect to Taxes. Airhub is in full compliance with all terms and conditions of any Tax exemptions or other Tax-sharing agreement or order of a foreign government and the consummation of the Merger shall not have any adverse effect on the continued validity and effectiveness of such Tax exemptions or other Tax-sharing agreement or order. 3.17 Tax Classification as a Partnership. At all times since its formation, Airhub has been properly classified as a "partnership" for federal and state income tax purposes. 3.18 Employee Benefit Plans. (a) The Airhub Disclosure Schedule lists, with respect to Airhub, and any trade or business (whether or not incorporated) which is treated as a single employer with Airhub (an "ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code: (i) all material employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in excess of $50,000, loans to officers and Airhub Members and any supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life insurance or accident insurance plans, programs or arrangements, (iii) all bonus, pension, profit sharing, savings, deferred compensation or incentive plans, programs or arrangements, (iv) other fringe or employee benefit plans, programs or arrangements that apply to senior management and that do not generally apply to all employees, and (v) any current or former employment or executive compensation or severance agreements, written or otherwise, as to which unsatisfied obligations of greater than $50,000 remain for the benefit of, or relating to, any present or former employee, consultant or director (collectively, the "Airhub Employee Plans"). (b) Airhub has furnished to Parent a copy of each of the Airhub Employee Plans and related plan documents (including trust documents, insurance policies or contracts, employee booklets, summary plan descriptions and other authorizing documents, and, to the extent still in its possession, any material employee communications relating thereto) and has, with respect to each Airhub Employee Plan which is subject to ERISA reporting requirements, provided copies of the Form 5500, including all schedules attached thereto and actuarial reports, -13- if any, filed for the last three Plan years. Any Airhub Employee Plan intended to be qualified under Sections 401(a) or 501(c)(9) of the Code is so qualified. Airhub has furnished Parent with the most recent Internal Revenue Service determination letter issued with respect to each such Airhub Employee Plan (and nothing has occurred since the issuance of each such letter which could reasonably be expected to cause the loss of the tax-qualified status of any Airhub Employee Plan subject to Code Section 401(a)), and all communications with respect to any plan described in Section 3.18(a) with the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation. (c) (i) None of the Airhub Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person; (ii) there have been no violations of applicable provisions of the Code or ERISA with respect to any Airhub Employee Plan that could reasonably be expected to have, in the aggregate, a Material Adverse Effect; (iii) each Airhub Employee Plan is in compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), except as would not have a Material Adverse Effect on Airhub, and Airhub and each ERISA Affiliate have no knowledge of any default or violation by any other party to any of the Airhub Employee Plans, which default or violation could reasonably be expected to have a Material Adverse Effect on Airhub; (iv) all material contributions required to be made by Airhub or any ERISA Affiliate to any Airhub Employee Plan have been made on or before its due dates and a reasonable amount has been accrued for contributions to each Airhub Employee Plan for the current plan years; and (v) neither Airhub no any ERISA Affiliate has ever maintained or otherwise incurred any obligation under any plan subject to Title IV of ERISA. No suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of Airhub, is threatened, against or with respect to any such Airhub Employee Plan, including any audit or inquiry by the Internal Revenue Service or United States Department of Labor. (d) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not: (i) entitle any current or former employee or other service provider or any Airhub Member, or any ERISA Affiliate to severance benefits or any other payment (including unemployment compensation, golden parachute, bonus or otherwise), (ii) increase any benefits otherwise payable or (iii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee, service provider or Airhub Director. (e) There has been no amendment to, written interpretation or announcement (whether or not written) by Airhub, or any ERISA Affiliate relating to, or change in participation or coverage under, any Airhub Employee Plan which would materially increase the expense of maintaining such Plan above the level of expense incurred with respect to that Plan for the most recent fiscal year included in the Annual Financial Statements. 3.19 Employee Matters. The Airhub Disclosure Schedule lists all employees of Airhub and the remuneration and benefits to which such employees are entitled. The Airhub Disclosure Schedule also lists all employment contracts and collective bargaining agreements, and all -14- pension, bonus, profit sharing, or other agreements or arrangements not otherwise described in Section 3.18 providing for employee remuneration or benefits to which Airhub is a party or by which it is bound; all of these contracts and arrangements are in full force and effect, and neither Airhub nor any other party is in default under them. There have been no claims of defaults and, to Airhub's knowledge there are no facts or conditions which if continued, or on notice, will result in a default under these contracts or arrangements. There is no pending or, to Airhub's knowledge, threatened labor dispute, strike, or work stoppage that would have a Material Adverse Effect on Airhub. Airhub is in compliance in all material respects with all current applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. There are no pending claims against Airhub under any workers compensation plan or policy or for long term disability. Airhub does not have any obligations under The Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") with respect to any former employees or qualifying beneficiaries thereunder. 3.20 Interested Party Transactions. Airhub is not indebted to any Airhub Member, interest holder, manager, officer, employee or agent of Airhub (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses), and no such person is indebted to Airhub, and there have been no other transactions of the type required to be disclosed pursuant to Items 402 and 404 of Regulation S-K under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. 3.21 Insurance. Airhub has policies of insurance and bonds of the type and in amounts customarily carried by persons conducting businesses or owning assets similar to those of Airhub. The Airhub Disclosure Schedule sets forth a true and complete listing of all such policies, including in each case applicable coverage limits, deductibles and policy expiration dates. There is no material claim pending under any of such policies or bonds as to which Airhub has received a denial, or, to Airhub's knowledge, as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and Airhub is otherwise in compliance in all material respects with the terms of such policies and bonds. Airhub has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. Each policy or bond is legal, valid, binding, enforceable and in full force and effect and will continue to be legal, valid, binding, enforceable and in full force and effect following the consummation of the transactions contemplated hereby. 3.22 Compliance With Laws. Airhub has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state, local or foreign statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for such violations or failures to comply as could not be reasonably expected to have a Material Adverse Effect on Airhub. 3.23 Major Customers. The Airhub Disclosure Schedule contains a list of the customers of Airhub for each of the two most recent fiscal years, that individually accounted for -15- more than five percent of the total dollar amount of net sales, showing the total dollar amount of net sales to each such customer during each such year. Airhub has no knowledge nor has it received notice from any of the customers listed on the Airhub Disclosure Schedule, that any of the customers listed in the Airhub Disclosure Schedule will not continue to be customers of Airhub after the Closing at substantially the same level of purchases. 3.24 Suppliers. As of the date hereof, no supplier of Airhub has indicated to Airhub that it will stop, or decrease the rate of, supplying materials, products or service to Airhub. Airhub has not knowingly breached, so as to provide a benefit to Airhub that was not intended by the parties, any agreement with, or engaged in any fraudulent conduct with respect to, any customer or supplier of Airhub. 3.25 Inventory. All inventories of raw materials, work-in process and finished goods (including all such in transit) of Airhub, together with related packaging materials (collectively, "Airhub Inventory"), reflected in the Interim Circuit Test Financial Statements (as defined in the Reorganization Agreement) consist of a quality and quantity usable and saleable in the ordinary course of business, have commercial values at least equal to the value shown on such balance sheet or are subject to purchase obligations by customers or suppliers at such value and is valued in accordance with generally accepted accounting principles at the lower of cost (on a first in first out basis) or market. All Airhub Inventory purchased since the date of such balance sheet consists of a quality and quantity usable and saleable in the ordinary course of business. Except as set forth in the Airhub Disclosure Schedule, all Airhub Inventory is located on premises owned or leased by Airhub. All work-in process contained in Airhub Inventory constitutes items in process of production pursuant to contracts or open orders taken in the ordinary course of business, from regular customers of Airhub with no recent history of credit problems with respect to Airhub; neither Airhub nor any such customer is in material breach of the terms of any obligation to the other, and, based on Airhub's knowledge or what Airhub reasonably should know, valid grounds exist for any counterclaim or set-off of amounts billable to such customers upon the completion of orders to which work-in-process relates. All work-in process is of a quality ordinarily produced in accordance with the requirements of the orders to which such work-in-process is identified, and will require no rework with respect to work performed prior to Closing. 3.26 Product Warranty and Product Liability. The Airhub Disclosure Schedule contains a true and complete copy of Airhub's standard warranty or warranties for its manufacturing services. There has been no variation from such warranties, except as set forth in the Airhub Disclosure Schedule. Except as stated therein, there are no warranties, commitments or obligations with respect to Airhub's performance of services. The Airhub Disclosure Schedule contains a description of all product liability claims and similar claims, actions, litigation and other proceedings relating to services rendered, which are presently pending or, to Airhub's knowledge, threatened, or which have been asserted or commenced against Airhub within the last five years, in which a party thereto either requests injunctive relief (whether temporary or permanent) or alleges damages (whether or not covered by insurance). There are no defects in Airhub's manufacturing services that would adversely affect performance of products Airhub -16- manufactures or create an unusual risk of injury to persons or property. Airhub's manufacturing services have been designed or performed so as to meet and comply with all governmental standards and specifications currently in effect, and have received all governmental approvals necessary to allow its performance. 3.27 Minute Books. The minute books of Airhub made available to Parent contain true and complete summaries of all meetings of members or actions by written consent since the time of formation of Airhub, and reflect all transactions referred to in such minutes accurately in all material respects. 3.28 Brokers' and Finders' Fees. Except for commissions or fees payable to Broadview Associates, LLC, Airhub has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 3.29 Disclosure. None of the representations or warranties made by Airhub herein or in the Airhub Disclosure Schedule, or in any certificate furnished by Airhub pursuant to this Agreement, when all such documents are read together in their entirety, contain or will contain at the Effective Time any untrue statement of a material fact, or omit or will omit at the Effective Time to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. Airhub has delivered or made available true and complete copies of each document that has been requested by Parent or its counsel in connection with their legal and accounting review of Airhub. 3.30 Reliance. The foregoing representations and warranties are being made by Airhub with the knowledge and expectation that Parent is placing reliance thereon. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CTLLC Except as disclosed in a document of even date herewith and delivered by CTLLC and the CTLLC Members to Parent prior to the execution and delivery of this Agreement and referring to the section number and subsection of the representations and warranties in this Agreement, subject to its subsequent revision from time to time prior to the Effective Time (but only with the prior written consent of Parent), (the "CTLLC Disclosure Schedule"), CTLLC and each of the CTLLC Members, jointly and severally, represent and warrant to Parent and LLC Acquisition as follows: 4.1 Organization, Standing and Power. CTLLC is a limited liability company duly organized and validly existing under the laws of the State of Florida, has the full power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in -17- which the failure to be so qualified and in good standing would have a Material Adverse Effect (as defined in Section 10.3) on CTLLC or its operations. CTLLC has delivered to Parent a true and correct copy of its Articles of Organization and Regulations, each as amended to date. Neither CTLLC nor any of its Members is in violation of any of the provisions of its Articles of Organization or Regulations or other equivalent organizational documents. The CTLLC Disclosure Schedule lists a complete and correct list of the CTLLC Members and the managers of CTLLC. 4.2 Capitalization; Unitholders. (a) There are currently two CTLLC Units owned by the CTLLC Members. There are no other outstanding CTLLC Units or other securities of CTLLC and no outstanding subscriptions, options, rights of first refusal, puts, calls, purchase or sale rights, exchangeable or convertible securities or other commitments or agreements of any nature relating to the CTLLC Units or other securities of CTLLC, or otherwise obligating CTLLC to issue, transfer, sell, purchase, redeem or otherwise acquire any such CTLLC Units or securities. There are not any options, warrants, calls, conversion rights, commitments, agreements, contracts, understandings, restrictions, arrangements or rights of any character to which CTLLC or any of the CTLLC Members is a party or by which CTLLC may be bound obligating CTLLC or any of the CTLLC Members to issue, deliver, or sell, or cause to be issued, delivered or sold, additional CTLLC Units or obligating CTLLC or any of the CTLLC Members to enter into such an option, right of first refusal, call, conversion right, commitment, agreement, contract, understanding, restriction, arrangement or right. There are no contracts, commitments or agreements relating to voting, purchase or sale of CTLLC Units (i) between or among CTLLC and any of the CTLLC Members or (ii) by or among any of the CTLLC Members. (b) Schedule 4.2 sets forth a true and complete list of the names of all owners of CTLLC Units, together with the number of CTLLC Units held by each such holder. Except as set forth in Schedule 4.2, each holder so listed is the record and the beneficial owner of all CTLLC Units so listed in its name, has the full power and authority, and has or will be fully empowered and authorized as of the Effective Time, to consummate the matters contemplated to be consummated by such holder herein. 4.3 Subsidiaries. CTLLC does not directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. 4.4 Due Authorization; No Conflict. (a) CTLLC has the full power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of CTLLC and the CTLLC Members. This Agreement has been duly executed and delivered by CTLLC -18- and constitutes the valid and binding obligation of CTLLC enforceable against CTLLC in accordance with its terms. The execution and delivery of this Agreement by CTLLC do not, and the consummation of the transactions contemplated hereby will not: (i) conflict with or violate any provision of the Articles of Organization or Regulations of CTLLC, (ii) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to CTLLC or the properties or assets of CTLLC or the CTLLC Units, or (iii) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of, or result in the creation of any Lien on any of the properties or assets of CTLLC or the CTLLC Units pursuant to, or require the consent or approval of any party to any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to CTLLC or any of its properties or assets, except, in the case of this clause (iii) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to have a Material Adverse Effect on CTLLC or materially affect the consummation of the transactions contemplated hereby. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to CTLLC in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than any consents, approvals, orders and registrations that, if not obtained or made, would not have a Material Adverse Effect on CTLLC or materially affect the consummation of transactions contemplated hereby. (b) Each CTLLC Member represents and warrants that such CTLLC Member is competent, and has the full power and authority, to execute, deliver and enter into this Agreement and to perform such Airhub Member's obligations, including the delivery of the CTLLC Units, hereunder and has taken all actions necessary to secure all approvals required in connection therewith. This Agreement has been duly executed and delivered by each CTLLC Member and constitutes the valid and binding obligation of such CTLLC Member enforceable against each CTLLC Member in accordance with its terms. The execution and delivery of this Agreement by the CTLLC Members does not, and the performance will not: (i) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to any CTLLC Member or the properties or assets of such CTLLC Member or (ii) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of, or result in the creation of any Lien on any of the properties or assets of such CTLLC Member pursuant to, or require the consent of any party to, any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to such CTLLC Member or any of its properties or assets, except, in the case of this clause (ii) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to materially affect the consummation of the transactions contemplated hereby. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to the CTLLC Member in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than any consents, approvals, orders and registrations -19- that, if not obtained or made, would not have a Material Adverse Effect on CTLLC or materially affect the consummation of transactions contemplated hereby. 4.5 Information Supplied. None of the information supplied or to be supplied by CTLLC, the CTLLC Members, or their auditors, attorneys, financial advisors, other consultants or advisors for inclusion in any document relating to the Transaction to be filed by Parent with the SEC will, at the time of the particular filing and any amendment or supplement thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading or necessary to correct any statement in any earlier filing with the SEC or any amendment or supplement thereto or any earlier communication to shareholders of Company with respect to the Transaction. 4.6 Absence of Certain Changes. Except as specifically permitted by this Agreement or as set forth in Schedule 4.6 of the CTLLC Disclosure Schedule, since December 31, 1996, CTLLC has conducted its business in the ordinary course consistent with past practice and there has not occurred: (i) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect on CTLLC; (ii) any action by or with respect to CTLLC that would have constituted a breach of any of the covenants contained in Section 6.1(b); or (iii) any of the following matters: (a) any material damage, destruction or loss (whether or not covered by insurance) to the properties and assets of CTLLC; (b) any Lien on any asset other than those otherwise permitted by this Agreement; (c) any labor dispute, litigation or governmental investigation affecting the business or financial condition of CTLLC; 4.7 Liabilities. Except as set forth in the Annual Financial Statements, the Interim Circuit Test Financial Statements, the CTLLC Disclosure Schedule and except for liabilities or obligations arising in the ordinary course and consistent with past practice and those incurred in connection herewith, CTLLC does not have any liability or obligation of any nature, whether due or to become due, fixed or contingent. 4.8 Accounts Receivable. All of the accounts receivable of CTLLC shown on the balance sheet included in the Interim CTLLC Financial Statements as of May 31, 1997 have been collected or are good and collectible in the aggregate recorded amounts thereof (less the allowance for doubtful accounts also appearing in such May 31, 1997 balance sheet and net of returns and payment discounts allowable by CTLLC's policies) and can reasonably be anticipated to be paid in full in the ordinary course of business consistent with past practice without outside collection efforts, subject to no counterclaims or setoffs. -20- 4.9 Litigation. There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of CTLLC, threatened against CTLLC or any of its assets and properties or any of its officers or directors (in their capacities as such) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on CTLLC. There is no judgment, decree or order against CTLLC, or, to the knowledge of CTLLC, any of its directors or officers (in their capacities as such), that could prevent consummation of the transactions contemplated by this Agreement, or that could reasonably be expected to have a Material Adverse Effect on CTLLC. 4.10 Restrictions on Business Activities. There is no material agreement, judgment, injunction, order or decree binding upon CTLLC which has or reasonably could be expected to have the effect of prohibiting or materially impairing any current or proposed business practice of CTLLC, any acquisition of property by CTLLC or the conduct of business by CTLLC as currently conducted or as proposed to be conducted by CTLLC. 4.11 Governmental Authorization. CTLLC has obtained each federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization that is necessary for CTLLC to own or lease, operate and use its respective assets and properties and to carry on business as currently conducted or as proposed to be conducted (collectively "CTLLC Authorizations"), CTLLC has performed and fulfilled its obligations under the CTLLC Authorizations, and all the CTLLC Authorizations are in full force and effect, except where the failure to obtain or have any of such CTLLC Authorizations could not reasonably be expected to have a Material Adverse Effect on CTLLC. 4.12 Contracts and Commitments. CTLLC is not a party to any oral or written (a)(i) obligation for borrowed money, (ii) obligation evidenced by bonds, debentures, notes or other similar instruments, (iii) obligation to pay the deferred purchase price of property or services (other than trade accounts arising in the ordinary course of business), (iv) obligation under capital leases, (v) debt of others secured by a Lien on its property, (vi) guaranty of liabilities or obligations of others, (vii) agreement under which CTLLC is obligated to make or expects to receive payments in excess of $50,000 or (viii) agreement granting any person a Lien on any of its properties or assets (except purchase money security interests created in the ordinary course of business consistent with past practice); (b)(i) employment agreement or collective bargaining agreement or (ii) agreements that limit the right of CTLLC, or any of its employees to compete in any line of business; or (c) agreement which, after giving effect to the transactions contemplated hereby, purports to restrict or bind Parent or any of its subsidiaries, other than Surviving Corporation, in any respect. True and complete copies of all agreements described in the CTLLC Disclosure Schedule or any other section thereto have been delivered to Parent. CTLLC has fulfilled, or taken all actions necessary to enable it to fulfill when due, its obligations under each of such agreements. All parties thereto have complied in all material respects with the provisions thereof and no party is in breach or violation of, or in default (with or without notice or lapse of time, or both) under such agreements. With respect to such -21- agreements, CTLLC has not received any notice of termination, cancellation or acceleration or any notice of breach, violation or default thereof. 4.13 Title to Property. CTLLC has good and marketable title to all of its respective properties and assets, or in the case of leased properties and assets, valid leasehold interests in such properties, free and clear of any Lien. The plants, property and equipment of CTLLC that are used in the operations of its business are in good operating condition and repair. All plants, property and equipment owned by CTLLC conform (to CTLLC's knowledge) with all applicable ordinances, regulations and zoning and other laws and do not encroach on the property of others, the failure to conform with which would have a Material Adverse Effect on CTLLC. There is no pending or, to CTLLC's knowledge, threatened change in any such ordinance, regulation or zoning or other law, and there is no pending or, to CTLLC's knowledge, threatened condemnation of any such building, machinery or equipment. The properties and assets of CTLLC include all rights, properties, interests in properties and assets necessary to permit Surviving Corporation to conduct its business as currently conducted. The CTLLC Disclosure Schedule identifies each parcel of real property owned or leased by CTLLC. 4.14 CTLLC Intellectual Property. (a) CTLLC owns, or is licensed or otherwise possesses legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, maskworks, net lists, schematics, technology, know-how, trade secrets, inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material ("CTLLC Intellectual Property") that are used in the business of CTLLC as currently conducted, except to the extent that the failure to have such rights has not and could not reasonably be expected to have a Material Adverse Effect on CTLLC. (b) The CTLLC Disclosure Schedule lists: (i) all patents and patent applications and all registered and unregistered trademarks, trade names and service marks, registered and unregistered copyrights, and maskworks, which CTLLC considers to be material to its business and included in the CTLLC Intellectual Property, including the jurisdictions in which each such CTLLC Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed, (ii) all material licenses, sublicenses and other agreements as to which CTLLC is a party and pursuant to which any person is authorized to use any CTLLC Intellectual Property, and (iii) all material licenses, sublicenses and other agreements as to which CTLLC is a party and pursuant to which CTLLC is authorized to use any third party patents, trademarks or copyrights, including software ("Third Party Intellectual Property Rights"), in each case which are incorporated in, are, or form a part of any product or service of CTLLC. (c) To the knowledge of CTLLC, there is no unauthorized use, disclosure, infringement or misappropriation of any CTLLC Intellectual Property rights of CTLLC, any trade secret material to CTLLC, or any Third Party Intellectual Property Right, by any third -22- party, including any employee or former employee of CTLLC. CTLLC has not entered into any agreement to indemnify any other person against any charge of infringement of any CTLLC Intellectual Property, other than indemnification provisions contained in purchase orders arising in the ordinary course of business, or contained in license agreements relating to CTLLC Intellectual Property licensed to CTLLC in the ordinary course of business. (d) CTLLC is not, and will not be as a result of the execution and delivery of this Agreement or the performance of CTLLC's obligations under this Agreement be, in breach of any license, sublicense or other agreement relating to the CTLLC Intellectual Property or Third Party Intellectual Property Rights, the breach of which could have a Material Adverse Effect on CTLLC. (e) All patents, registered trademarks, service marks and copyrights held by CTLLC are valid and subsisting. CTLLC (i) has not been sued in any suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary right of any third party or (ii) has not brought any action, suit or proceeding for infringement of CTLLC Intellectual Property or breach of any license or agreement involving CTLLC Intellectual Property against any third party. To the knowledge of CTLLC, the manufacture, marketing, licensing or sale of the products and services of CTLLC does not infringe any patent, trademark, service mark, copyright, trade secret or other proprietary right of any third party. (f) CTLLC has secured valid written assignments from all consultants and employees who contributed to the creation or development of CTLLC Intellectual Property of the rights to such contributions that CTLLC does not already own by operation of law. (g) CTLLC has taken all reasonable and appropriate steps to protect and preserve the confidentiality of all CTLLC Intellectual Property not otherwise protected by patents, or patent applications or copyright ("CTLLC Confidential Information"). All use, disclosure or appropriation of CTLLC Confidential Information owned by CTLLC by or to a third party has been pursuant to the terms of a written agreement with such third party. All use, disclosure or appropriation of CTLLC Confidential Information not owned by CTLLC has been pursuant to the terms of a written agreement with the owner of such CTLLC Confidential Information, or is otherwise lawful. 4.15 Environmental Matters. (a) CTLLC has complied with, and is in compliance with, all Environmental Laws (as defined in Section 3.15(a)) applicable to its current and prior business, properties and assets. CTLLC has, and CTLLC has provided to Parent, true and complete copies of, all permits, approvals, registrations, licenses and other authorizations required by any Governmental Entity pursuant to any Environmental Law applicable to its business, properties and assets, the absence of which would have a Material Adverse Effect on CTLLC and all such permits, approvals, registrations, licenses and other authorization are listed on the CTLLC Disclosure Schedule. -23- There is no pending or, to CTLLC's knowledge, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law to which CTLLC is a party or, to CTLLC's knowledge, threatened to be made a party. (b) There have been no releases or threatened releases of any Hazardous Substance in violation of Environmental Law at any parcel of real property or any facility currently or formerly owned, leased, operated or controlled by CTLLC. With respect to any such releases of or threatened releases of Hazardous Substance, CTLLC has given all required notices to government authorities, copies of which have been provided to Parent. CTLLC is not aware of any releases of Hazardous Substance at parcels of real property or facilities other than those presently or formerly owned, leased, operated or controlled by CTLLC that could reasonably be expected to have an impact on the real property or facilities owned, leased, operated or controlled by CTLLC. (c) The CTLLC Disclosure Schedule lists all environmental reports, investigations, audits or similar environmental documents in the possession of CTLLC with respect to the operations of, or real property owned, leased, operated or controlled by CTLLC (whether conducted by or on behalf of CTLLC or a third party and whether done at the initiative of CTLLC or directed by a Governmental Entity or other third party). True and complete copies of each such document have been provided to Parent. (d) CTLLC is not subject to, and is not reasonably expected to be subject to any material environmental liability, including without limitation liability arising out of the utilization by CTLLC of any transporter or facility used for treatment, recycling, storage or disposal. 4.16 Taxes. CTLLC, and any combined, unitary or aggregate group for Tax (as defined in Section 3.16) purposes of which CTLLC is or has been a member have timely filed all Tax Returns (as defined in this Section 4.16) required to be filed by it taking into account extensions of due dates and the information included in those returns is true, correct and complete, have paid all Taxes shown thereon to be due and have provided adequate accruals in accordance with generally accepted accounting principles in its financial statements for any Taxes that have not been paid, whether shown as being due on any Tax returns. CTLLC has withheld and paid over all Taxes required to have been withheld and paid over (including any estimated taxes), and has complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. CTLLC does not have any liability for Taxes of any other entity or person under any federal, state, local or foreign law by reason of having been a member of any consolidated, combined or unitary group. Except as disclosed in the CTLLC Disclosure Schedule: (a) no material claim for Taxes has become a Lien against the property of CTLLC or is being asserted against CTLLC other than Liens for Taxes not yet due and payable, (b) no audit of any Tax Return of CTLLC is being conducted by a Tax authority, (c) no Tax authority is now asserting, or to the knowledge of -24- CTLLC, threatening to assert against CTLLC any deficiency or claim for additional Taxes, and there are no requests for information from a Tax authority currently outstanding that could affect the Taxes of CTLLC, (d) no extension of the statute of limitations on the assessment of any Taxes has been granted by CTLLC and is currently in effect, (e) no action has been taken that would have the effect of deferring any liability for Taxes for CTLLC from any period prior to the Effective Date to any period after the Effective Date, (f) CTLLC is not (nor has it ever been) a party to any Tax sharing agreement, (g) CTLLC has not disposed of any property that has been accounted for under the installment method, (h) CTLLC is not a party to any interest rate swap, currency swap or similar transaction, (i) CTLLC is not a member of any joint venture, partnership or other arrangement that is treated as a partnership for federal income tax purposes, (j) CTLLC has not made any of the foregoing elections and is not required to apply any of the foregoing rules under any comparable state or local income tax provisions, (k) the transactions contemplated herein are not subject to the tax withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code, or of any other provision of law, and (l) CTLLC is not required to treat any asset as owned by another person for federal income tax purposes or as tax exempt bond financed property or tax exempt use property within the meaning of Section 168 of the Code. CTLLC will not be required to include any material adjustment in Taxable income for any Tax period (or portion thereof) ending after the Effective Time attributable to adjustments made prior to the Effective Time pursuant to Section 481 or 263A of the Code or any comparable provision of any state or foreign Tax law. The CTLLC Disclosure Schedule contains accurate and complete information with respect to: (w) all material tax elections in effect with respect to CTLLC, and (x) the current tax basis of the assets of CTLLC. CTLLC is in full compliance with all terms and conditions of any Tax exemptions or other Tax-sharing agreement or order of a foreign government and the consummation of the Merger shall not have any adverse effect on the continued validity and effectiveness of such Tax exemptions or other Tax-sharing agreement or order. 4.17 Tax Classification as a Partnership. At all times since its formation, CTLLC has been properly classified as a "partnership" for federal and state income tax purposes. 4.18 Employee Benefit Plans. (a) The CTLLC Disclosure Schedule lists, with respect to CTLLC, and any trade or business (whether or not incorporated) which is treated as an ERISA Affiliate within the meaning of Section 414(b), (c), (m) or (o) of the Code: (i) all material employee benefit plans (as defined in Section 3(3) of ERISA, (ii) each loan to a non-officer employee in excess of $50,000, loans to officers and CTLLC Members and any supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life insurance or accident insurance plans, programs or arrangements, (iii) all bonus, pension, profit sharing, savings, deferred compensation or incentive plans, programs or arrangements, (iv) other fringe or employee benefit plans, programs or arrangements that apply to senior management and that do not generally apply to all employees, and (v) any current or former employment or executive compensation or severance agreements, written or otherwise, as to which unsatisfied obligations of greater than $50,000 -25- remain for the benefit of, or relating to, any present or former employee, consultant or director (collectively, the "CTLLC Employee Plans"). (b) CTLLC has furnished to Parent a copy of each of the CTLLC Employee Plans and related plan documents (including trust documents, insurance policies or contracts, employee booklets, summary plan descriptions and other authorizing documents, and, to the extent still in its possession, any material employee communications relating thereto) and has, with respect to each CTLLC Employee Plan which is subject to ERISA reporting requirements, provided copies of the Form 5500, including all schedules attached thereto and actuarial reports, if any, filed for the last three Plan years. Any CTLLC Employee Plan intended to be qualified under Sections 401(a) or 501(c)(9) of the Code is so qualified. CTLLC has furnished Parent with the most recent Internal Revenue Service determination letter issued with respect to each such CTLLC Employee Plan (and nothing has occurred since the issuance of each such letter which could reasonably be expected to cause the loss of the tax-qualified status of any CTLLC Employee Plan subject to Code Section 401(a)), and all communications with respect to any plan described in Section 4.18(a) with the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation. (c) (i) None of the CTLLC Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person; (ii) there have been no violations of applicable provisions of the Code or ERISA with respect to any CTLLC Employee Plan that could reasonably be expected to have, in the aggregate, a Material Adverse Effect; (iii) each CTLLC Employee Plan is in compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), except as would not have a Material Adverse Effect on CTLLC, and CTLLC and each ERISA Affiliate have no knowledge of any default or violation by any other party to any of the CTLLC Employee Plans, which default or violation could reasonably be expected to have a Material Adverse Effect on CTLLC; (iv) all material contributions required to be made by CTLLC or any ERISA Affiliate to any CTLLC Employee Plan have been made on or before its due dates and a reasonable amount has been accrued for contributions to each CTLLC Employee Plan for the current plan years; and (v) neither CTLLC no any ERISA Affiliate has ever maintained or otherwise incurred any obligation under any plan subject to Title IV of ERISA. No suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of CTLLC, is threatened, against or with respect to any such CTLLC Employee Plan, including any audit or inquiry by the Internal Revenue Service or United States Department of Labor. (d) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not: (i) entitle any current or former employee or other service provider or any CTLLC Member, or any ERISA Affiliate to severance benefits or any other payment (including unemployment compensation, golden parachute, bonus or otherwise), (ii) increase any benefits otherwise payable or (iii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee, service provider or CTLLC Director. -26- (e) There has been no amendment to, written interpretation or announcement (whether or not written) by CTLLC, or any ERISA Affiliate relating to, or change in participation or coverage under, any CTLLC Employee Plan which would materially increase the expense of maintaining such Plan above the level of expense incurred with respect to that Plan for the most recent fiscal year included in the Annual Financial Statements. 4.19 Employee Matters. The CTLLC Disclosure Schedule lists all employees of CTLLC and the remuneration and benefits to which such employees are entitled. The CTLLC Disclosure Schedule also lists all employment contracts and collective bargaining agreements, and all pension, bonus, profit sharing, or other agreements or arrangements not otherwise described in Section 4.18 providing for employee remuneration or benefits to which CTLLC is a party or by which it is bound; all of these contracts and arrangements are in full force and effect, and neither CTLLC nor any other party is in default under them. There have been no claims of defaults and, to CTLLC's knowledge there are no facts or conditions which if continued, or on notice, will result in a default under these contracts or arrangements. There is no pending or, to CTLLC's knowledge, threatened labor dispute, strike, or work stoppage that would have a Material Adverse Effect on CTLLC. CTLLC is in compliance in all material respects with all current applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. There are no pending claims against CTLLC under any workers compensation plan or policy or for long term disability. CTLLC does not have any obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder. 4.20 Interested Party Transactions. CTLLC is not indebted to any CTLLC Member, CTLLC Unit Holder, manager, officer, employee or agent of CTLLC (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses), and no such person is indebted to CTLLC, and there have been no other transactions of the type required to be disclosed pursuant to Items 402 and 404 of Regulation S-K under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. 4.21 Insurance. CTLLC has policies of insurance and bonds of the type and in amounts customarily carried by persons conducting businesses or owning assets similar to those of CTLLC. The CTLLC Disclosure Schedule sets forth a true and complete listing of all such policies, including in each case applicable coverage limits, deductibles and policy expiration dates. There is no material claim pending under any of such policies or bonds as to which CTLLC has received a denial, or, to CTLLC's knowledge, as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and CTLLC is otherwise in compliance in all material respects with the terms of such policies and bonds. CTLLC has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. Each policy or bond is legal, valid, binding, enforceable and in full force and effect and will continue to be legal, valid, binding, enforceable and in full force and effect following the consummation of the transactions contemplated hereby. -27- 4.22 Compliance With Laws. CTLLC has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state, local or foreign statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for such violations or failures to comply as could not be reasonably expected to have a Material Adverse Effect on CTLLC. 4.23 Major Customers. The CTLLC Disclosure Schedule contains a list of the customers of CTLLC for each of the two most recent fiscal years, that individually accounted for more than five percent of the total dollar amount of net sales, showing the total dollar amount of net sales to each such customer during each such year. CTLLC has no knowledge nor has it received notice from any of the customers listed on the CTLLC Disclosure Schedule, that any of the customers listed in the CTLLC Disclosure Schedule will not continue to be customers of CTLLC after the Closing at substantially the same level of purchases. 4.24 Suppliers. As of the date hereof, no supplier of CTLLC has indicated to CTLLC that it will stop, or decrease the rate of, supplying materials, products or service to CTLLC. CTLLC has not knowingly breached, so as to provide a benefit to CTLLC that was not intended by the parties, any agreement with, or engaged in any fraudulent conduct with respect to, any customer or supplier of CTLLC. 4.25 Inventory. All inventories of raw materials, work-in process and finished goods (including all such in transit) of CTLLC, together with related packaging materials (collectively, "CTLLC Inventory"), reflected in the Interim Circuit Test Financial Statements consist of a quality and quantity usable and saleable in the ordinary course of business, have commercial values at least equal to the value shown on such balance sheet or are subject to purchase obligations by customers or suppliers at such value and is valued in accordance with generally accepted accounting principles at the lower of cost (on a first in first out basis) or market. All CTLLC Inventory purchased since the date of such balance sheet consists of a quality and quantity usable and saleable in the ordinary course of business. Except as set forth in the CTLLC Disclosure Schedule, all CTLLC Inventory is located on premises owned or leased by CTLLC. All work-in process contained in CTLLC Inventory constitutes items in process of production pursuant to contracts or open orders taken in the ordinary course of business, from regular customers of CTLLC with no recent history of credit problems with respect to CTLLC; neither CTLLC nor any such customer is in material breach of the terms of any obligation to the other, and, based on CTLLC's knowledge or what CTLLC reasonably should know, valid grounds exist for any counterclaim or set-off of amounts billable to such customers upon the completion of orders to which work-in-process relates. All work-in process is of a quality ordinarily produced in accordance with the requirements of the orders to which such work-in-process is identified, and will require no rework with respect to work performed prior to Closing. 4.26 Product Warranty and Product Liability. The CTLLC Disclosure Schedule contains a true and complete copy of CTLLC's standard warranty or warranties for its manufacturing services. There has been no variation from such warranties, except as set forth in the CTLLC Disclosure Schedule. Except as stated therein, there are no warranties, commitments -28- or obligations with respect to CTLLC's performance of services. The CTLLC Disclosure Schedule contains a description of all product liability claims and similar claims, actions, litigation and other proceedings relating to services rendered, which are presently pending or, to CTLLC's knowledge, threatened, or which have been asserted or commenced against CTLLC within the last five years, in which a party thereto either requests injunctive relief (whether temporary or permanent) or alleges damages (whether or not covered by insurance). There are no defects in CTLLC's manufacturing services that would adversely affect performance of products CTLLC manufactures or create an unusual risk of injury to persons or property. CTLLC's manufacturing services have been designed or performed so as to meet and comply with all governmental standards and specifications currently in effect, and have received all governmental approvals necessary to allow its performance. 4.27 Minute Books. The minute books of CTLLC made available to Parent contain true and complete summaries of all meetings of members or actions by written consent since the time of formation of CTLLC, and reflect all transactions referred to in such minutes accurately in all material respects. 4.28 Brokers' and Finders' Fees. Except for commissions or fees payable to Broadview Associates, LLC, CTLLC has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 4.29 Disclosure. None of the representations or warranties made by CTLLC herein or in the CTLLC Disclosure Schedule, or in any certificate furnished by CTLLC pursuant to this Agreement, when all such documents are read together in their entirety, contain or will contain at the Effective Time any untrue statement of a material fact, or omit or will omit at the Effective Time to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. CTLLC has delivered or made available true and complete copies of each document that has been requested by Parent or its counsel in connection with their legal and accounting review of CTLLC. 4.30 Reliance. The foregoing representations and warranties are being made by CTLLC with the knowledge and expectation that Parent and LLC Acquisition are placing reliance thereon. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND LLC ACQUISITION Except as disclosed in a document of even date herewith and delivered by Parent and LLC Acquisition to Airhub prior to the execution and delivery of this Agreement and referring to the sections and subsections of the representations and warranties in this Agreement (the "Parent Disclosure Schedule"), subject to its subsequent revision from time to time to the Effective Time -29- (but only with the prior written consent of Airhub) Parent and LLC Acquisition, jointly and severally, represent and warrant to Airhub, the Airhub Members, CTLLC and the CTLLC Members as follows: 5.1 Organization, Standing and Power. Each of Parent and LLC Acquisition is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has the full corporate power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a Material Adverse Effect on Parent. LLC Acquisition has not engaged in any business (other than certain organizational matters) since the date of its incorporation. 5.2 Due Authorization. Parent and LLC Acquisition have the full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and LLC Acquisition. This Agreement has been duly executed and delivered by Parent and LLC Acquisition and constitutes the valid and binding obligations of Parent and LLC Acquisition. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not: (a) conflict with or violate any provision of the Amended and Restated Articles of Incorporation or Amended and Restated Bylaws of Parent, as amended, the Articles of Incorporation or Bylaws of LLC Acquisition, or equivalent charter documents of any of Parent's subsidiaries, as amended, (b) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to Parent or any of its subsidiaries or the properties or assets of Parent or any of its subsidiaries, or (c) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to any right of termination, cancellation or acceleration of, or result in the creation of any Lien on any of the properties or assets of Parent or any of its subsidiaries pursuant to any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to Parent or any of its subsidiaries or their properties or assets, except, in the case of this clause (c) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to have a Material Adverse Effect on Parent. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent or any of its subsidiaries in connection with the execution and delivery of this Agreement by Parent and LLC Acquisition or the consummation by Parent and LLC Acquisition of the transactions contemplated hereby, except for: (i) the filing with the SEC and the National Association of Securities Dealers, Inc. ("NASD") of the Proxy Statement relating to the shareholders meeting to be held regarding the Transaction, (ii) the filing of a Form 8-K with the SEC and NASD within 15 days after the Closing Date, (iii) any filings as may be required under applicable state securities laws and the securities laws of any foreign country, and (iv) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, -30- would not have a Material Adverse Effect on Parent and would not prevent or materially alter or delay any of the transactions contemplated by this Agreement. 5.3 Absence of Certain Changes. Except as disclosed in the documents that have been filed with the SEC prior to the date hereof (the "Parent SEC Documents"), since March 31, 1996 (the "Parent Balance Sheet Date"), each of Parent and its subsidiaries has conducted its business in the ordinary course consistent with past practice and there has not occurred: (a) any change, event or condition (whether or not covered by insurance) that has resulted in, or might reasonably be expected to result in, a Material Adverse Effect on Parent or (b) any declaration, setting aside, or payment of a dividend or other distribution with respect to the shares of Parent, or any direct or indirect redemption, retirement, purchase or other acquisition by Parent of any of its capital stock. Except as disclosed in such Parent SEC Documents, Parent is not aware of any facts which are reasonably likely to have a Material Adverse Effect on Parent. 5.4 Compliance with Laws. Each of Parent and its subsidiaries has complied with, is not in violation of, and have not received any notices of violation with respect to, any federal, state, local or foreign statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for such violations or failures to comply as could not be reasonably expected to have a Material Adverse Effect on Parent. 5.5 Board Approval. The Boards of Directors of Parent and LLC Acquisition have (a) approved this Agreement, (b) determined that the transactions described by this Agreement are in the best interests of their respective shareholders and is on terms that are fair to such shareholders and (c) recommended that the shareholders of Parent and LLC Acquisition approve this Agreement and the transactions contemplated herein. 5.6 Brokers' and Finders' Fees. Parent has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 5.7 Reliance. The forgoing representations and warranties are being made by Parent and LLC Acquisition with the knowledge and expectation that Airhub, CTLLC and their respective members are placing reliance thereon. ARTICLE VI CONDUCT PRIOR TO EFFECTIVE TIME 6.1 Conduct of Business of Circuit Test. Prior to the Effective Time, except as expressly contemplated by this Agreement or as agreed in writing by Parent: (a) Affirmative Covenants. Airhub and CTLLC will: -31- (i) carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use its best efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the Effective Time; (ii) maintain insurance coverages and its books, accounts and records in the usual manner consistent with past practice; (iii) comply in all material respects with all laws and regulations of any Governmental Entity applicable to it; (iv) maintain and keep its plants, property and equipment in good repair, working order and condition, ordinary wear and tear excepted; (v) perform in all material respects its obligations under all contracts and commitments to which it is a party or by which it is bound; (vi) notify Parent of any event or occurrence not in the ordinary course of its business, and of any event which could have a Material Adverse Effect on Circuit Test; or (vii) pay, consistent with past practice, all accounts payable that arise in the ordinary course of its business. (b) Negative Covenants. Neither Airhub nor CTLLC will (and the Members of each entity will take such reasonable steps to prevent Airhub and CTLLC): (i) cause or permit any amendments to its Articles of Organization or Operating Agreement/Regulations (as applicable) or equivalent charter documents; (ii) transfer to any person or entity any rights to its Intellectual Property; (iii) enter into or amend any agreements pursuant to which any other party is granted exclusive marketing or other exclusive rights of any type or scope with respect to any of its products or technology; (iv) enter into any operating lease providing for payments in excess of an aggregate of $50,000; (v) adopt or amend any employee benefit plan, or hire any new manager level or officer level employee (other than in the ordinary course of business), pay any special bonus or special remuneration to any employee or manager, or increase the salaries or -32- wage rates of its employees, except as set forth in Section 6.1(b) of the Airhub and CTLLC Disclosure Schedule; (vi) commence a lawsuit other than (A) for the routine collection of bills, (B) in such cases where it in good faith determines that failure to commence suit would result in the material impairment of a valuable aspect of its business, provided that it consults with Parent prior to the filing of such a suit, or (C) for a breach of this Agreement; (vii) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, other than in the ordinary course of business consistent with past practice; (viii) other than in the ordinary course of business, make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, file any material Tax Return or any amendment to a material Tax Return, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (ix) revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (x) take, or agree in writing or otherwise to take, any other action that would make any of its representations or warranties contained in this Agreement untrue; (xi) delay in the payment of any trade or other payables other than in the ordinary course of business consistent with past practice; (xii) sell, lease or otherwise transfer or dispose of any property or asset, other than in the ordinary course of business consistent with past practice; (xiii) declare, set aside, or pay any distribution to the Airhub or CTLLC Members, or any direct or indirect redemption, retirement, purchase or other acquisition by Airhub or CTLLC, as applicable, of any of its securities, except as set forth on Schedule 6.1(b); (xiv) enter into commitment or transaction (including any capital expenditure, capital financing or sale of assets) for any amount that requires or could require payments in excess of $50,000 with respect to any individual contract or a series of related contracts; (xv) cancel any debt or waive or release of any right or claim by either Airhub or CTLLC, as applicable, other than in the ordinary course of business; -33- (xviii) make any payment, or discharge or satisfy any claim, liability or obligation by Airhub or CTLLC, as applicable, other than as reflected or reserved against in the Annual Financial Statements or the Interim Circuit Test Financial Statements or in the ordinary course of business consistent with past practice; (xix) issue or sell any Airhub or CTLLC Units, as applicable or other securities, rights of first refusal or other rights to acquire securities of Airhub or CTLLC, as applicable; (xx) incur any indebtedness for borrowed money, or guarantee or otherwise assume any such indebtedness, except as set forth in Schedule 6.1(b); (xxi) make any loan or advance (other than advances to employees in the ordinary course of business for travel and entertainment in accordance with past practice) to any person; (xxii ) increase in any salary, wage, benefit or other remuneration payable or to become payable to any current or former officer, manager, employee, independent contractor or agent, or pay or agree to pay any bonus or severance payment or arrangement made to, for or with any officer, manager, employee or agent, or provide for any supplemental retirement plan or other program or special remuneration for any officer, manager, employee or agent, except for normal salary or wage increases relating to periodic performance reviews and annual bonuses consistent with past practice; (xxiii) grant credit to any customer on terms or in amounts more favorable than those which have been extended to such customer in the past, any other change in the terms of any credit heretofore extended or any other change in the policies or practices with respect to the granting of credit; or (xiv) agree, whether in writing or otherwise, to do any of the foregoing. 6.2 No Solicitation; Acquisition Proposals. Subject to the fiduciary duties of the Airhub and CTLLC Members under applicable law, as advised by counsel, neither Airhub or CTLLC shall, directly or indirectly, through any Member, officer, manager, employee, representative, agent, financial advisor or otherwise, solicit, initiate or encourage inquiries or submission of proposals or offers from any person relating to any sale of all or any portion of the assets, business, properties of (other than immaterial or insubstantial assets or inventory in the ordinary course of business), or any equity interest in, Airhub or CTLLC, as applicable, or any business combination with Airhub or CTLLC, as applicable, whether by merger, purchase of assets, tender offer or otherwise or participate in any negotiation regarding, or furnishing to any other person any information with respect to, or otherwise cooperate in any way with, or assist in, facilitate or encourage, any effort or attempt by any other person to do or seek to do any of the foregoing. Each of Airhub and CTLLC shall use its best efforts to cause all confidential materials previously furnished to any third parties in connection with any of the foregoing to be -34- promptly returned to Airhub or CTLLC, as applicable, and shall cease any negotiations conducted in connection therewith or otherwise conducted with any such parties. 6.3 Conduct of Business of Parent. Prior to the Effective Time, except as expressly contemplated by this Agreement or as agreed in writing by Airhub and CTLLC: (a) Affirmative Covenants. Parent will, and will cause each of its subsidiaries to: (i) carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use its best efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the Effective Time; (ii) maintain insurance coverages and its books, accounts and records in the usual manner consistent with past practice; (iii) comply in all material respects with all laws and regulations of any Governmental Entity applicable to it; (iv) maintain and keep its plants, property and equipment in good repair, working order and condition, ordinary wear and tear excepted; (v) perform in all material respects its obligations under all contracts and commitments to which it is a party or by which it is bound; (vi) notify Airhub and CTLLC of any event or occurrence not in the ordinary course of its business, and of any event which could have a Material Adverse Effect on Parent; or (vii) pay, consistent with past practice, all accounts payable that arise in the ordinary course of its business except to the extent that the amount owing is being duly contested by Parent and such contest does not have a Material Adverse Effect on Parent and adequate reserves therefor are reflected on the Annual Financial Statements or the Interim Financial Statements for Parent. 6.4 Notice of Breach. Each party hereto shall promptly give written notice to the others upon becoming aware of the occurrence or, to its knowledge, impending or threatened occurrence, of any event that could cause or constitute a breach of any of its representations, warranties or covenants hereunder. -35- ARTICLE VII ADDITIONAL COVENANTS 7.1 Access to Information. Airhub and CTLLC and their respective Members shall afford Parent and its accountants, counsel and other representatives full access during normal business hours (and at such other times as the parties hereto agree) during the period prior to the Effective Time to: (a) all of Airhub's and CTLLC's properties, books, contracts, commitments and records, and (b) all other information concerning the business, properties and personnel of Airhub and CTLLC as Parent may reasonably request including information relating to the Members of Airhub and CTLLC. Airhub and CTLLC agree to provide to Parent and its accountants, counsel and other representatives copies of internal financial statements, business plans and budgets promptly upon request. Parent shall cooperate with Airhub and CTLLC with its due diligence review of Parent to the extent necessary to confirm the accuracy of Parent's and LLC Acquisition's representations and warranties. Subject to compliance with applicable law, from the date hereof until the Effective Time, each of Parent, Airhub, and CTLLC shall confer on a regular and frequent basis with one or more representatives of the other party to report and discuss material operational matters and the general status of ongoing operations. No information or knowledge obtained in any investigation pursuant to this Section 7.1 shall affect or be deemed to modify any term hereof, any representation or warranty contained herein or any obligations of the parties hereto, including their obligations to consummate the transactions contemplated hereby. 7.2 Confidentiality. The parties hereto will treat as confidential and hold in confidence all information concerning the businesses and affairs of Airhub and CTLLC and the business and affairs of Parent and LLC Acquisition ("Proprietary Information") that is not already generally available to the public and is not otherwise known to the party to whom it was disclosed on a non-confidential basis and refrain from using any such Proprietary Information except in furtherance of this Agreement or as required by law. 7.3 Publicity. None of Airhub, the Airhub Members, CTLLC and the CTLLC Members shall issue, or cause or permit to be issued, any press release or otherwise make any public statement regarding the terms of this Agreement or the transactions contemplated hereby without Parent's prior written consent. Parent and LLC Acquisition shall consult with Airhub and CTLLC before issuing any press release or otherwise making any public statement regarding the terms of this Agreement or the transactions contemplated hereby, provided, however, that any failure to consult with Airhub or CTLLC shall not constitute a breach of this Agreement to the extent such consultation would be impractical and such press release or statement is necessary to comply with law or other legal obligations of Parent or any of its subsidiaries or, upon the advice of counsel, is necessary or prudent to be made in order to avoid potential liability of Parent or any of its subsidiaries, directors, officers or employees under federal or state securities laws. -36- 7.4 Filings; Cooperation. Parent, Airhub, and CTLLC shall make, and cause their affiliates to make, all necessary filings with respect to the transactions contemplated hereby including any those required under the Securities Act and the Exchange Act and the rules and regulations thereunder including, without limitation the Proxy Statement to be prepared by Parent in connection with the Transaction, and under applicable Blue Sky or similar securities laws, and shall use all reasonable efforts to obtain any required approvals and clearances with respect thereto to (a) comply as promptly as practicable with all governmental requirements applicable to the transaction and (b) obtain promptly all necessary consents, approvals, orders and authorizations of, and all registrations, declarations and filings with, Governmental Entities and consents of third parties necessary for the consummation of the transactions contemplated hereby. 7.5 Earnout Agreement. At or prior to the Effective Time, Parent, the Airhub Members and the CTLLC Members will enter into agreements which will provide for certain contingent earnout payments. Such earnout payments, payable by the Parent to each Airhub and CTLLC Member on a pro rata basis, are described in an "Earnout Agreement", the form of which is attached as Exhibit 7.5 hereto. 7.6 Further Assurances. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable (other than actions that materially alter terms or materially reduce intended beneficiaries) under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals, to effect all necessary registrations and filings (including, but not limited to, filings with all applicable Governmental Entities) and to lift any injunction or other legal bar to any of the transactions contemplated hereby (and, in such case, to proceed with the Transfer as expeditiously as possible). (b) If, at any time after the Effective Time, any further action described in Section 7.6 (a) is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent and the former Airhub and CTLLC Members shall take such action. 7.7 Indemnification Agreement. The Parent, Airhub and CTLLC Members shall enter into an agreement regarding the indemnification of Parent and Merger Sub with respect to the representations, warranties and covenants of this Agreement (the "Indemnification Agreement"), which Indemnification Agreement shall be substantially in the form of Exhibit 8.3(h) attached to the Reorganization Agreement. 7.8 Deferred Compensation. The parties hereto agree that after the Effective Time Airhub and CTLLC shall be authorized to pay up to an aggregate of $500,000 to its employees as -37- "Deferred Compensation", less the amount of any Deferred Compensation paid by Circuit Test pursuant to Section 7.14 of the Reorganization Agreement. ARTICLE VIII CONDITIONS PRECEDENT 8.1 Conditions to Obligations of Each Party to Effect the LLC Transfer. The respective obligations of each party hereto to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by agreement of the parties hereto: (a) The Reorganization Agreement, and the transactions contemplated thereby shall have been approved and adopted by the requisite vote of the holders of capital stock of both Parent and Circuit Test, and the closing of such transactions shall have occurred contemporaneously with the Closing. (b) No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the LLC Transfer or materially altering the terms of the Transaction, nor any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing, shall be pending; nor shall there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the LLC Transfer or the Transaction that makes the consummation of the LLC Transfer illegal. (c) Each party to this Agreement shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for consummation of or in connection with the LLC Transfer and the several transactions contemplated hereby, including such approvals, waivers and consents as may be required under federal and state securities laws. 8.2 Additional Conditions to Obligations of Airhub to Effect the Airhub Transfer. The obligations of Airhub to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by Airhub: (a) Parent shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by them at or prior to the Effective Time and the representations and warranties of Parent in this Agreement shall be true and correct in all material respects (or in all respects in the case of any representation or warranty that is qualified by its terms by a reference to Material Adverse -38- Effect or otherwise the concept of materiality) when made and on and as of the Effective Time as though such representations and warranties were made on and as of such date. (b) Airhub shall have received a certificate executed on behalf of Parent by its Chief Financial Officer certifying that the conditions specified in Section 8.2(a) have been fulfilled. (c) Airhub shall have received a legal opinion of Holme Roberts & Owen LLP, counsel to Parent, substantially in the form attached hereto as Exhibit 8.2(c). 8.3 Additional Conditions to Obligations of CTLLC to Effect the CTLLC Transfer. The obligations of CTLLC to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by CTLLC: (a) Parent and LLC Acquisition shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by them at or prior to the Effective Time and the representations and warranties of Parent and LLC Acquisition in this Agreement shall be true and correct in all material respects (or in all respects in the case of any representation or warranty that is qualified by its terms by a reference to Material Adverse Effect or otherwise the concept of materiality) when made and on and as of the Effective Time as though such representations and warranties were made on and as of such date. (b) Airhub shall have received a certificate executed on behalf of Parent by its Chief Financial Officer certifying that the conditions specified in Section 8.3(a) have been fulfilled. (c) Airhub shall have received a legal opinion of Holme Roberts & Owen LLP, counsel to Parent, substantially in the form attached hereto as Exhibit 8.2(c). 8.4 Additional Conditions to the Obligations of Parent and LLC Acquisition to Effect the LLC Transfer. The obligations of Parent, with respect to the LLC Transfer, and of both Parent and LLC Acquisition, with respect to the CTLLC Transfer, to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, by Parent: (a) Airhub and the Airhub Members shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by them at or prior to the Effective Time and the representations and warranties of Airhub and the Airhub Members in this Agreement shall be true and correct in all material respects (or in all respects in the case of any representation or warranty that is qualified by its terms by a reference to Material Adverse Effect or otherwise by the concept of -39- materiality) when made and on and as of the Effective Time as though such representations and warranties were made at and as of such time. (b) Parent shall have received a certificate, dated as of the Effective Time, executed on behalf of Airhub by its Managing Member certifying that the conditions specified in Section 8.4(a) have been fulfilled. (c) CTLLC and the CTLLC Members shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by them at or prior to the Effective Time and the representations and warranties of Airhub and the CTLLC Members in this Agreement shall be true and correct in all material respects (or in all respects in the case of any representation or warranty that is qualified by its terms by a reference to Material Adverse Effect or otherwise by the concept of materiality) when made and on and as of the Effective Time as though such representations and warranties were made on and as of such time. (d) Parent and LLC Acquisition shall have received a certificate, dated as of the Effective Time, executed on behalf of CTLLC by its Managing Member certifying that the conditions specified in Section 8.4(c) have been fulfilled. (e) Parent shall have received a legal opinion from Burch, Porter & Johnson, PLLC, legal counsel to Airhub, substantially in form attached hereto as Exhibit 8.4(e). (f) There shall not have occurred any Material Adverse Effect on Airhub or CTLLC (including, specifically, any change to the CTI Group Closing Balance Sheet). (g) Parent shall have received such clearance certificate or shall have received or filed such other documents as may be required by any state taxing authority in order to relieve Parent of any obligaion to withold any portion of the consideration payable hereunder. (h) Airhub and CTLLC shall each deliver to Parent at Closing a "Certificate of Non-Foreign Status", under section 1445 of the Code, in a form reasonably satisfactory to Parent. ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 9.1 Termination. At any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the shareholders of Airhub and Parent, this Agreement may be terminated: (a) by mutual consent of all of the parties to this Agreement; -40- (b) by either Parent, Airhub or CTLLC, if, without fault of the terminating party, the Closing shall not have occurred on or before the later of (i) 30 days after the date the -41- Proxy Statement is mailed, but in no event later than November 30, 1997, or (ii) such later date as may be agreed upon in writing by the parties hereto; (c) by either Parent, CTLLC or Airhub if the any other party shall have breached its respective representations, warranties or other obligations under Articles IV through VII in any material respect and such breach continues for a period of 10 days after receipt of -42- notice of the breach from the non-breaching party hereto. 9.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub or Airhub or their respective officers, directors, shareholders or affiliates, except to the extent that such termination results from the breach by a party hereto of any of its representations, warranties or other obligations set forth in this Agreement; provided that, the provisions of this Section 9.2 and Section 7.2 (Confidentiality) and Article X (General Provisions) shall remain in full force and effect and survive any termination of this Agreement. 9.3 Amendment. The respective parties hereto may cause this Agreement to be amended at any time by execution of an instrument in writing signed on behalf of each of the parties hereto. 9.4 Extension; Waiver. At any time prior to the Effective Time any party (the "Waiving Party") hereto may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto (but only to the extent intended to benefit the Waiving Party), (b) waive any inaccuracies in the representations and warranties made to the Waiving Party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions for the benefit of the Waiving Party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE X GENERAL PROVISIONS 10.1 Survival of Representations and Warranties. The representations and warranties of Airhub Article III and CTLLC in Article IV shall survive the Closing and continue in full force and effect for two years after the Effective Time, except for those contained in Sections 3.16, 3.17, 4.16 and 4.17 shall survive the Closing and continue in full force and effect after the Effective Time for the applicable statute of limitations period. The Airhub Members and the CTLLC Members have agreed to indemnify Parent pursuant to the Indemnification Agreement, subject to the limitations contained therein. The representations and warranties of Parent and LLC Acquisition shall not survive the Closing. 10.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or sent via facsimile, in either case with confirmation of receipt, or shall be deemed given the business day after delivery of such notice (together with a proper request for overnight delivery) to a nationally recognized overnight -43- courier service that guarantees next-business-day delivery to the applicable destination, in each such case to the parties at the following address or at such other address for a party as shall be specified by notice hereunder: (a) if to Parent or Merger Sub, to: EFTC Corporation 7241 West 4th Street Greeley, Colorado 80634 Attention: Stuart W. Fuhlendorf Facsimile No.: (303) 892-4306 with a copy to: Holme Roberts & Owen LLP 1700 Lincoln, Suite 4100 Denver, Colorado 80203 Attention: Francis R. Wheeler Facsimile No.: (303) 866-0200 (b) if to Airhub or CTLLC, to: Circuit Test Group 4601 Cromwell Avenue Memphis, Tennessee 38118 Attention: Allen S. Braswell, Jr. Facsimile No.: (901) 795-5305 with a copy to: Burch, Porter & Johnson, PLLC 50 North Front Street Suite 800 Memphis, Tennessee 38103 Attention: Warner B. Rodda Facsimile No.: (901) 524-5026 10.3 Interpretation. When a reference is made in this Agreement to Exhibits, Articles or Sections, such reference shall be to an Exhibit, Article or Section to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been reasonably identified and delivered, or other reasonable access is provided to the party to whom such information is to be made available. The table of contents, index of defined terms and Article -44- and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, any reference to any event, change, condition or effect being "material" with respect to any entity or group of entities means any material event, change, condition or effect related to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, operations or results of operations of such entity or group of entities. In this Agreement, any reference to a "Material Adverse Effect" with respect to any entity or group of entities means any event, change or effect that is materially adverse to the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of such entity and its subsidiaries, taken as a whole. In this Agreement, any reference to a party's "knowledge" means such party's actual knowledge of a particular fact or matter after due and diligent inquiry of officers, directors and other employees of such party reasonably believed to have knowledge of such matters. Whenever the context may require, any pronoun shall be deemed include the corresponding masculine, feminine and neuter forms. 10.4 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. 10.5 Entire Agreement; Nonassignability; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the Exhibits, the Airhub Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof; (b) are not intended to confer upon any other person any rights or remedies hereunder; and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided. 10.6 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 10.7 Remedies Cumulative; No Waiver. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair -45- such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. 10.8 Governing Law. All aspects of this Agreement shall be governed by and construed in accordance with the laws of the State of Colorado (without regard to the principles of conflicts of law thereof). 10.9 Rules of Construction. The parties hereto acknowledge that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 10.10 Expenses. Whether or not the LLC Transfer is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, the fees and expenses of its advisers, accountants and legal counsel) shall be paid by the party incurring such expense. 10.11 Attorneys Fees. In the event of any proceeding to enforce this Agreement, the prevailing party shall be entitled to receive from the losing party all reasonable costs and expenses, including the reasonable fees of attorneys, accountants and other experts, incurred by the prevailing party in investigating and prosecuting (or defending) such action at trial or upon any appeal. -46- SIGNATURE PAGE--LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT IN WITNESS WHEREOF, Airhub, CTLLC, Parent, LLC Acquisition, the Airhub Members, and the CTI Members have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above. EFTC GROUP EFTC CORPORATION, a Colorado corporation By /s/ Its CTLLC ACQUISITION CORP., a Florida Corporation By: /s/ Its -47- Signature Page--LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT, continued AIRHUB GROUP AIRHUB SERVICES GROUP, L.C., INC. a Kentucky limited liability company By: /s/ Its AIRHUB MEMBERS: ALLEN S. BRASWELL, JR. REVOCABLE LIVING TRUST By /s/ Allen S. Braswell, Jr., Trustee CIRCUIT TEST INTERNATIONAL LIMITED PARTNERSHIP, a Florida limited Partnership By ALLEN S. BRASWELL, SR. LIVING TRUST Its General Partner /s/ Allen S. Braswell, Sr., Trustee -48- Signature Page--LIMITED LIABILITY COMPANY UNIT PURCHASE AGREEMENT, continued CTLLC GROUP CIRCUIT TEST INTERNATIONAL, L.C., a Florida limited liability company By /s/ Its CTLLC MEMBERS: ALLEN S. BRASWELL, JR. REVOCABLE LIVING TRUST By /s/ Allen S. Braswell, Jr., Trustee CIRCUIT TEST INTERNATIONAL LIMITED PARTNERSHIP, a Florida limited Partnership By ALLEN S. BRASWELL, SR. LIVING TRUST Its General Partner /s/ Allen S. Braswell, Sr., Trustee -49- EX-2.3 4 INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated September 30, 1997 is among the undersigned shareholders (each a "Shareholder") of Circuit Test, Inc., a Florida corporation ("Circuit Test"), the undersigned members (the "Airhub Members") of Airhub Services Group, L.C., a Kentucky limited liability company ("Airhub"), and the members (the "CTLLC Members" and, together with the Airhub Members and the Shareholders, the "Indemnitors") of Circuit Test International, L.C., a Florida limited liability company ("CTLLC"), and EFTC Corporation, a Colorado corporation ("Parent"). RECITALS A. Pursuant to the Agreement and Plan of Reorganization, dated as of July 9, 1997 (the "Reorganization Agreement") among Parent, CTI Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and Circuit Test, the Shareholders will receive shares of Common Stock, $.01 par value, of Parent ("Parent Common Stock") in exchange for their shares of Class A and Class B Common Stock, $.01 par value, of Circuit Test ("Circuit Test Common Stock"). In connection with the Reorganization Agreement, Parent has granted the Shareholders demand and piggyback registration rights pursuant to the Registration Rights Agreement of even date herewith (the "Registration Rights Agreement"). B. Pursuant to that certain Limited Liability Company Unit Purchase Agreement, dated as of July 9, 1997 (the "Purchase Agreement"), among Parent, CTLLC Acquisition Corp., a Florida corporation and wholly owned subsidiary of Parent ("LLC Acquisition"), Airhub, the Airhub Members, CTLLC and the CTLLC Members, all of the outstanding interests in Airhub and CTLLC will be acquired (the "Acquisition") and as a result of the Acquisition, all outstanding interests in Airhub will be acquired by Parent and all of outstanding interests in CTLLC will be acquired by Parent and LLC Acquisition. C. In consideration of Parent entering the Reorganization Agreement, the Purchase Agreement and the Registration Rights Agreement and to induce Parent to consummate the transactions contemplated thereby, the Indemnitors are making certain representations and warranties set forth herein and indemnifying Parent with respect to certain matters under the Reorganization Agreement. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and of the representations, covenants and agreements contained herein, the parties hereto agree as follows: 1 ARTICLE I REPRESENTATIONS AND WARRANTIES 1.1 Due Authorization; Enforceability; No Conflict. Each of the Indemnitors represents and warrants to Parent with respect to such Indemnitor that the Indemnitor has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and has taken all actions necessary to secure all approvals required in connection therewith. This Agreement has been duly executed and delivered by the Indemnitor and constitutes the valid and binding obligation of the Indemnitor enforceable against the Indemnitor in accordance with its terms. The execution and delivery of this Agreement does not, and the performance will not: (a) violate or conflict with any permit, order, license, decree, judgment, statute, law, ordinance, rule or regulation applicable to the Indemnitor or (b) result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of, or result in the creation of any mortgage, pledge, lien, encumbrance, charge, or other security interest (a "Lien") on any of the properties or assets of the Indemnitor pursuant to, or require the consent of any party to any mortgage, indenture, lease, contract or other agreement or instrument, bond, note, concession or franchise applicable to the Indemnitor or any of its properties or assets, except, in the case of this clause (c) only, where such conflict, violation, default, termination, cancellation or acceleration would not have and could not reasonably be expected to prevent the consummation of the transactions contemplated hereby. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to the Indemnitor in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated by the Reorganization Agreement and the Purchase Agreement, including the payment and performance of all payment and other obligations hereunder. 1.2 Other Representations and Warranties of Circuit Test Shareholders. Each of the Shareholders represents and warrants to Parent with respect to such Shareholder that the representations and warranties in Sections 1 of the Voting Agreement, dated as of July 9, 1997, among the Shareholders and Parent are true and correct in all respects. The Shareholder has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges (except as specified in Section 4.28 of the Reorganization Agreement) in connection with this Agreement or any transaction contemplated by the Reorganization Agreement and the Purchase Agreement, including the payment and performance of all payment and other obligations hereunder. -2- ARTICLE II SURVIVAL; INDEMNIFICATION 2.1 Indemnification. (a) In the event (i) Circuit Test breaches a covenant, or if any representation or warranty of Circuit Test in the Reorganization Agreement is inaccurate (and, if there is an applicable survival period pursuant to Section 11.1 (Survival of Representations and Warranties) of the Reorganization Agreement, provided that Parent makes a written claim for indemnification against any Indemnitor within the applicable survival period), (ii) Airhub, any Airhub Member, CTLLC or any CTLLC Member breaches a covenant, or if any representation or warranty in the Purchase Agreement is inaccurate (and, if there is an applicable survival period pursuant to Section 10.1 (Survival of Representations and Warranties) of the Purchase Agreement, provided that Parent makes a written claim for indemnification against any Indemnitor within the applicable survival period), then each Indemnitor shall indemnify and hold Parent harmless from and against such Indemnitor's Pro Rata Share (as defined in Section 2.1(b)) of any action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, injunction, judgment, order, decree, ruling, damage, dues, penalty, fines, costs, amounts paid in settlement, liabilities, obligations, Taxes (as defined in Section 2.1(b)), Liens, losses, expenses and fees, including court costs and attorneys' fees and expenses (collectively, "Losses") that Parent or any of its subsidiaries may suffer through and after the date of the claim for indemnification (including any Losses Parent or its subsidiaries suffer after the end of any applicable survival period) caused by or arising out of any such breach or inaccuracy; except that the Indemnitors will not have any obligation to indemnify Parent from and against any Losses caused by or arising out of any such breach or inaccuracy: (i) until Parent or its subsidiaries have suffered Losses by reason thereof in excess of a $100,000 aggregate threshold (at which time the Indemnitors will indemnify Parent relating back to the first dollar of such Losses and any further such Losses) or thereafter, and (ii) to the extent the Losses Parent has suffered by reason of all such breaches and inaccuracies exceeds a $2,500,000 aggregate ceiling (after which the Indemnitors will have no obligation to indemnify Parent from and against any further such Losses) unless such Losses are caused by or arise out of any breach or inaccuracy of which any Indemnitor had actual knowledge at the time of the related agreement or representation was made or deemed made, in which case there shall be no limitation on the aggregate liability of the Indemnitors hereunder. (b) The "Indemnitor's Pro Rata Share" means that fraction equal to the amount of Consideration received by the Indemnitor over the Total Consideration, where -3- (i) "Consideration" with respect to (A) any Shareholder means the number of shares of Parent Common Stock received by such Shareholder pursuant to the Reorganization Agreement times the $7.80, plus the amount of cash, if any, received by such Shareholder pursuant to the Reorganization Agreement and, (B) any Airhub Member or CTLLC Member means such member's ratable portion (determined by reference to such members proportionate ownership of Airhub and CTLLC taken together) of the aggregate purchase price payable by Parent to the Airhub Members and the CTLLC Members pursuant to the Purchase Agreement, and (ii) "Total Consideration" means the sum of the Consideration received by all Indemnitors. (c) If Parent has a claim for Losses pursuant to this Article II that does not involve a Third Party Claim (as defined in Section 2.2(a)), Parent shall notify the Representative (as defined in Section 2.3(a)) of such claim, specifying the nature of the Losses and the amount or estimated amount thereof if feasible. If the Representative does not notify Parent within 30 days from the date it receives such notice that the Representative disputes such claim, the amount of such claim shall be conclusively deemed a liability of the Indemnitors under this Agreement. Nothing herein shall be deemed to prevent Parent from making a claim for potential or contingent Losses. 2.2 Third Party Claims. (a) If any third party notifies Parent with respect to any matter that may give rise to a claim for indemnification against any Indemnitor under this Article II (a "Third Party Claim"), then Parent shall promptly notify the Representative thereof in writing (a "Notice of Claim"). The Representative will have the right to assume and thereafter conduct the defense of the Third Party Claim with counsel of the Representative's choice reasonably satisfactory to Parent so long as: (i) the Representative notifies Parent in writing within ten (10) days after Parent has given the Notice of Claim that the Indemnitors will indemnify the Parent from and against the entirety of any Losses Parent may suffer caused by or arising from the Third Party Claim, (ii) the Representative provides Parent with evidence reasonably acceptable to Parent that the Indemnitors will have the financial resources to defend against the Third Party Claim and fulfill their indemnification obligations hereunder, (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (iv) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of Parent, likely to establish a precedent, custom or practice materially adverse to the continuing business, operations, assets, prospects or interests of Parent or its subsidiaries, and (v) the Representative conducts the defense of the Third Party Claim actively and diligently. In the event of a Third Party Claim that seeks an injunction or other equitable relief, the Representative will be entitled to participate with Parent in the defense of such Third Party Claim. (b) While the Representative is conducting the defense of the Third Party Claim: (i) Parent may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (ii) Parent will not consent to the entry of any judgment or -4- enter into any settlement with respect to the Third Party Claim without the prior written consent of the Representative, and (iii) the Representative will not consent to the entry of any judgment or enter any settlement with respect to the Third Party Claim without the prior written consent of Parent. (c) If any condition under Section 2.2(a) is or becomes unsatisfied: (i) Parent may defend against the Third Party Claim in any manner it reasonably may deem appropriate, (ii) Parent may consent to entry of any judgment or enter into any settlement that is consented to by the Representative or to which the Indemnitors could not reasonably object, (iii) each Indemnitor will reimburse Parent the Indemnitor's Pro Rata Share promptly and upon request of Parent for the costs of defending against the Third Party Claim, including reasonable attorneys' fees and expenses, and (iv) the Indemnitors will remain responsible for any Losses Parent may suffer caused by or arising from the Third Party Claim to the fullest extent provided by this Article II. The Indemnitors and the Representative agree to consent to any entry of judgment or the entering into of any settlement under clause (ii) above reasonably appropriate under the circumstances. 2.3 Representative. (a) To the fullest extent permitted by law, each Indemnitor hereby irrevocably constitutes and appoints Allen S. Braswell, Jr. as such Indemnitor's attorney-in-fact and legal and judicial representative (the "Representative"), with full power of substitution, for the purposes of: (i) receiving all notices and communications directed to any Indemnitor under this Agreement and taking any action (or determining to take no action) with respect thereto as the Representative may deem appropriate, including the settlement or compromise on behalf of any Indemnitor of any Third Party Claim or Losses, and (ii) executing and delivering on behalf of any Indemnitor all instruments and documents of every kind the Representative may deem necessary or advisable to accomplish the foregoing. Each Indemnitor hereby ratifies and confirms, as the Indemnitor's own act, all that the Representative shall do or cause to be done pursuant to this Agreement. (b) If the Representative resigns, the resigning Representative shall appoint as successor either another Indemnitor or a third party reasonably acceptable to Parent (a "Successor Representative"). The resigning Representative's resignation shall not be effective until a Successor Representative shall have agreed in writing to accept such appointment. If the Representative should die or become incapacitated, a Successor Representative shall be appointed within 30 days of the Representative's death or incapacity by Indemnitors that received a majority of Total Consideration. Upon acceptance by a Successor Representative of the Successor Representative's appointment, the appointment shall be final and binding on the Indemnitors. (c) Each Indemnitor irrevocably agrees that with respect to any Third Party Claim or any claim for indemnification hereunder, any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon the Indemnitor if delivered by registered or certified mail, postage prepaid with return receipt -5- requested to the Representative at such person's address set forth in Section 4.1, whom each Indemnitor irrevocably appoints as its authorized agent for service of process. (d) The death or incapacity of any Indemnitor shall not terminate the authority and agency of the Representative. (e) Each Indemnitor hereby agrees to indemnify the Representative and to hold the Representative harmless against any loss, liability or expense incurred without negligent conduct or bad faith on the part of the Representative and arising out of or in connection with his duties as Representative, including court costs and attorneys' fees and expenses incurred by the Representative in defending against any Third Party Claim or Losses in connection with this Agreement. 2.4 Payment Terms. If all or part of any indemnification obligation under this Agreement is not paid when due, the Indemnitors shall pay Parent interest thereon, payable on demand, for each day from the date the amount became due until the date of payment in full at a rate of 10% per annum. 2.5 Other Indemnification Matters. Parent's claims pursuant to the foregoing indemnification provisions shall not be limited by any examination made by or on behalf of Parent or its subsidiaries, the knowledge of Parent or it subsidiaries or any of their respective officers, directors, stockholders, employees or agents, or the acceptance by Parent of any certificate or opinion. ARTICLE III DISPUTE RESOLUTION 3.1 Remedies. Parent may proceed to enforce the obligations of the Indemnitors hereunder in any court or other tribunal by an action at law, suit in equity or other appropriate proceedings, whether for damages, for the specific performance of any term hereof, or otherwise, or in aid of the exercise of any power granted hereby or by law. In the event of any such proceeding, the prevailing party in such proceeding shall be entitled to receive from the losing party all reasonable costs and expenses, including the reasonable fees of attorneys, accountants, and other experts, incurred by the prevailing party in investigating and prosecuting (or defending) such action at trial or upon any appeal. The amount of any such costs or expenses awarded hereunder shall not be subject to the limitations on liability contained in Section 2.1. 3.2 Jurisdiction and Consent to Suit. Any action, suit or proceeding by Parent to enforce this Agreement may be brought in the District Court in and for the City and County of Denver, State of Colorado, in the United States District Court for the District of Colorado or in any other court in which venue and jurisdiction are proper. Each Indemnitor and the -6- Representative consent and submit to the non-exclusive jurisdiction in personam of any such court in respect of any such action, suit or proceeding. ARTICLE IV GENERAL PROVISIONS 4.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail, return receipt requested, or sent via facsimile, with confirmation of receipt, to the parties at the following address or at such other address for a party as shall be specified by notice hereunder: (a) if to Parent, to: EFTC Corporation 7241 West 4th Street Greeley, Colorado 80634 Attention: Stuart W. Fuhlendorf Facsimile No.: (303) 892-4306 with a copy to: Holme Roberts & Owen LLP 1700 Lincoln, Suite 4100 Denver, Colorado 80203 Attention: Francis R. Wheeler Facsimile No.: (303) 866 0200 (b) if to the Indemnitors, to the Representative: Allen S. Braswell, Jr. 4601 Cromwell Avenue Memphis, Tennessee 38118 Facsimile No.: (901) 795-5305 with a copy to: Burch, Porter & Johnson, PLLC 50 North Front Street Suite 800 Memphis, Tennessee 38103 Attention: Warner B. Rodda Facsimile No.: (901) 524-5026 -7- 4.2 Interpretation. When a reference is made in this Agreement to Articles or Sections, such reference shall be to an Article or Section to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, any reference to any event, change, condition or effect being "material" with respect to any entity or group of entities means any material event, change, condition or effect related to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, operations or results of operations of such entity or group of entities. In this Agreement, any reference to a party's "knowledge" means such party's actual knowledge of a particular fact or matter after due and diligent inquiry of officers, directors and other employees of such party reasonably believed to have knowledge of such matters. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms, and with respect to the parties shall include where the context does not prohibit, their respective permitted successors and assigns. 4.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. 4.4 Entire Agreement; Nonassignability; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto: (a) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof; (b) are not intended to confer upon any other person any rights or remedies hereunder; and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided. This Agreement will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed. 4.5 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 4.6 Remedies Cumulative; No Waiver. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the -8- 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. -9- SIGNATURE PAGE-INDEMNIFICATION AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Indemnification Agreement to be executed and delivered as of the date first written above. Parent: EFTC CORPORATION, a Colorado corporation By: /s/ Shareholders: Allen S. Braswell, Sr. Grantor Retained Income Trust u/a/d 12/31/89 By /s/ Allen S. Braswell, Jr., Trustee By /s/ Bruce A. Braswell, Trustee /s/ Allen S. Braswell, Jr. /s/ Alma L. Braswell -10- SIGNATURE PAGE-INDEMNIFICATION AGREEMENT Continued Airhub Members: ALLEN S. BRASWELL, JR. REVOCABLE LIVING TRUST By /s/ Allen S. Braswell, Jr., Trustee CIRCUIT TEST INTERNATIONAL LIMITED PARTNERSHIP, a Florida limited Partnership By ALLEN S. BRASWELL, SR. LIVING TRUST Its General Partner /s/ Allen S. Braswell, Sr., Trustee CTLLC Members: ALLEN S. BRASWELL, JR. REVOCABLE LIVING TRUST By /s/ Allen S. Braswell, Jr., Trustee CIRCUIT TEST INTERNATIONAL LIMITED PARTNERSHIP, a Florida limited Partnership By ALLEN S. BRASWELL, SR. LIVING TRUST Its General Partner /s/ Allen S. Braswell, Sr., Trustee -11- EX-2.4 5 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of September 30, 1997, is among EFTC CORPORATION, a Colorado corporation ("Parent"), and the undersigned SHAREHOLDERS (individually a "Shareholder" and together, the "Shareholders") of Parent. RECITALS A. Parent, CTI Acquisition Corp., a Florida corporation ("Merger Sub"), and Circuit Test, Inc., a Florida corporation ("Circuit Test"), have entered into an Agreement and Plan of Reorganization, dated July 9, 1997 (the "Reorganization Agreement"), pursuant to which Circuit Test was merged with and into Merger Sub and the Shareholders received in consideration therefor, among other things, shares of Common Stock, $.01 par value, of Parent ("Parent Common Stock"). B. This Agreement is executed and delivered pursuant to Section 8.2(d) of the Reorganization Agreement and sets forth the terms on which the Shareholders may require Parent to register, under the Securities Act (as defined in Article I), securities of Parent owned by them. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following terms shall have the following meanings as used in this Agreement: 1.1 "Agreement" has the meaning set forth in the opening statement of this Agreement. 1.2 "Circuit Test" has the meaning set forth in Recital A. 1.3 "Demand Registration" has the meaning set forth in Section 2.1. 1.4 "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder. 1.5 "Indemnified Party" has the meaning set forth in Section 6.2. 1.6 "Indemnifying Party" has the meaning set forth in Section 6.2. -1- 1.7 "Losses" has the meaning set forth in Section 6.1. 1.8 "Reorganization Agreement" has the meaning set forth in Recital A. 1.9 "Merger Sub" has the meaning set forth in Recital A. 1.10 "Parent" has the meaning set forth in the opening statement of this Agreement. 1.11 "Parent Common Stock" has the meaning set forth in Recital A. 1.12 "Person" means any individual, corporation, partnership, limited liability company, trust, organization, association, governmental body or agency. 1.13 "Piggyback Registration" has the meaning set forth in Section 3.1. 1.14 "Pro Rata Share" has the meaning set forth in Section 6.2. 1.15 "Registerable Securities" means any outstanding shares of Parent Common Stock held by the Shareholders on the date hereof and any securities issued or issuable with respect thereto by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, reclassification or other reorganization. A Registerable Security shall cease to be a Registerable Security when: (a) a Registration Statement with respect to the sale of such security shall have become effective under the Securities Act and such security shall have been disposed of in accordance with such Registration Statement; (b) such security shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act; (c) such security shall have been otherwise transferred, new certificates for which, not bearing a legend restricting further transfer, shall have been delivered by Parent and subsequent disposition of the security shall not require registration or qualification of such security under the Securities Act or any similar state law then in force, or (d) such security shall have ceased to be outstanding. 1.16 "Registration Expenses" means all expenses incident to Parent's performance of or compliance with this Agreement, including, all registration and filing fees, fees and expenses of compliance with federal and state securities laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for Parent and all independent certified public accountants, underwriters (excluding underwriting discounts, commissions spreads or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals), and other Persons retained by Parent for the purpose of fulfilling its obligations under this Agreement. 1.17 "Registration Statement" means any registration statement or comparable document under Section 5 of the Securities Act through which a public sale or disposition of Registrable Securities may be registered. -2- 1.18 "SEC" means the Securities and Exchange Commission or any other federal agency administering the Securities Act. 1.19 "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of promulgated thereunder. 1.20 "Shareholder" and the "Shareholders" have the meanings set forth in the opening statement of this Agreement. ARTICLE II DEMAND REGISTRATION 2.1 Request for Registration. At any time beginning one year after the date hereof, the holders of a majority of the then outstanding Registrable Securities, may request registration under the Securities Act of all or part of their Registrable Securities (the "Initial Demand"). In addition, at any time eighteen (18) months after the effectiveness of the Registration Statement filed with respect to the Initial Demand, the holders of a majority of the then outstanding Registrable Securities, may request an additional registration under the Securities Act of all or part of their Registrable Securities not registered pursuant to the Initial Demand (the "Secondary Demand"). In either instance, such holders may exercise their right under this Section 2.1 by giving a written request to Parent signed by them specifying the number of shares of Registrable Securities requested to be included and the intended method of disposition thereof. Within ten days after receipt of the request, Parent will give written notice of the request to all other holders of Registrable Securities and will include in such registration all Registrable Securities for which Parent has received written requests for inclusion within fifteen (15) days after Parent's notice is given to the holders pursuant to this Section 2.1, so long as the aggregate amount of Registrable Securities that the holders request be included in each such registration equals at least 40% of all Registrable Securities and have a fair market value at the time of the request equal to $5,000,000 (a "Demand Registration"). 2.2 Underwritten Offerings; Priority on Demand Registrations. If the holders of a majority of the Registrable Securities requested to be included so elect, the Demand Registration may be in the form of an underwritten offering. If the Demand Registration is an underwritten offering, Parent shall select the managing underwriters for the offering and Parent may elect to include other securities in such registration on the same terms and conditions as the Registrable Securities to be included in such registration; provided however, if the managing underwriters advise Parent in writing that in their opinion the number of Registrable Securities and other securities to be included in the registration exceeds the number that can be sold in such offering at a price satisfactory to the holders of a majority of the Registrable Securities requested to be included in such registration, Parent will give priority for inclusion in such registration: (a) first, to the Registrable Securities requested to be included in such registration (or to such lesser number of Registrable Securities that is equal to the number that, in the opinion of the managing -3- underwriters, can be sold, pro rata among the holders thereof based on the number of Registrable Securities owned), (b) second, to the securities, if any, requested to be included in such registration pursuant to warrants or options issued to the representatives of the underwriters with respect thereto; (c) third, to the securities Parent proposes to include in such registration; (d) fourth, to the securities that Parent is otherwise obligated to include in such registration; and (e) fifth, to other securities that Parent may desire to include in such registration. 2.3 Restrictions on Demand Registration. Notwithstanding anything in this Article II to the contrary, if Parent shall furnish to the holders of Registrable Securities requesting registration a certificate signed by the Chief Executive Officer or President of Parent stating that, in the good faith reasonable judgment of the Board of Directors of Parent, such registration of Registrable Securities would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving Parent or any of its wholly-owned subsidiaries or would otherwise have a material adverse effect on Parent or the selling holders if undertaken at the time requested, Parent shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the holders of Registrable Securities; provided, however, that Parent may not utilize this right more than once in any twelve (12) month period. 2.4 Expenses. Except as otherwise provided in this Article II, Parent will pay all Registration Expenses in connection with a Demand Registration. In a Demand Registration that is an underwritten offering, all underwriting discounts, commissions spreads or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the Registrable Securities being offered thereby will be paid by the holders thereof pro rata based on the number of Registrable Securities that each such holder has requested be registered. ARTICLE III PIGGYBACK REGISTRATION 3.1 Right to Piggyback. Whenever Parent proposes to register any of its securities under the Securities Act (other than as (a) a Demand Registration; (b) a registration of securities in connection with a merger, an acquisition, an exchange offer, other business combination or an employee benefit plan maintained by Parent or its subsidiaries; or (c) a registration of securities on Form S-4 or S-8 or any successor or similar form) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), Parent will give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and will include in such registration, subject to Section 3.3, all Registrable Securities with respect to which Parent has received written requests for Piggyback Registration within fifteen (15) days after Parent's notice is given to the holders of Registrable Securities. -4- 3.2 Piggyback Expenses. Parent will pay all Registration Expenses in connection with a Piggyback Registration. In a Piggyback Registration that is an underwritten offering, all underwriting discounts, commissions spreads or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the Registrable Securities being offered thereby will be paid by the holders thereof pro rata based on the number of Registrable Securities that each such holder has requested be registered. 3.3 Restrictions on Piggyback Registrations. Notwithstanding anything to the contrary in this Article III: (a) if, at any time after receiving such requests and prior to the effective date of the Registration Statement filed in connection with the Piggyback Registration, Parent for any reason decides not to register securities of Parent, Parent will give written notice of its decision to the holders of Registrable Securities and thereupon be relieved of its obligation to register any Registrable Securities in connection with such registration; and (b) if Parent determines for any reason to delay a Piggyback Registration, Parent may do so by giving written notice of its decision to the holders of Registrable Securities. 3.4 Priority on Underwritten Primary Registrations. If a Piggyback Registration is an underwritten offering initiated on behalf of Parent and the managing underwriters advise Parent in writing that in their opinion the number of securities to be included in such registration exceeds the number that can be sold in such offering at a price satisfactory to Parent, Parent will give priority for inclusion in such registration: (a) first, to the securities Parent proposes to include in such registration; (b) second, to the securities, if any, requested to be included in such registration pursuant to warrants or options issued to the representatives of the underwriters with respect thereto; (c) third, securities that Parent has become, prior to the date hereof, otherwise obligated to include in such registration; (d) fourth, to the Registrable Securities requested to be included in such registration (or to such lesser number of Registrable Securities, which is equal to the number that, in the opinion of the managing underwriters, can be sold, pro rata among the holders thereof based on the number of Registrable Securities owned); and (d) fifth, to other securities that Parent may desire to include in such registration. 3.5 Priority on Underwritten Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of Parent's securities, and the managing underwriters advise Parent in writing that in their opinion the number of securities requested to be included in the registration exceeds the number that can be sold in the offering, Parent will give priority for inclusion in such registration: (a) first, to the securities requested to be included by the holders requesting such registration; (b) second, to the securities sought to be included in such registration pursuant to the warrants or options issued to the representatives of the underwriters with respect thereto; (c) third, to the Registrable Securities requested to be included in such registration (or to such lesser number of Registrable Securities, which is equal to the number that, in the opinion of the managing underwriters, can be sold, pro rata among the holders thereof based on the number of Registrable Securities owned), and (d) fourth, to other securities that Parent may desire to include in such registration. -5- ARTICLE IV REGISTRATION PROCEDURES 4.1 Procedures Parent Will Follow. Whenever the holders of the Registrable Securities duly request that any Registrable Securities be registered pursuant to this Agreement, Parent will use its best efforts to effect the registration of the Registrable Securities on a form available under the Securities Act for which Parent then qualifies and that counsel for Parent deems appropriate and which form is available for the sale of the Registrable Securities in accordance with the intended method of disposition, and pursuant thereto Parent will do the following as expeditiously as possible: (a) Registration Statement. Parent will prepare and file with the SEC, and use its best efforts to cause to become effective, a Registration Statement with respect to the Registrable Securities Parent has been so requested to register on a form available under the Securities Act for which Parent then qualifies and that counsel for Parent deems appropriate and which form is available for the sale of the Registrable Securities in accordance with the intended method of disposition. (b) Maintenance of Effectiveness. Parent will prepare and file with the SEC such amendments and supplements to the Registration Statement and prospectus used for the sale of the Registrable Securities as may be necessary to keep the Registration Statement effective until the earlier of: (i) the date on which the sale of the Registrable Securities is completed and (ii) the date ninety (90) days after the Registration Statement with respect to the Registrable Securities becomes effective, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement during its effectiveness in accordance with the intended methods of disposition of such securities. (c) Copies of Prospectuses. Parent will furnish to the holders the number of copies of the Registration Statement, each amendment and supplement thereto, the prospectus included in the Registration Statement (including each preliminary prospectus) and such other documents that the holders may reasonably request to facilitate the disposition of the Registrable Securities Parent has been so requested to register. At any time when a prospectus with respect to the Registrable Securities is required to be delivered under the Securities Act, Parent will notify the holders of the occurrence of any material change in the information contained in the prospectus included in the Registration Statement. Whenever in Parent's judgment it is necessary, Parent will prepare a supplement or amendment to the prospectus so that, as thereafter delivered to the proposed purchasers of the Registrable Securities, the prospectus will not contain, to Parent's knowledge, any untrue statement of material fact or omit to state any fact necessary to make the statements in it not misleading, and the holders will discontinue disposition of the Registrable Securities until the holders are advised in writing by Parent that the use of the prospectus may be resumed and are furnished with a supplement or amendment to the -6- 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. -7- (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 -8- Parent that the use of the prospectus may be resumed or receive the copies of the supplement or amendment to the prospectus. (b) Compliance with Law. The holders will comply with all rules and regulations of the SEC and applicable state securities laws governing the manner of sale of securities in connection with the disposition of any Registrable Securities pursuant to any Registration Statement. (c) Participation in Underwritten Offerings. No holder of Registrable Securities may participate in any underwritten offering hereunder unless such holder: (i) agrees to sell such holder's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority (by number of shares) of Registrable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. ARTICLE V BLACK OUT PERIODS 5.1 Restrictions on Public Sale by Holders. Whenever Parent proposes to register any of its securities under the Securities Act in an underwritten offering (other than as (a) a Demand Registration; (b) a registration of securities in connection with a merger, an acquisition, an exchange offer, other business combination or an employee benefit plan maintained by Parent or its subsidiaries; or (c) a registration of securities on Form S-4 or S-8 or any successor or similar form) and if requested by the managing underwriters, each holder of Registrable Securities will not effect any public sale or disposition of securities of Parent the same as or similar to those being registered, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, except as part of such registration, during the 14-day period prior to, and during the 90-day period (or, with respect to a Piggyback Registration, such longer period of up to 120 days as may reasonably be requested by such managing underwriters) beginning on the effective date of the related Registration Statement, to the extent timely notified in writing by Parent or the managing underwriters. 5.2 Restrictions on Public Sale by Parent and Others. In connection with any Demand Registration that is an underwritten offering and if requested by the managing underwriters, Parent will not effect any public sale or disposition of any securities the same as or similar to those being registered by Parent, except as part of such registration, during the 14-day period prior to, and during the 90-day period beginning on the effective date of the related Registration Statement to the extent timely notified in writing by the managing underwriters. Notwithstanding anything to the contrary in the foregoing, the restrictions under this Section 5.2 shall not limit the issuance of securities of Parent, or options or warrants to purchase such securities, that Parent is required to issue pursuant to: (a) any employee stock option plan or non-employee director stock option plan in effect at the time Parent receives a request for Demand Registration; (b) the exercise of any outstanding options or warrants with respect to securities of Parent; or (c) the exercise of any conversion or exchange right in accordance with the terms of any other security convertible into or exchangeable for securities the same as or similar to those being registered by Parent. 5.3 Third-Party Registration Rights. This Agreement is in all cases subject to the contractual registration rights granted pursuant to the Registration Rights Agreement between Parent and certain of its shareholders dated January __, 1994 and with the contractual registration rights granted pursuant to the Registration Rights Agreement between Parent and certain former shareholders of Current Electronics, Inc. dated February __, 1997. ARTICLE VI INDEMNIFICATION 6.1 Indemnification by Parent. Parent will indemnify and hold harmless, to the extent permitted by law, each each holder of Registrable Securities and, if applicable, the officers and directors of the holder, and each Person who controls the holder (within the meaning of the Securities Act or the Exchange Act) from and against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, injunction, judgment, order, decree, ruling, damage, dues, penalty, fines, costs, amounts paid in settlement, liabilities, obligations, losses, expenses and fees, including court costs and attorneys' fees and expenses (collectively, "Losses") that the holder and, if applicable, the officers and directors of the holder, and each Person who controls the holder may suffer through and after the date of the claim for indemnification caused by or arising out of any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus, preliminary prospectus, or other related filing with the SEC or any other federal or state governmental agency, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to Parent by any holder of Registrable Securities expressly for use therein or by any holder's failure to comply with any legal requirement applicable to such holder and not contractually assumed by Parent to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto after Parent has furnished the holder with a sufficient number of copies of the same. In connection with an underwritten offering, Parent shall indemnify the underwriters, their officers and directors, and each Person who controls the underwriters (within the meaning of the Securities Act or the Exchange Act) to the extent customary. 6.2 Indemnification by Holders. In connection with any registration in which a holder of Registrable Securities is participating, each such Holder will indemnify and hold harmless, to the extent permitted by law, Parent, its directors and officers and each Person who controls Parent (within the meaning of the Securities Act or the Exchange Act) from and against the -9- holder's Pro Rata Share (as defined in this Section 6.2) of all Losses that Parent, its directors and officers and each Person who controls Parent may suffer through and after the date of the claim for indemnification caused by or arising out of any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus, preliminary prospectus, or other related filing with the SEC or any other federal or state governmental agency, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that the same are caused by or contained in any information furnished in writing to Parent by any holder of Registrable Securities expressly for use therein or by any holder's failure to comply with any legal requirement applicable to such holder and not contractually assumed by Parent to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto after Parent has furnished the holder with a sufficient number of copies of the same. For purposes of the foregoing, a holder's "Pro Rata Share" means that fraction equal to the amount of the proceeds received or to be received by the holder in connection with the registration over the total proceeds received or to be received by all holders in connection with the registration. 6.3 Indemnification Procedure. If any Person has a claim for Losses hereunder (an "Indemnified Party"), the Indemnified Party will: (a) notify the party or parties hereto from which it is entitled to make such claim (individually, an "Indemnifying Party" and, together, the "Indemnifying Parties") of such claim, specifying the nature of the Losses and the amount or estimated amount thereof if feasible, and (b) unless in the Indemnified Party's reasonable judgment (based on written advice of counsel) a conflict of interest between the Indemnified Party and the Indemnifying Parties may exist with respect to the matter giving rise to such claim, permit the Indemnifying Party to assume and thereafter conduct the defense of the matter with counsel of the Indemnifying Party's choice reasonably satisfactory to the Indemnified Party. If the defense is so assumed, the Indemnifying Party will not be subject to any liability for any settlement made with respect to such claim by the Indemnified Party without its consent, which will not be unreasonably withheld. An Indemnifying Party who is not entitled to or elects not to assume the defense of a claim, will not be obligated to pay the fees and expenses of more than one counsel for all parties it indemnifies with respect to such claim, unless in the reasonable judgment of any Indemnified Party (based on written advice of counsel) a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim. ARTICLE VII GENERAL PROVISIONS 7.1 Remedies. Any Person having rights under this Agreement will be entitled to enforce them specifically, to recover damages caused by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law. -10- 7.2 Successors and Assigns. This Agreement will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed. Any provision of this Agreement for the benefit of the holders of Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of Registrable Securities to which the subsequent holder has been expressly assigned such rights at the time of the transfer of the Registrable Securities to him, but not otherwise. 7.3 Term; Effect of Expiration or Termination. This Agreement shall be effective as of the date hereof, and unless earlier terminated in accordance with this Agreement, shall expire on the earliest of: (a) three (3) years from the date of this Agreement or (b) such time as all Registrable Securities have been sold pursuant to an effective Registration Statement under the Securities Act or may be publicly sold without registration. Moreover, the obligation of Parent to register its securities under this Agreement as to any Shareholder shall terminate at such time as such Shareholder can then publicly sell all of its Registrable Securities without registration under the Securities Act during a three-month period pursuant to Rule 144 under the Securities Act or otherwise. In the event of termination or expiration of this Agreement, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of the parties hereto, except the provisions of Article VI (Indemnification) and this Article VII (General Provisions) shall remain in full force and effect and survive any termination of this Agreement. 7.4 Amendments; Modifications. This Agreement may be amended or modified in writing by Parent and the holders of a majority of the Registrable Securities at the time of such amendment or modification. 7.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail, return receipt requested, or sent via facsimile, with confirmation of receipt, to the parties at the following address or at such other address for a party as shall be specified by notice hereunder: (a) if to Parent, to: EFTC Corporation 7241 West 4th Street Greeley, Colorado 80634 Attention: Stuart W. Fuhlendorf Facsimile No.: (303) 892 8306 -11- (b) if to the Shareholders, to: Allen S. Braswell, Jr. 4601 Cromwell Avenue Memphis, Tennessee 38118 Facsimile No.: (901) 795-5305 7.6 Entire Agreement. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof. 7.7 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 7.8 Remedies Cumulative; No Waiver. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. 7.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado (without regard to the principles of conflicts of law thereof). 7.10 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. -12- 7.11 Interpretation. When a reference is made in this Agreement to Articles, Recitals or Sections, such reference shall be to an Article, Recital or Section to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party hereto to whom such information is to be made available. The table of contents and Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, any reference to a party's "knowledge" means such party's actual knowledge after due and diligent inquiry of officers, directors and other employees of such party reasonably believed to have knowledge of such matters. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. 7.12 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. -13- SIGNATURE PAGE--REGISTRATION RIGHTS AGREEMENT IN WITNESS WHEREOF, the parties hereto have duly executed this Registration Rights Agreement as of the date first written above. Parent: EFTC CORPORATION, a Colorado corporation By: /s/ Shareholders: Allen S. Braswell, Sr. Grantor Retained Income Trust u/a/d 12/31/89 By /s/ Its Trustee /s/ Allen S. Braswell, Jr. /s/ Alma L. Braswell /s/ Bruce A. Braswell /s/ Amy A. Braswell /s/ Anita B. Murman -14- EX-2.5 6 EARNOUT AGREEMENT EARNOUT AGREEMENT THIS EARNOUT AGREEMENT (this "Agreement"), dated as of September 30, 1997, is among EFTC CORPORATION, a Colorado corporation ("Parent"), and the undersigned MEMBERS (the "Airhub Members") of AIRHUB SERVICES GROUP, L.C., a Kentucky limited liability company ("Airhub"), and the MEMBERS (the "CTLLC Members" and, together with the Airhub Members, the "LLC Members") of CIRCUIT TEST INTERNATIONAL, L.C., a Florida limited liability company ("CTLLC"). RECITALS A. Pursuant to that certain Agreement and Plan of Reorganization, dated as of July 9, 1997 (the "Reorganization Agreement"), among Parent, CTI and CTI Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of Parent, CTI Acquisition Corp. will be merged with and into CTI (the "Merger") and as a result of the Merger, all shares of CTI Common Stock will be converted into the right to receive shares of Parent Common Stock. B. Pursuant to that certain Limited Liability Company Unit Purchase Agreement, dated as of July 9, 1997 (the "Purchase Agreement"), among Parent, CTILLC Acquisition Corp. ("LLC Acquisition"), Airhub, the Airhub Members, CTLLC and the CTLLC Members, all of the outstanding interests in Airhub and CTLLC will be acquired (the "Acquisition") and as a result of the Acquisition, all outstanding interests in Airhub will be acquired by Parent and all of outstanding interests in CTLLC will be acquired by Parent and LLC Acquisition. C. In connection with, and in order to induce Parent, Airhub, the Airhub Members, CTLLC and the CTLLC Members to enter into the Purchase Agreement and as additional consideration for the interests acquired pursuant to the Purchase Agreement, Parent, Airhub, the Airhub Members, CTLLC and the CTLLC Members are entering into this Agreement. D. Capitalized terms used not defined herein shall have that meaning as given in the Purchase Agreement. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: 1. Earnout Payments. (a) Within ninety (90) days after December 31, 1997, 1998 and 1999, Parent agrees to make certain cash earnout payments (the "Earnout Payments") to the Airhub Members and the CTLLC Members, payable pro rata (determined by the percentage set forth opposite the name of each of the Airhub Members and the CTLLC Members in Schedule A attached hereto). The three Earnout Payments will be in the following amounts: 1 (i) 1997: $2 million, but only if the aggregate EBIT, if any, of the CTI Group for the first such year exceeds $4.5 million, (ii) 1998: $4 million, less the payment made, if any, pursuant to 1(a)(i) above, but only if the aggregate EBIT of the CTI Group for 1997 and 1998 exceeds $9.0 million, and (iii) 1999: $6 million, less payments made, if any, pursuant to 1(a)(i) and (ii) above, but only if the aggregate EBIT of the CTI Group for 1997, 1998, and 1999 exceeds $13.5 million; (b) For the purposes of this Agreement, (i) "CTI Group" means CTI, CTLLC and Airhub, taken as a group; and (ii) "EBIT" means the earnings, before interest and taxes, determined on a consolidated basis in accordance with generally accepted accounting principles at the time of determination of CTLLC and Airhub (and including, if necessary to achieve the target amounts of EBIT specified in 1(a), CTI). (c) For the purpose of determining the EBIT for each year specified in Sections 1(a)(i), (ii) and (iii), the CTI Group shall be audited in accordance with generally accepted auditing standards at the time by a certified public accounting firm of Parent's selection for each such year and EBIT shall be conclusively determined by such accounting firm from the results of each such audit. Such audit shall be conducted and EBIT shall be determined independently of Parent and its affiliates other than the CTI Group, without any allocation of income or expense not directly incurred by the CTI Group (based on its historic operations measured as of the effective time). Each party agrees to cooperate in, and to provide all information necessary or reasonably requested by such accounting firm in connection with, the conduct of such audit. EBIT shall be calculated to not include charges and expenses, deferred compensation in the amount of $500,000, and bonuses payable by the CTI Group paid or payable in connection with the Transaction as contemplated by the Reorganization Agreement and the Purchase Agreement (the "Transaction Expenses"), and payments made to Broadview Associates described in Section 4.28 of the Reorganization Agreement. In the event of a dispute over the EBIT as determined by Parent's accountants, but not over the Transaction Expenses, at the election of an Airhub or CTLLC Member, an independent certified public accounting firm (the "Member Accounting Firm"), other than the firm used by Parent, may examine the records of the CTI Group to determine the accuracy of such EBIT determination. Prior to conducting such a review, the Member Accounting Firm shall sign such reasonable confidentiality agreements as are requested by Parent. The expense of any such audit shall be the responsibility of the Airhub or CTLLC Member who has elected to dispute the EBIT determination, unless such Member Accounting Firm determines that an error which would result in payment of an Earnout Payment which otherwise was not to be paid. In such case, Parent shall be responsible for any fees reasonably incurred in such audit. The report of such Member Accounting Firm shall be final, 2 binding and conclusive on the parties. In the event of a dispute over the calculation of the Transaction Expenses, the parties shall first endeavor in good faith to resolve such a dispute. If no resolution of such a dispute is had, the dispute shall be resolved by final and binding arbitration by three arbitrators. One selected by Parent, the other selected by Allen S. Braswell, Jr. and the third selected by the two arbitrators appointed by Parent and Allen S. Braswell, Jr. The arbitration shall take place in Denver, Colorado and in no other place. The arbitration shall be conducted in accordance with the rules and procedures of the American Arbitration Association. During the pendency of any such arbitration to determine Transaction Expenses, Parent's payment obligations under this Agreement, if any, shall be tolled and only be due, if at all, ninety (90) days after the entry of a final award or decision of the arbitrators. 2. Payment in the Event of an Offering or Change in Control. (a) If, on or prior to December 31, 1999, Parent consummates any transaction involving either (i) the registration and underwritten sale of shares of Parent Common Stock or securities convertible into or exchangeable for Parent Common Stock for the account of Parent; or (ii) the private placement of shares of Parent Common Stock, or securities convertible into or exchangeable for Parent Common Stock, for the account of Parent with aggregate net proceeds to Parent from such private placement of not less than $40 million, then Parent shall pay the Airhub Members and the CTLLC Members $6 million, less any Earnout Payments paid or due and payable pursuant to Section 1. Any payment made according to this Section 2(a) shall be paid in full to the Airhub Members and the CTLLC Members pro rata (determined as provided above in Section 1) within thirty (30) days of the closing of such underwritten sale or private placement. No payment obligation shall arise under this Section 2(a) if, prior to any such underwritten sale or private placement, a Change in Control (as defined below) shall have occurred, in which case Parent's payment obligation shall be governed by Section 2(b). (b) If a Change in Control occurs on or prior to December 31, 1999 after the date of this Agreement, Parent shall pay the Airhub Members and the CTLLC Members $6 million, less any Earnout Payments already paid or due and payable pursuant to Section 1. Any payment made according to this Section 2(b) shall be paid in full to the Airhub Members and the CTLLC Members pro rata (determined as provided above in Section 1) within thirty (30) days of the closing of such Change in Control. No payment obligation shall arise under this Section 2(b) if, prior to any such Change in Control, an underwritten sale or private placement giving rise to a payment under Section 2(a) shall have occurred, in which case Parent's payment obligation shall be governed by Section 2(a). (c) For the purposes of this Agreement, (i) the term "Change in Control" means (A) the sale, lease, conveyance or other disposition of all or substantially all of the assets of Parent to any Person (as defined below) or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934), other than any Permitted Owner (as defined below), (B) the merger or consolidation of Parent with any Person that is not controlled by a Permitted Holder, 3 (C) the liquidation or dissolution of Parent, or (D) the occurrence of any other transaction, excluding a public offering of voting capital stock of Parent, that results in Permitted Holders directly or indirectly owning in the aggregate less than 35% of all of the voting capital stock of Parent then outstanding, (ii) the term "Permitted Holders" means any (A) Person owning, immediately after the effectiveness of the Merger, greater than 5% of Parent's outstanding Common Stock, (B) Person serving, immediately after the effectiveness of the Merger as an executive officer or director of Parent, or (C) group (used as specified above) of Persons that includes at least one Person meeting the criteria in either of the foregoing clauses (A) and (B), and (iii) the term "Person" means any individual, corporation, firm, joint venture, association, partnership, organization, business, trust, other legal entity or enterprise, government or political subdivision, department or instrumentality thereof, including any governmental authority or district. 3. Binding Effect; Expiration. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is intended to bind each Airhub Member as a member of Airhub and each CTLLC Member as a member of CTLLC only with respect to the specific matters set forth herein and shall not prohibit any Airhub Member or CTLLC Member from acting in accordance with any applicable fiduciary duties as a member of Airhub or CTLLC. 4. Further Assurances. The parties will take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable, in the reasonable opinion of Parent, to carry out the intents and purposes of this Agreement, including the execution and delivery of additional documents and instruments. 5. General Provisions. (a) All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or sent via facsimile, in either case with confirmation of receipt, or shall be deemed given the business day after delivery of such notice (together with a proper request for overnight delivery and confirmation of receipt) to a nationally recognized overnight courier service that guarantees next-business-day delivery to the applicable destination, in each such case to the parties at the following address or at such other address for a party as shall be specified by notice hereunder: 4 (i) if to Parent, to: EFTC Corporation 7241 West 4th Street Greeley, Colorado 80634 Attention: Stuart W. Fuhlendorf Facsimile No.: (303) 892-4306 with a copy to: Holme Roberts & Owen LLP 1700 Lincoln, Suite 4100 Denver, Colorado 80203 Attention: Francis R. Wheeler Facsimile No.: (303) 866-0200 or (b) if to the Airhub or CTLLC Members, to: Allen S. Braswell, Jr. 4601 Cromwell Avenue Memphis, Tennessee 38118 Facsimile No.: (901) 795-5305 with a copy to: Burch, Porter & Johnson, PLLC 50 North Front Street, Suite 800 Memphis, Tennessee 38103 Attention: Warner B. Rodda Facsimile No.: (901) 524-5026 (b) When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. (c) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. (d) This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto: (i) constitute the entire agreement among 5 the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof; (ii) are not intended to confer upon any other Person any rights or remedies hereunder; and (iii) shall not be assigned by operation of law or otherwise except as otherwise specifically provided. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (e) In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. (f) Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. This Agreement may be amended or modified in writing by the party hereto against whom enforcement of such amendment or modification is sought. (g) This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado (without regard to the principles of conflicts of law thereof). (h) The parties hereto acknowledge that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. (i) In the event of any proceeding to enforce this Agreement, the prevailing party shall be entitled to receive from the losing party all reasonable costs and expenses, including the reasonable fees of attorneys, accountants and other experts, incurred by the prevailing party in investigating and prosecuting (or defending) such action at trial or upon any appeal. 6 SIGNATURE PAGE--EARNOUT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Earnout Agreement to be executed and delivered as of the date first written above. PARENT: EFTC CORPORATION, a Colorado corporation By: ALLEN S. BRASWELL, JR. REVOCABLE LIVING TRUST By /s/ Allen S. Braswell, Jr., Trustee CIRCUIT TEST INTERNATIONAL LIMITED PARTNERSHIP, a Florida limited Partnership By ALLEN S. BRASWELL, SR. LIVING TRUST Its General Partner /s/ Allen S. Braswell, Sr., Trustee CTLLC MEMBERS: ALLEN S. BRASWELL, JR. REVOCABLE LIVING TRUST By /s/ Allen S. Braswell, Jr., Trustee CIRCUIT TEST INTERNATIONAL LIMITED PARTNERSHIP, a Florida limited Partnership By ALLEN S. BRASWELL, SR. LIVING TRUST Its General Partner /s/ Allen S. Braswell, Sr., Trustee 7 EX-2.6 7 FORM OF CTI EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of __________, 1997, is between ELECTRONIC FAB TECHNOLOGY CORP., a Colorado corporation ("Parent"), and Circuit Test, Inc., a Florida corporation ("Circuit Test"), and _____________ __________ ("Executive"). RECITAL Parent, CTI Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), Circuit Test have entered into the Agreement and Plan of Reorganization, dated as of July 9, 1997, pursuant to which [Merger Sub was merged with and into Circuit Test]. This Agreement is executed and delivered pursuant to Article VII of that agreement and sets forth the terms on which the Company, (as defined below)engages Executive to provide the services to Circuit Test. AGREEMENT NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: 1. Definitions. The following terms shall have the following meanings as used in this Agreement: "Company" means Parent, its successors and assigns, and any of its present or future subsidiaries, and persons controlled by, controlling or under common control with it. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder. "Executive" has the meaning set forth in the opening statement to this Agreement. 7.7-1 "Expiration Date" has the meaning set forth in Section 4. "Parent" has the meaning set forth in the opening statement to this Agreement. "Participate In" means, with respect to the Executive, directly or indirectly, for his own benefit or for, with or through any other person or entity, own, manage, operate, control, lend money to or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant, agent, independent contractor or otherwise with, or acquiesce in the use of his name in or by. "Proprietary Information" means information disclosed to or known or developed by Executive about the Company's plans, strategies, prospects, products, processes and services, including information and materials relating to the Company's products, manufacturing procedures and techniques and information relating to the Company's research, development, inventions, manufacture, purchasing, accounting, engineering, marketing, merchandising and selling, but excluding information that Executive conclusively establishes, (i) was known, other than under an obligation of confidentiality or binder of secrecy, to Executive prior to the engagement of Executive hereunder or as a result of Consultant's employment by Circuit Test or any of its affiliates; (ii) has passed into the public domain other than through acts or omissions attributable to Executive; or (iii) was subsequently obtained other than under an obligation of confidentiality or binder of secrecy from a third party not possessing the information under an obligation of confidentiality from the disclosing party. 2. Engagement; Duties. The Company will employ Executive as [TITLE] or in such other executive capacity as the Company determines from time to time. During his employment by the Company, Executive will faithfully and to the best of his ability serve the Company perform the duties and bear the responsibilities commensurate with his position as the Chief may request. Executive will devote his entire working time, attention and energies to the business of the Company. Executive will not at any time discredit the Company or any of its products and services. Except for his involvement in personal investments that do not require any significant services on his part, Executive will not Participate In any other business activity or activities that require significant personal services by Executive or that, in the judgment of the Company, may conflict with the proper performance of Executive's duties hereunder. Employee initially will be based in the Company's facilities in ______________. The Company may relocate Executive to other facilities of the Company. 3. Compensation; Bonuses; Benefits; Incentives; Expenses. (a) As compensation for Executive's services hereunder, the Company will pay Executive a salary of $________ per year (the "Base Salary"), prorated for any partial year, for each year during the term of this Agreement, payable monthly in arrears or as the parties hereto may otherwise agree. (b) The Company will award Executive bonuses in the same amount, if any, as it awards to any other employee, who in the Company's judgment holds a position with the 7.7-2 Company comparable to Executive's position and whose duties and responsibilities and performance thereof are, in the Company's judgment, comparable to Executive's duties, responsibilities and performance. If a bonus is so awarded and has not been paid prior to termination or expiration of this Agreement (other than in connection with a termination under Section 4(c) or 4(d)), the Company will pay to Executive, within 90 days after the end of the calendar year in which such termination or expiration occurs, a proportionate part of the bonus so awarded based on the number of days elapsed during the calendar year in which such termination or expiration occurs from January 1 of such year through and including the date termination or expiration occurs. (c) In addition to Base Salary, the Company will provide Executive with the benefits of such insurance plans, hospitalization plans, pension or profit sharing plans and other employee fringe benefit plans as are customarily provided to employees of the Company and for which Executive is eligible under the terms of such plans. Nothing in this Agreement shall require the Company to adopt or maintain any such plan. (d) In addition to the stock options the Company has awarded Executive on or before the date hereof, the Company also may award or grant Executive such stock options and other equity incentives as are approved by the Company in its sole discretion. Nothing in this Agreement shall require the Company to establish an equity incentive program or confer on Executive any right to receive any stock option or other equity incentive not awarded on or before the date hereof. (e) The Company will reimburse Executive for the reasonable out-of-pocket expenses incurred by Executive at the request of the Company in the performance of his duties hereunder and such other expenses as may be approved by the Company, in each case upon presentation to the Company of an itemized accounting of such expenses with reasonable supporting data. 4. Term. This Agreement shall be effective on the date hereof and, unless earlier terminated in accordance with Section 5, shall expire three years from the date hereof (the "Expiration Date"). If this Agreement terminates or expires, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of the parties hereto, except as otherwise provided herein and except the provisions of this Section 4 and Sections 6, 7, 8, 9 and 10 will remain in full force and effect and survive any termination or expiration of this Agreement. 5. Termination. (a) If Executive dies, the Company will pay Executive's estate the compensation that would otherwise have been payable to him for the month in which his death occurs, and this Agreement will be deemed terminated on the last day of such month. (b) If Employee is prevented from performing his duties by reason of illness or incapacity for a continuous period of 120 days, the Company may terminate this Agreement 7.7-3 by notice to Employee or his duly appointed legal representative. For purposes of this Section 5(b), a period of illness or incapacity will be deemed to have occurred for a "continuous" period of 120 days notwithstanding Employee's performance of his duties during a single period of less than 15 continuous days during such 120 day period. (c) The Company may terminate this Agreement at any time, with cause, by giving written notice of termination to Executive. For purposes of this Agreement, "cause" means any one or more of the following: (i) gross negligence or willful misconduct that is injurious to the Company; (ii) conduct on the part of Executive that would constitute a felony or other crime of moral turpitude where committed; (iii) failure by Executive to perform assigned services and duties under this Agreement, which failure continues for at least thirty (30) days after notice in writing thereof is given by the Company; or (iv) breach or threatened breach by Executive or Vendor of any provision of Section 6, 7 or 8. (d) (i) The Company may terminate this Agreement at any time, without cause, by giving written notice of termination to Executive. In connection with any termination by the Company pursuant to this Section 5(d), except as set forth below in clause (ii) of this Section 5(d), the Company will not be obligated to pay any amount to other than the amounts specified in Section 3(a) that have accrued through the date of termination. The Company will make a termination payment to in connection with a termination under this Section 5(d) if and only if the conditions set forth below in Section 5(d)(ii) are satisfied, in which event the amount of termination payments will be determined pursuant to Section 5(d)(ii). (ii) In order to receive termination payments under this Section 5(d), Executive must sign a release, in form and substance reasonably satisfactory to the Company, fully releasing the Company (and its officers, directors, shareholders, employees and agents) from any claim or cause of action that Executive may have against the Company or such other persons relating in any way to this Agreement, Executive's employment by the Company or any aspect of Employee's relationship with the Company, through the date of such release. The release will be signed at such times as are reasonably requested by the Company in order for the release to be fully effective under state and federal age discrimination laws and other laws that may impose similar requirements, and, except to the extent that Executive may exercise his rights as a shareholder of the Company, will prohibit Executive from making any communications or taking other acts that may injure the business, goodwill or reputation of the Company or its officers, directors, shareholders, employees or agents. The Company will then begin making termination payments at such time as any revocation period set forth in the release will have expired. The amount of the termination payments payable under this Section 5(d) will equal the amounts that Executive would have received had this Agreement remained in effect through twelve (12) months pay if terminated within the first eighteen (18) months of this Agreement, six (6) months pay if terminated after eighteen (18) months of this Agreement. Any payments pursuant to this Section 5(d) will be paid in equal monthly installments. 7.7-4 6. Non-Disclosure of Information. (a) Except as specifically permitted by the Company in writing and as is required for Executive to perform his services and duties hereunder, Executive will not, during or prior to two years after the term of this Agreement, disclose any Proprietary Information to any person or entity for any purpose or use or permit the use of any Proprietary Information. In addition, Executive will not, during and for two years after the termination or expiration hereof, undertake on behalf of any other person or entity any commercial project, employment or consultancy that would result in use or disclosure of Proprietary Information or that would appear to involve such use or disclosure unless the Company shall have consented in writing to such undertaking, employment or consultancy. The Company may require that Executive and any person or entity proposing to engage Executive in such a capacity provide appropriate written assurances regarding the avoidance of any such conflict. (b) Upon the termination or expiration of this Agreement, Executive will deliver to the Company all notes, letters, prints, drawings, records, forms, contracts, studies, reports, appraisals, financial data, lists of names or other customer data, and any other articles or papers, computer tapes and materials that have come into their possession by reason of Executive's employment by the Company or Executive's prior employment by the Circuit Test or its affiliates and subsidiaries, whether or not prepared by Executive, and Executive will not retain memoranda or copies of any of those items. (c) Executive acknowledges that Proprietary Information of the Company is unique and a valuable asset of the Company, the loss or unauthorized disclosure or use of which would cause the Company irreparable harm. 7. Inventions. (a) Executive hereby assigns and agrees to assign to the Company, or to any person or entity designated by the Company, without royalty or other consideration to Executive therefor other than the compensation set forth in this Agreement, all of his right, title and interest in and to all Inventions, to applications for United States of America and foreign letters patent and United States of America and foreign letters patent granted upon Inventions, and to all material related thereto subject to copyright. Executive further acknowledges that all copyrightable materials developed or produced by Executive within the scope of his engagement by the Company constitute works made for hire. (b) Executive will communicate promptly and disclose to the Company, in such form as the Company may reasonably request, all information, details and data pertaining to any Invention. (c) At the request of the Company, Executive will do all acts necessary or appropriate to secure for the Company the full benefits of each Invention, and otherwise to carry into full force and effect the assignment contained in Section 7(a). Such acts may include, giving testimony in support of Executive's inventorship and promptly executing and delivering to the 7.7-5 Company such papers, instruments and documents, without expense to Executive, as may be appropriate in the Company's opinion to apply for, secure, maintain, reissue, extend or defend the Company's worldwide rights in Inventions or in any or all United States of America and foreign letters patent. 8. Covenants Not to Compete or Interfere. (a) In view of the unique and valuable services that Executive has been engaged to provide to the Company and Executive's current and future knowledge of the Company's Proprietary Information, Executive will not, (i) during the term hereof and (ii) for two years after the termination or expiration hereof (or, if this Agreement is terminated under Section 5(d) and Executive receives termination payments, during the period such payments are received), Participate In the electronic contract manufacturing or repair business and any other business in which the Company is engaged, or has taken material steps to be engaged, at the time of such termination or expiration. Notwithstanding the foregoing, Executive will not be deemed to Participate In a business merely because Executive owns less than 5% of the outstanding stock of a corporation (measured in voting power or equity), if, at the time of its acquisition by Executive, such stock is listed on a national securities exchange or is reported on the Nasdaq National Market. (b) During the period specified in Section 8(a) and in no event less than two years after any termination or expiration of this Agreement, Executive will not (i) directly or indirectly cause or attempt to cause any employee of the Company to leave the employ of the Company; (ii) in any way interfere with the relationship between the Company and any of its employees, customers or suppliers; (iii) directly or indirectly hire any employee of the Company to work for any entity of which Executive is an officer, director, employee, Executive, independent contractor or owner of an equity or other financial interest; or (iv) interfere or attempt to interfere with any transaction in which the Company was involved during the term of this Agreement. (c) If any restriction contained in this Section 8 is deemed to be invalid, illegal or unenforceable by a court of competent jurisdiction by reason of its duration, geographical scope or otherwise, then such provision will be deemed reduced in extent, duration, geographical scope or otherwise by the minimum reduction necessary to cause the restriction to be enforceable. 9. Injunctive Relief. Executive acknowledges that the breach or threatened breach by Executive of any of the provisions of Section 6, 7 or 8 would cause the Company irreparable harm. Upon the breach or threatened breach of any of the provisions of Section 6, 7 or 8, the Company will be entitled to an injunction, without bond, restraining Executive from committing such breach. This right shall not be construed to limit the Company's ability to obtain any other remedies available to it for such breach or threatened breach, including the recovery of damages. 10. General Provisions. 7.7-6 (a) Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. (b) This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado (without regard to the principles of conflicts of law thereof). Except as otherwise provided herein, in the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. Except as otherwise provided herein, the parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 7.7-7 (c) All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail, return receipt requested, or sent via facsimile, with confirmation of receipt, to the parties hereto at the following address or at such other address for a party hereto as shall be specified by notice hereunder: (i) if to the Company, to: EFTC Corporation 7241 West 4th Street Greeley, Colorado 80634 Attention: Stuart W. Fuhlendorf Facsimile No.: (303) 892-4306 with a copy to: Holme Roberts & Owen LLP 1700 Lincoln, Suite 4100 Denver, Colorado 80203 Attention: Francis R. Wheeler Facsimile No.: (303) 866-0200 (ii) If to Executive: ========================= ========================= (d) Except as otherwise provided herein, no party hereto may assign its rights or delegate its obligations under this Agreement. The Company may assign its rights and delegate its obligations under this Agreement to any affiliate of the Company or to any person or entity that acquires all or substantially all of the business of the Company whether through merger, purchase of assets, purchase of stock or otherwise. This Agreement will be binding upon and inure to the benefit of the parties and their respective legal representatives, heirs, and permitted successors and assigns. (e) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof (f) This Agreement may be amended or modified only in writing signed by all of the parties hereto. (g) When a reference is made in this Agreement to a Section, such reference 7.7-8 shall be to a Section of this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. (h) The parties hereto acknowledge that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. (i) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. (j) In the event of any proceeding to enforce this Agreement, the prevailing party shall be entitled to receive from the losing party all reasonable costs and expenses, including the reasonable fees of attorneys, accountants and other experts, incurred by the prevailing party in investigating and prosecuting (or defending) such action at trial or upon any appeal. 7.7-9 SIGNATURE PAGE--EMPLOYMENT AGREEMENT IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above. Parent: EFTC CORPORATION, a Colorado corporation By: _______________________ Circuit Test, Inc., a Florida corporation By: _______________________ Executive: --------------------------- 7.7-10 EX-99.1 8 BANK ONE CREDIT AGREEMENT $45,000,000 CREDIT AGREEMENT Dated as of September 30, 1997 by and among EFTC CORPORATION, as Borrower and THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF and BANK ONE, COLORADO, N.A., as Agent Arranged by Bank One Capital Markets - ----------------------------------------------------------------- October 3, 1997 10:35 am TABLE OF CONTENTS Page
Recitals..........................................................................................................1 Agreement.........................................................................................................1 ARTICLE I DEFINITIONS AND ACCOUNTING TERMS..........................................................1 SECTION 1.1 Definitions. ...................................................................1 SECTION 1.2 Accounting Terms and Determinations.............................................24 ARTICLE II COMMITMENT; AMOUNTS AND TERMS OF THE ADVANCES AND LETTERS OF CREDIT........................................................................24 SECTION 2.1 Commitment......................................................................24 (a) Revolving Loans Commitment..............................................24 (b) Term Loan Commitment....................................................25 (c) Swing Loan Commitment...................................................25 SECTION 2.2 Advances........................................................................26 SECTION 2.3 Making the Advances.............................................................27 (a) Request for Advance, Revolving Loans and Term Loan. ............................................................27 (b) Swing Loan Request......................................................27 (c) Request for Advance Irrevocable.........................................28 (d) Availability of Funds, Revolving Loans and Term Loan...........................................................28 (e) Advances by Agent.......................................................28 SECTION 2.4 Letters of Credit...............................................................29 (a) Letter of Credit Commitment.............................................29 (b) Terms of Letters of Credit and Applications............................................................29 (c) Renewals and Extensions.................................................29 (d) Issued on Business Day..................................................30 (e) Request for Letter of Credit............................................30 (f) Participations..........................................................30 (g) Notice of Draw..........................................................31 (h) Payment of Draw.........................................................31 (i) Participation in Draw...................................................31 (j) Obligations of Banks....................................................32 (k) Waiver of Liability; Indemnity..........................................33 SECTION 2.5 Fees............................................................................35 (a) Commitment Fee..........................................................35 (b) Letter of Credit Fees...................................................35 (c) Other Fees..............................................................36 SECTION 2.6 Reduction of the Revolving Loans Commitment......................................................................36 SECTION 2.7 Repayment.......................................................................36 (a) Voluntary Repayment.....................................................36 (b) Installment Payments of Term Loan.......................................36 (c) Mandatory Repayment.....................................................37 (d) Repayment of Swing Loans................................................38 -i- Page (e) Application of Repayments...............................................38 SECTION 2.8 Distribution of Payments by the Agent...........................................38 SECTION 2.9 Promissory Notes................................................................39 (a) The Revolving Notes.....................................................39 (b) Term Notes..............................................................39 (c) Swing Loan Note.........................................................40 SECTION 2.10 Pro Rata Treatment..............................................................40 SECTION 2.11 Interest........................................................................40 (a) Prime Rate Loans........................................................40 (b) LIBOR Rate Loans........................................................40 (c) Default Rate Interest...................................................41 SECTION 2.12 Yield Protection................................................................41 (a) Increased Costs.........................................................41 (b) Additional Interest.....................................................41 (c) Increased Capital.......................................................42 (d) Breakage Costs..........................................................42 SECTION 2.13 Conversion of Loans; Change of Interest Periods.........................................................................43 SECTION 2.14 Illegality, Etc.................................................................43 SECTION 2.15 Payments and Computations.......................................................44 SECTION 2.16 Effect of Letters of Credit on Revolving Loans Commitment Utilization....................................................45 SECTION 2.17 Cash Collateralization of Letters of Credit..........................................................................45 SECTION 2.18 Borrowing Base..................................................................45 ARTICLE III CONDITIONS OF LENDING....................................................................46 SECTION 3.1 Conditions Precedent to Initial Advance or Issuance of Initial Letter of Credit............................................46 SECTION 3.2 Conditions Precedent to All Advances and Issuance of All Letters of Credit...............................................50 ARTICLE IV REPRESENTATIONS AND WARRANTIES...........................................................51 SECTION 4.1 Representations and Warranties of the Borrower........................................................................51 (a) Corporate Existence.....................................................51 (b) Powers, Etc.............................................................51 (c) Authorization; No Conflict..............................................52 (d) Approvals...............................................................52 (e) Enforceability..........................................................52 (f) Financial Statements....................................................53 (g) Litigation..............................................................53 (h) Federal Reserve Regulations.............................................53 (i) Investment Company Act..................................................54 (j) ERISA...................................................................54 (k) Compliance with Laws....................................................55 (l) Payment of Debts and Taxes..............................................55 (m) Indebtedness, Guaranties................................................55 (n) Material Agreements.....................................................56 -ii- Page (o) Properties, Inventory and Equipment.....................................56 (p) Financial Condition.....................................................56 (q) Insurance...............................................................57 (r) Full Disclosure.........................................................57 (s) No Default..............................................................58 (t) Status of Loans as Senior Debt..........................................58 (u) Swap Obligations........................................................58 ARTICLE V COVENANTS OF THE BORROWER................................................................58 SECTION 5.1 Affirmative Covenants...........................................................58 (a) Use of Proceeds.........................................................58 (b) Reporting and Notice Requirements.......................................59 (c) Maintenance of Existence, Etc...........................................61 (d) Compliance With Laws....................................................61 (e) Insurance...............................................................61 (f) Material Agreements.....................................................62 (g) Obligations and Taxes...................................................62 (h) Maintaining Records; Access to Properties and Inspections..............................................62 (i) Environmental and Safety Matters........................................63 (j) Deposit Balances........................................................63 (k) Interest Rate Protection................................................64 (l) Surveys.................................................................64 (m) Audit of Accounts Receivable and Inventory...............................................................64 (n) Acquisition of Tucson Real Property.....................................65 (o) AlliedSignal Acquisition Agreements.....................................65 (p) Greeley Phase I Environmental Assessment................................66 (q) Further Assurances......................................................66 SECTION 5.2 Negative Covenants..............................................................66 (a) Financial Covenants.....................................................66 (b) Prohibition of Fundamental Changes......................................69 (c) Limitation on Liens.....................................................69 (d) Debt....................................................................69 (e) Guarantees..............................................................70 (f) Investments, Loans, Advances, etc.......................................70 (g) Sales of Assets.........................................................71 (h) Transactions with Affiliates............................................71 (i) Modification of Certain Documents; Performance of Material Agreements......................................71 (j) Dividends...............................................................72 (k) Accounting..............................................................72 (l) Subordinated Debt...........................................................72 (m) Change of Address; Business Name(s).........................................72 ARTICLE VI EVENTS OF DEFAULT........................................................................73 SECTION 6.1 Events of Default...............................................................73 (a) Payments under the Agreement and the Notes...................................................................73 -iii- Page (b) Representations and Warranties..........................................73 (c) Other Loan Instrument Obligations.......................................73 (d) Other Debt..............................................................74 (e) Insolvency..............................................................74 (f) Judgments...............................................................75 (g) Termination of Certain Loan Instruments.............................................................75 (h) Collateral Liens........................................................75 SECTION 6.2 Bank's Rights Upon an Event of Default..........................................75 ARTICLE VII THE AGENT................................................................................76 SECTION 7.1 Appointment and Powers..........................................................76 SECTION 7.2 Limitation on Agent's Liability.................................................76 SECTION 7.3 Defaults........................................................................77 SECTION 7.4 Rights as a Bank................................................................77 SECTION 7.5 Indemnification.................................................................77 SECTION 7.6 Non-Reliance on Agent and Other Banks...........................................78 SECTION 7.7 Execution and Amendment of Loan Instruments on Behalf of the Banks..............................................78 SECTION 7.8 Resignation of the Agent........................................................79 ARTICLE VIII MISCELLANEOUS............................................................................79 SECTION 8.1 Amendments; Waivers.............................................................79 SECTION 8.2 Notices, Etc....................................................................80 SECTION 8.3 Remedies........................................................................81 SECTION 8.4 Costs, Expenses and Taxes.......................................................81 SECTION 8.5 Right of Set-off................................................................82 SECTION 8.6 Binding Effect..................................................................82 SECTION 8.7 Indemnity.......................................................................82 SECTION 8.8 Consent to Exclusive Jurisdiction...............................................83 SECTION 8.9 Waiver of Jury Trial and Certain Damages........................................83 SECTION 8.10 Governing Law...................................................................84 SECTION 8.11 Inconsistent Provisions.........................................................84 SECTION 8.12 Sharing of Recoveries...........................................................84 SECTION 8.13 Assignments and Participations..................................................85 (a) Assignments.............................................................85 (b) Participations..........................................................86 SECTION 8.14 Survival of Representations and Warranties......................................................................87 SECTION 8.15 Counterparts....................................................................87 -iv- Schedules Schedule I Banks Schedule 2.1 Banks; Address; Commitment Percentages Schedule 4.1(a) Borrower's and Guarantors' Capital Structure and Shareholders Schedule 4.1(b) Borrower's and Guarantors' Business Names and Jurisdictions where Qualified to do Business Schedule 4.1(d) Approvals Schedule 4.1(f) Financial Disclosures Schedule 4.1(g) Litigation Schedule 4.1(j) ERISA Disclosures Schedule 4.1(m) Indebtedness; Guaranties Schedule 4.1(n) Material Agreements Schedule 4.1(o) Real Property; Inventory; Liens Schedule 4.1(q) Insurance -v- Exhibits Exhibit A-1 Form of Revolving Note Exhibit A-2 Form of Term Note Exhibit A-3 Form of Swing Loan Note Exhibit B-1 Form of Request for Advance Exhibit B-2 Form of Request for Letter of Credit Exhibit B-3 Form of Interest Period/Conversion Notice Exhibit B-4 Form of Borrowing Base Certificate Exhibit B-5 Form of Compliance Certificate Exhibit C Form of Guaranty Exhibit D Form of Pledge and Security Agreement Exhibit E Form of Security Agreement and Assignment Exhibit F-1 Form of Deed of Trust Exhibit F-2 Form of Collateral Assignment of Leases Exhibit F-3 Landlord's Waiver and Consent Exhibit F-4 Consent to Assignment of Contracts Exhibit G-1 Form of Borrower's Omnibus Certificate Exhibit G-2 Form of Guarantor's Omnibus Certificate Exhibit H-1 Form of Opinion of Counsel to Borrower Exhibit H-2 Form of Opinion of Counsel to Guarantors Exhibit H-3 Form of Opinion of Local Counsel Exhibit I Form of Notice of Assignment -vi-
CREDIT AGREEMENT Dated as of September 30,1997 THIS CREDIT AGREEMENT (the "Agreement") is made and entered into as of September 30, 1997 by and between EFTC CORPORATION, a Colorado corporation,(the "Borrower") and the Banks listed on the attached Schedule I, as revised from time to time (collectively the "Banks" and individually the "Bank"); and BANK ONE, COLORADO, N.A.,as letter of credit issuing bank and in its capacity as agent for the Banks hereunder(in such capacity, the "Agent"). Recitals Pursuant and subject to the terms and conditions of this Agreement, the Banks will make available to the Borrower (a) until September 30, 2000, a Senior Secured Revolving Line of Credit in the maximum amount of up to $25,000,000 which shall include the issuance of Bank letters of credit up to $5,000,000 and Swing Loans up to $2,500,000, and (b) until September 30, 2002, a Senior Secured Term Loan of $20,000,000. Payment by the Borrower of the amounts due hereunder will be secured by liens on and security interests in the real and personal property of the Borrower. Agreement In consideration of the covenants contained herein the Parties hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 Definitions. As used in this Agreement, the terms identified in this Section 1.1 shall have the meanings specified below. "Account Receivable" means any account (as such term is defined in the Uniform Commercial Code as adopted in the State of Colorado) or other right to payment for goods sold or services rendered of the Borrower and its Subsidiaries. -1- "Advance" means an advance of funds by the Bank to the Borrower as a Loan pursuant to a Request for Advance as provided in Section 2.2. "Affiliate" means a Person that controls, is controlled by or is under common control with another Person. For purposes hereof, "control" means the practical power to direct the activities of a Person. "Agent" means Bank One, Colorado, N.A., as agent for and representative (within the meaning of Section 9-105(m) of the Uniform Commercial Code) of the Banks under the Loan Instruments, and any successor Agent appointed pursuant to Section 7.8. "Agreement" means this Credit Agreement dated as of September , 1997 between the Borrower and the Banks, together with all schedules and exhibits hereto, and all modifications, amendments, supplements, renewals and extensions hereof in the manner provided herein. "Airhub Services " means, Airhub Services Group, LLC, a Kentucky limited liability company, which is a wholly-owned subsidiary of the Borrower and its Affiliates. "AlliedSignal Acquisition" means the purchase of certain assets and assumption of certain liabilities by the Borrower as provided for under the AlliedSignal Acquisition Agreements. "AlliedSignal Acquisition Agreements" means collectively the License Agreement and the Master Agreement Regarding Asset Purchase and Related Transactions by and between AlliedSignal Avionics, Inc., AlliedSignal Inc. and the Borrower dated as of July 15, 1997. "Applicable Law" means,(a) all applicable common law and principles of equity and (b) all applicable provisions of all (i) constitutions, statutes, rules, regulations and orders of governmental bodies, (ii) approvals of Government Authorities and (iii) orders, decisions, judgements and decrees of all courts (whether at law or in equity or admiralty) and arbitrators. "Applicable Margin" means such percentage for the Type of Loan as set forth in the following table opposite the applicable ratio of Total Debt to Trailing Four Quarter EBITDA determined as of the fiscal quarter immediately preceding such period: -2-
Greater Less Than Revolving Revolving Term Loan Term Loan Than or Loan Loan LIBOR Prime + Equal to LIBOR Prime + Base Rate Base Rate + + 3.75x - 2.750% 1.000% 3.250% 1.500% 3.25x 3.75x 2.500% 0.625% 3.000% 1.125% 2.75x 3.25x 2.250% 0.375% 2.750% 0.875% - 2.75x 2.000% 0.00% 2.500% 0.500%
The ratio of Total Debt to Trailing Four Quarter EBITDA shall be computed by the Borrower and such ratio and the Applicable Margin for each Type of Loan will be set forth in the Compliance Certificate furnished under Section 5.1(b)(iv). The Applicable Margin shall be subject to adjustment, if necessary, on a date fifty (50) days after the end of each fiscal quarter of the Borrower ("Margin Adjustment Date"). Any change in the Applicable Margin shall apply to all Loans outstanding of any Type as of the Margin Adjustment Date. Notwithstanding the foregoing, the Applicable Margin will be equal to: Revolving Term Loan Loan LIBOR Base Rate LIBOR + 3.25% + 2.75% or or Prime + 1.50% Prime + 1.00% as the case may be, from the Effective Date to fifty (50) days after the fiscal quarter ended September 30, 1997, at which point the Applicable Margin will be as set forth in the Compliance Certificate accompanying the financial statements furnished under Section 5.1(b)(iv) for the fiscal quarter ended September 30, 1997. If the Borrower fails to furnish the Compliance Certificate and the financial statements fifty (50) days after the end of any fiscal quarter, the Applicable Margin shall be for the relevant fiscal quarter Revolving Term Loan Loan LIBOR Base Rate LIBOR + 3.25% + 2.75% or or Prime + 1.50% Prime + 1.00% -3- "Arranger" shall mean Bank One Capital Markets, an affiliate of Bank One, Colorado, N.A. "Authorized Signatory" means such Person or Persons as may be designated from time to time in the most recent certificate delivered to the Bank by the Borrower as being authorized to execute and deliver certificates or other documents required or permitted to be executed and delivered to the Bank by the Borrower or other Persons pursuant to this Agreement or any other Loan Instrument, and in any case shall include the President and the Chief Financial Officer of the Borrower. "Bank" and "Banks" means (a) the Agent and any Person listed on the signature pages hereof following the Agent and (b) any Person that has been assigned any or all of the rights or obligations of a Bank pursuant to Section 8.13. "Borrower" means EFTC Corporation, a Colorado corporation. "Borrower's Account" means a demand deposit account maintained by the Borrower with the Agent. "Borrower Loan Instruments" means, the Loan Instruments to which the Borrower is a party. "Borrower's Omnibus Certificate" means a certificate from the Borrower substantially in the form of Exhibit G-1 hereto. "Borrower's Real Property" has the meaning given thereto in Section 4.1(o). "Borrowing Base" shall have the meaning specified in Section 2.18. "Borrowing Base Certificate" shall mean a certificate to be provided to the Bank by the Borrower from time to time in accordance with Section 2.18 substantially in the form of Exhibit B-4 hereto. "Braswell Earn-Out Agreement" means the Earnout Agreement dated as of July 9, 1997 by and among EFTC Corporation, Allen S. Braswell, Jr. Revocable Living Trust, Circuit Test International Limited Partnership and the Allen S. Braswell, Sr. Living Trust. "Business Day" means a day of the year other than Saturday or Sunday on which banks are not authorized to close in Denver, Colorado and, if the applicable Business Day relates to any LIBOR Rate Loans, on which dealings are carried on in the London interbank market. -4- "Capital Expenditures" means amounts paid or indebtedness incurred by the Borrower or any of its Subsidiaries in connection with the acquisition, purchase or lease by such Borrower or any of its Subsidiaries of capital assets that would be required to be capitalized (including the applicable amount in respect of capitalized interest) and which amounts would be shown as such capital expenditures on the consolidated statement of cash flow of such Person in accordance with GAAP, provided, however, Capital Expenditures shall not include (i) amounts paid with insurance proceeds or the proceeds of a condemnation award within twelve (12) months after receipt by the Borrower or its Subsidiaries, as the case may be, in connection with the purchase of capital assets to replace the capital assets destroyed in the casualty loss giving rise to such insurance proceeds or taken in the condemnation proceeding giving rise to such condemnation proceeds, as the case may be, and (ii) amounts expended in connection with the acquisition of the Drexel Road Property in accordance with Section 5.1(n). "Circuit Test" means, Circuit Test, Inc., a Florida corporation, that is a wholly-owned subsidiary of the Borrower. "Circuit Test Acquisition" means the acquisition by the Borrower of the Persons identified in the Circuit Test Acquisition Agreement. "Circuit Test Acquisition Agreement" means the Limited Liability Company Unit Purchase Agreement among the Borrower, CTLLC Acquisition Corp., Circuit Test International, L.C., Airhub Services Group, L.C., and the Members of Airhub Services Group, L.C. and Circuit Test International, L.C. dated as of July 9, 1997. "Circuit Test International" means Circuit Test International, L.C., a Florida limited liability company, that is wholly-owned by the Borrower and its Affiliates. "CMLTD" means, with respect to the Borrower or any Guarantor, all principal amounts due and payable by the Borrower or such Guarantor during the then-current month and during the following eleven months with respect to Debt of such Person other than accounts payable, accrued expenses and income taxes payable. "Code" means the Internal Revenue Code of 1986, as amended, and as the same may be supplemented, modified, amended or restated from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of applicable law. "Collateral" shall mean all rights and interests of the Borrower and of the Guarantors which are subject to the Collateral Documents. -5- "Collateral Documents" means the Deeds of Trust, the Security Agreements, the Guaranties, the Landlord Consent and Waiver, the Collateral Assignments of Leases, and the Pledge Agreement. "Commitment" means, with respect to each Bank, such Bank's obligation to make Loans pursuant to the Revolving Loan Commitment and Term Loan Commitment. "Commitment Fee" has the meaning specified in Section 2.5(a) hereof. "Compliance Certificate" means, a certificate substantially in the form of Exhibit B-5. "Fixed Charges" means, as of any date of determination, the following, determined with respect to the immediately preceding four fiscal quarters of the Borrower and the Guarantors for which financial statements have been delivered pursuant to Section 5.1, the sum of (a) CMLTD and (b) Interest Expense for such period. There shall be included in the computation of Fixed Charges for any period the pro-forma effect for such period of the financial results of Current Electronics and Circuit Test for such period to the extent that such financial results were included in the computation of EBITDA. "Convert", "Conversion" and "Converted" each refers to a conversion of a Loan of one Type into a Loan of another Type pursuant to Section 2.13 or 2.14. "CTLLC Acquisition" means, CTLLC Acquisition Corp., a Florida corporation, that is a wholly-owned subsidiary of the Borrower. "Current Electronics" means, Current Electronics, Inc., an Oregon corporation, that is a wholly-owned subsidiary of the Borrower. "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. -6- "Deed of Trust" and "Deeds of Trust" mean, respec tively, any mortgage, deed of trust or other collateral security document pertaining to non-leasehold interests in real property executed by the Borrower or any Guarantor from time to time in favor of the Agent (on behalf of the Banks)supporting or securing any of the Obligations, including the Deeds of Trust substantially in the form of Exhibit F-1 hereto from the Borrower and certain of the Guarantors, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein. "Default" means any event or state of affairs that, with the giving of notice or the passage of time (or both) would constitute an Event of Default. "Default Rate" means an interest rate per annum equal to three percent (3%) above the Prime Rate in effect with respect to Loans at the time of occurrence of any Event of Default. "Disposition" means any sale, assignment, transfer or other disposition (including a ground lease or other long term obligation which under GAAP is the equivalent of a sale of such asset) or any asset (whether now owned or hereafter acquired) of any Person, other than inventory in the ordinary course of business. "Dollars", "dollars" and "$" means lawful money of the United States of America. "Draw" shall mean any payment by the Issuing Bank to a beneficiary of a Letter of Credit pursuant to the terms of a Letter of Credit. "EBITDA" means, with respect to the Borrower on a consolidated basis, in a twelve-month period, an amount equal to earnings (determined in accordance with GAAP)before deduction of interest expenses, taxes, depreciation expenses and amortization, provided, however that for purposes of calculating the financial covenants in Section 5.2 during the twelve (12) month period following the Effective Date, EBITDA shall be calculated by also taking into account during the relevant period, without duplication,(x) the results of operations of Circuit Test and Current Electronics determined in accordance with the financial statements of Circuit Test and Current Electronics as provided to the Agent,(y) the amount imputed to the Allied Signal Acquisition described on the Compliance Certificate to be furnished under Section 5.1(b)(iv) , and (z) the results of operations of any other acquired Person as determined in accordance with the financial statements of any such Person for such period as provided to the Agent. Operations of such acquired Person shall be treated as if it had been a Subsidiary of the Borrower for the preceding four fiscal quarters. -7- "Effective Date" means September 30, 1997. "Eligible Account Receivable" means all Accounts Receivable of the Borrower and its Subsidiaries which are subject to a first and prior Lien in favor of the Agent on behalf of the Banks pursuant to the Collateral Documents (reduced by the amount of any refund, rebate, allowance, discount or other concession to the account debtor in connection therewith) except for the following: (i) Accounts Receivable with respect to which the account debtor is an Affiliate of the Borrower or any Guarantor, or a director, officer, employee or agent of the Borrower or any Guarantor; (ii) Accounts Receivable with respect to which goods are placed on consignment, guaranteed sale, "sale or return" or other terms by reason of which the payment of the account debtor may be conditional; (iii) Accounts Receivable which are subject to dispute, counterclaim or set off; (iv) Accounts Receivable with respect to which the goods have not been shipped or the services rendered to the account debtor; (v) Accounts Receivable from account debtors whose financial condition or creditworthiness of such account debtor is unacceptable under the credit policy of the Borrower, which credit policy shall be consistent with prudent industry practice; (vi) Accounts Receivable which are not due and payable within 60 days after their invoice date; (vii) Accounts Receivable which are more than 60 days past their due date; (viii) That portion of Accounts Receivable owed by a single account debtor that exceeds (a) fifty percent (50%) of total Eligible Accounts Receivable for an account debtor rated BBB- by Standard & Poor's and Baa3 by Moody's Investor Services, Inc., or higher ("Investment Grade Accounts Receivable") and (b) twenty five percent (25%) for non-Investment Grade Accounts Receivable.; (ix) Accounts Receivable owing from a single account debtor if twenty-five percent (25%) of its Accounts -8- Receivable with the Borrower and all Guarantors is more than 60 days past due; (x) Accounts Receivable from account debtors which do not maintain their principal place of business in the United States, unless they are supported by an irrevocable letter of credit from a banking institution in the United States acceptable to the Agent in its sole discretion; (xi) Accounts Receivable from an account debtor which has filed, or which has had filed against it, and is pending, a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency or debtor-relief statute; or which has had appointed, and continues to be appointed, a trustee, custodian or receiver for the assets of such account debtor; or which has made, and is pending, an assignment for the benefit of creditors or has become, and remains, insolvent or has failed, and continues to fail, generally to pay its debts (including its employee payroll) as such debts become due; (xii) Accounts Receivable with respect to which the account debtor is the United States, or any department or agency thereof (other than such Accounts Receivable in which the Banks have been granted an enforceable assignment in compliance with the provisions of 41 U.S.C. Section 15); and (xiii) Accounts Receivable which are not subject to a Lien in favor of the Agent, or which are subject to a Lien in favor of a Person other than the Agent, whether or not such Lien is junior to the Lien of the Agent other than Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or which are being contested in good faith and with due diligence and with respect to which adequate reserves, determined in the reasonable discretion of the Agent, have been established and Liens which do not materially and adversely affect the Banks' rights and interests in such Accounts Receivable, the Collateral, or the collectibility of the Accounts Receivable. "Eligible Inventory" means Inventory of the Borrower and its Subsidiaries subject to a first and prior Lien in favor of the Agent on behalf of the Banks pursuant to the Collateral Documents, except for the following: (i) any portion of Inventory consisting of work-in- process that is not subject to an enforceable purchase order or purchase agreement; -9- (ii) Inventory which is not subject to a Lien in favor of the Bank or which is subject to a Lien in favor of a Person other than the Banks, whether or not such Lien is junior to the Lien of the Banks other than Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or which are being contested in good faith and with due diligence and with respect to which adequate reserves, determined in the reasonable discretion of the Agent, have been established and Liens which do not materially and adversely affect the Banks' rights and interests in such Inventory or the Collateral; (iii) Finished goods that do not meet the specifications of the purchase order for such goods; (iv) Inventory situated at a premises leased by the Borrower or a Subsidiary located in Ft. Lauderdale, Florida, or Oregon for which there is no valid landlord waiver, mortgagees waiver or warehouseman's or bailee's agreement, if appropriate, in form and substance acceptable to the Agent in its sole discretion except that such waivers for Inventory located on leased premises in all other locations must be provided within thirty (30) days after the Effective Date or they will be excluded; (v) Inventory produced in violation of the Fair Labor Standards Act and in particular the provisions of that statute contained in 29 U.S.C. ss.215(a)(i); (vi) Inventory which is deemed to be obsolete, unsaleable, damaged and unfit for further processing in accordance with GAAP, provided that, if the Agent reasonably disagrees with the valuation of such inventory it may, once annually, at Borrower's expense, require a collateral audit to establish the value of such; and (vii) Inventory which is not located in the United States. "Environmental Claim" means: (a) any responsibility, liability or unlawful act or omission under any Environmental Law (whether alleged or otherwise); (b) any tortious act or omission or breach of contract pertaining to any Environmental Substance (whether alleged or otherwise); or (c) any other violation or claim under any Environmental Law or in respect of any Hazardous Materials (whether alleged or otherwise). -10- "Environmental and Safety Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, codes and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and common law concerning public health or safety, worker health or safety or pollution of protection of the environment, including without limitation those relating to any emissions, discharges or releases of Hazardous Materials to ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, control, clean-up or handling of Hazardous Materials. "Equipment" means the Borrower's equipment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and as the same may be supplemented, modified, amended or restated from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of applicable law. "ERISA Affiliate" and "ERISA Affiliates" shall mean, respectively, any one or more of any trade, business, person or persons that together with the Borrower would be deemed to be a single employer within the meaning of Section 4001(b)(1) of ERISA. "ERISA Effect" means any material and adverse effect on (a) any Plan, (b) the assets and properties of any Plan or (c) any funding or other liability of any one or more of the Borrower or any ERISA Affiliate in respect of any Plan (individually or in the aggregate). "ERISA Event" means any (a) "accumulated funding deficiency" (whether or not waived), "prohibited transaction," "reportable event" (other than any event for which the 30-day notice requirement has been waived by regulation), "disqualification," "partial withdrawal," involuntary "partial termination" or "termination," "insolvency," "reorganization" or the imposition of any "penalty" or "withdrawal liability" in respect of any Plan under (and as such words and phrases are defined in" ERISA or the Code, as applicable), (b) any other violation of ERISA, the Code or any other applicable law in respect of any Plan (whether asserted or otherwise), (c) supplement or amendment to or modification or restatement of any Plan that could have or has had an ERISA Effect, or (d) imposition, increase or other adverse change in any funding obligation or other liability of any one or more of the Borrower or any ERISA Affiliate in respect of any Plan or to the Pension Benefit Guaranty Corporation (individually or in the aggregate). -11- "Event of Default" shall have the meaning assigned thereto in Section 6.1 hereof. "Excess Cash Flow" means, for any fiscal period, the excess of (a) EBITDA over (b) the sum of (i) Consolidated Fixed Charges for such period,(ii) Capital Expenditures actually made during such period, (iii) cash taxes for such period, and (iv) optional prepayments of principal of the Term Loan made during such period. "Existing Debt" means any Debt outstanding on the Effective Date to the extent set forth on Schedule 4.1(m). "Existing Loan Agreement" means the Business Loan Agreement, dated as of February 24, 1997, between the Borrower and Bank One, Colorado, N.A. "Existing Loan Instruments" means the Existing Loan Agreement, and all notes, security agreements, deeds of trust, mortgages and other collateral security documents, all financing statements relating thereto, and all other instruments executed by the Borrower in connection with the Existing Loan Agreement. "Federal Funds Rate" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. "Fees" means the Commitment Fee and the Letter of Credit Fees. "GAAP" means generally accepted accounting principals applied in the United States and practices which are recognized as such by the American Institute of Certified Public Accountants or successor organization. "Governmental Authorities" means any federal, state, county, municipal, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" and "Guarantees" mean a guarantee, endorsement, contingent agreement to purchase or furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, any indebtedness (including Debt) or other obligations of any Person, or a guarantee of the payment of dividends or other distributions upon -12- the stock or other equity interests in any Person, or an agreement to purchase, sell or lease (as lessee or lessor) real or personal property or services primarily for the purpose of enabling a debtor to make payment of its obligations or an agreement to assure a creditor against loss, and including, without limitation, causing a bank to issue a letter of credit for the benefit of another Person. "Guarantor" and "Guarantors" means, respectively, any one or more of Current, Circuit Test, Airhub Services, Circuit Test International and CTLLC Acquisition. "Guarantor Omnibus Certificate" means a certificate to be provided to the Bank by each of the Guarantors, each substantially in the form of Exhibit G-2 hereto. "Guaranty" and "Guaranties" means, the Guaranty from each of the Guarantors to the Bank substantially in the form of Exhibit C-1 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein. "Hazardous Materials" means, collectively, any polychlorinated biphenyls, petroleum or petroleum derived substance, friable asbestos, and any toxic or otherwise hazardous waste, material or substance, including, without limitation, all substances with respect to which liability or standards of conduct may be imposed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, the Resource Conservation and Recovery Act of 1976, as amended from time to time, or any other Environmental and Safety Law. "Interest Expense" means, with respect to the Borrower, for any fiscal year, the interest payable by the Borrower during such fiscal year in cash. Expressly excluded from the definition of "Cash Interest Expense" is any interest expense imputed to the Borrower by the Borrower's independent accountants for GAAP accounting purposes, for purposes of federal or state taxation, or for any other purposes. "Interest Period" means, for each LIBOR Rate Loan, the period commencing on the date of the Advance thereof or the date of the Conversion of any Prime Rate Loan into such a LIBOR Rate Loan and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be 1, 3 or 6 months as the Borrower may, upon notice received by the Bank not later than 10:00 a.m. (Denver, Colorado time) on the third -13- Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (ii) no Interest Period applicable to a Term Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of the Term Loans unless the aggregate principal amount of Term Loans represented by Prime Rate Loans or LIBOR Rate Loans having Interest Periods that will expire on or before such date, equals or exceeds the amount of such principal payment; and (iii) no Interest Period for any Term Loan shall extend beyond September 30, 2002 and no Interest Period for any Revolving Loan shall extend beyond September 30, 2000. "Interest Period/Conversion Notice" means a notice from the Borrower to the Bank substantially in the form of Exhibit B-3 concerning Conversions of Types of Advances, or concerning Interest Period elections. "Interest Rate Protection Agreement" means any interest rate protection agreement, future, option swap, cap or collar agreement or other arrangement designed to fix interest rates or other wise hedge against fluctuations in interest rates. "Inventory" means all raw materials, work in process, finished goods, merchandise, parts and supplies of every kind and description of the Borrower, and of the Guarantors, and goods held for sale or lease or furnished under contracts of service in which the Borrower or any Guarantor now has or hereafter acquires any right, whether held by the Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of the Borrower's or any Guarantor's custody or possession. "Issuing Bank" means Bank One, Colorado, N.A. in its capacity as issuer of one or more Letters of Credit hereunder -14- "Landlord Waiver and Consent" means the Landlord Waiver and Consent pertaining to the lessor's interest the leasehold estates held by the Borrower or its Subsidiaries in the of form of Exhibit F-2 hereto. "Letter of Credit" and "Letters of Credit" means one or more letters of credit issued by the Bank for the account of the Borrower as provided in Section 2.4 hereto. "Letter of Credit Fees" shall have the meaning specified in Section 2.5(b). "Letter of Credit Rate" means, the percentage set forth below in the following table opposite the applicable ratio of Total Debt to Trailing Four Quarter EBITDA determined as of the fiscal quarter immediately preceding such period: Greater Than or Less Than Letter of Equal to Credit Rate 3.75x - 2.750% 3.25x 3.75x 2.500% 2.75x 3.25x 2.250% - 2.75x 2.000% The ratio of Total Debt to Trailing Four Quarter EBITDA shall be computed by the Borrower and such ratio and the Letter of Credit Rate for the fiscal quarter will be set forth in the Compliance Certificate furnished under Section 5.1(b)(iv). The Letter of Credit Rate shall be subject to adjustment, if necessary, on a date fifty (50) days after the end of each fiscal quarter of the Borrower. Notwithstanding the foregoing, the Letter of Credit Rate will be 2.75% from the Effective Date to fifty (50) days after the fiscal quarter ended September 30, 1997, at which point the Letter of Credit Rate will be as set forth in the Compliance Certificate accompanying the financial statements furnished under Section 5.1(b)(iv) for the fiscal quarter ended September 30, 1997. "Letter of Credit Sublimit" means $5,000,000. "LIBOR Base Rate" means, for any Interest Period for any LIBOR Rate Loan, the offered rate for U.S. Dollar deposits of not less than $1,000,000.00 as of 11:00 A.M. City of London, England time two London Business Days prior to the first date of each Interest Period as shown on the display designated as "British Bankers Assoc, Interest Settlement Rates" on the Telerate System ("Telerate"), Page 3750 or Page 3740, or such other page or pages as may replace such pages on Telerate for the -15- purpose of displaying such rate. Provided, however, that if such offered rate is not available on Telerate then such offered rate shall be calculated by the Agent by a substantially similar methodology as that theretofore used to determine such offered rate in Telerate. "London Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England. "LIBOR Rate" means, for any LIBOR Rate Loan for any Interest Period therefor, a rate per annum (expressed as a decimal, rounded upwards, if necessary, to the nearest 1/100,000 of 1%) determined by the Agent to be equal to the sum of (a) the LIBOR Base Rate for such Advance for such Interest Period, plus (b) the Applicable Margin. The LIBOR Base Rate shall be adjusted automatically as to all LIBOR Rate Loans outstanding as of the effective date of any change in the Reserve Requirement. "LIBOR Rate Loan" means a Loan which bears interest as provided in Section 2.11(b). "Lien" means any mortgage, deed of trust, lien, chattel mortgage, conditional sale contract, pledge, charge, security interest or encumbrance of any kind whatsoever. "Loan" and "Loans" means, respectively, all funds Advanced by the Banks to the Borrower pursuant to Requests for Advance submitted by the Borrower to the Agent, all Swing Loans, all Draws under Letters of Credit, and all other amounts paid or otherwise advanced by the Issuing Bank on behalf of the Borrower pursuant hereto or pursuant to any other Loan Instrument, which Loans will be evidenced by the Notes. "Loan Instrument" and "Loan Instruments" means, respectively, any one or more of this Agreement, the Notes, the Requests for Advance, the Requests for Letter of Credit, the Letters of Credit, the Guaranties, the Collateral Documents, and the various other deeds of trust, mortgages, assignments, instruments and other documents creating or evidencing the Banks' interest in any collateral securing or intended to secure anyone's obligations under any of the foregoing, and all waivers, consents, agreements, representations and warranties, reports, statements, certificates, schedules and other documents executed by the requisite Person(s) pursuant to or in connection with any of the foregoing and accepted or delivered by the Agent (whether prior to, on or from time to time after the Effective Date), as each may be supplemented, modified, amended or restated from time to time in the manner provided therein. "Material Adverse Effect" means any material and adverse effect, whether individually or in the aggregate, upon (a) the assets, business, operations, properties or condition, -16- financial or otherwise, of the Borrower and its wholly owned Subsidiaries, taken as a whole, (b) the ability of the Borrower to make payment as and when due of all or any part of the Obligations, or (c) the Collateral. "Material Agreements" means all agreements of the Borrower which are included in the Collateral, and all other agreements and contracts (written or oral, now existing or hereafter entered into) to which the Borrower is a party, or by which the Borrower, or the Collateral is bound, the nonperformance of which by the Borrower, or by the Borrower's counter parties thereto would have a Material Adverse Effect on the Borrower which Material Agreements in effect on the date hereof are identified in Schedule 4.1(n) hereto. "Maturity Date" means, (a) with respect to the Revolving Loans, the first to occur of (i) the Revolving Loans Scheduled Maturity Date and (ii) the date on which the due date of the Loans has been accelerated and payment demanded by the Bank by reason of an Event of Default pursuant to Article VI; and (b) with respect to the Term Loans, the first to occur of (iii) the Term Loans Scheduled Maturity Date and (iv) the date on which the due date of the Loans has been accelerated and payment demanded by the Agent by reason of an Event of Default pursuant to Article VI. "Maximum Revolving Credit Amount" means the lesser of (y) $25,000,000 and (z) the Borrowing Base in effect from time to time, as such $25,000,000 may be reduced by the Borrower pursuant to Section 2.6. "Monfort Subordinated Notes" means the promissory note or promissory notes issued by the Borrower to Richard L. Monfort in the aggregate face amount of $15,000,000 due December 31, 2002 that are subordinated to the Revolving Loans, Term Loans and Swing Line Loans on terms and conditions satisfactory to the Agent. "Multiemployer Plan" of any Person shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by such Person or any ERISA Affiliate of such Person and which is covered by Title IV of ERISA. "Net Income" means, for any computation period, with respect to the Borrower on a consolidated basis, cumulative net income earned during such period as determined in accordance with GAAP. "Net Proceeds" means the proceeds received by the Borrower in cash from the sale, lease, assignment or other disposition of any asset or property (other than sales of assets -17- in the ordinary course of business, which, for purposes of this definition, shall not include any disposition of assets in which the total consideration received or receivable is in excess of $500,000), net of (a) reasonable and customary fees, costs, commissions and expenses, including attorneys' fees, incurred in connection with such sale, lease, assignment or other disposition and payable by or on behalf of the seller or the transferor of the assets to which sale or disposition relates, and (b) the amount of all foreign, Federal, state and local taxes payable as a direct consequence of such sale, lease, assignment or other disposition. For this purpose, all proceeds of insurance paid on account of the loss of or damage to any such asset or property, or group of assets or properties, and awards of compensation for any such asset or property, or group of properties, taken by condemnation or eminent domain shall be deemed to be Net Proceeds (provided that, in the case of proceeds from insurance paid with respect to any loss or damage to any asset, such proceeds, or any portion thereof, shall not constitute Net Proceeds if the Agent has received notice from the Borrower of its intention to use such proceeds or portion thereof at the time of such loss or damage, and such proceeds or portion thereof are in fact so used within six months after the occurrence of such loss or damage to repair, restore or replace such assets). With respect to the issuance or sale of equity securities, Net Proceeds means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' fees, discounts and commissions and other expenses actually incurred in connection with such sale or issuance. Net Proceeds do not include the proceeds from the exercise of (A) warrants issued to Richard L. Monfort in connection with the Monfort Subordinated Notes and (B) stock options issued pursuant to an employee stock option plan described in the Borrower's proxy statements. "Net Worth" means the net worth of a Person, determined in accordance with GAAP. "Notes" means, collectively, the Revolving Notes, the Term Notes and the Swing Loan Notes. "Obligations" means the obligations of the Borrower to repay the balance of the Loans outstanding hereunder, together with accrued and unpaid interest thereon, fees payable hereunder, and all other amounts payable or obligations to be performed by the Borrower hereunder or under any other Loan Instrument or under any Permitted Swap Obligations for which the counterparty is a Bank. "Permitted Lien" means: (a) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or which are being contested in good faith and with due diligence -18- and with respect to which adequate reserves have been established; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business not yet delinquent or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; (c) Liens (other than Liens imposed by ERISA) consisting of pledges or deposits under workers' compensation, unemployment insurance and other social security legislation; (d) easements, rights-of-way, zoning restrictions and other similar encumbrances of record on real property incurred in the ordinary course of business which, in the aggregate, are not material in dollar amount, and which do not in any case interfere with the ordinary conduct of the business of the Borrower or any Guarantor; (e) Liens existing on the date hereof and disclosed in Schedule 4.1(p) hereto; (f) purchase money security interests securing payment by the Borrower or any Guarantor of a portion of the purchase price of any asset, provided that (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the aggregate principal outstanding of such purchase money security interest Liens shall not at any one time exceed $2,500,000; (g) Liens, deposits or pledges to secure the non-delinquent performance of bids, tenders, contracts(other than contracts for the payment of money), leases (permitted under this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; or (h) any attachment or judgment Lien either in existence less than 30 calendar days after the entry thereof, or with respect to which execution has been stayed, or with respect to which payment in full above any deductible is covered by insurance, -19- "Permitted Swap Obligations" means all obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under Swap Contracts with one or more creditworthy parties as the swap counterparty, provided that such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments or assets held or reasonably anticipated by such Person and not for the purpose of speculation. For the purposes of this definition, the term "creditworthy party" means any Bank, any Affiliate of any Bank or any third party having a credit rating from Standard & Poor's and Moodys Investor's Services, Inc. not less than that of the Bank with the lowest credit rating. All Swap Contracts with counterparties who are not Banks will be unsecured. "Person" means any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, limited liability partnership, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). "Plan" of a Person shall mean an employee benefit or other plan established or maintained by such Person or any ERISA Affiliate of such Person and which is covered by Title IV of ERISA, other than a Multiemployer Plan of such Person. "Pledge Agreement" means the Pledge and Security Agreement of the Borrower pertaining to its interests and its other personal property substantially in the form of Exhibit D hereto. "Prime Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time as announced publicly by the Agent in Denver, Colorado, from time to time, as the Agent's prime rate. Such rate will not necessarily be the lowest interest rate charged by the Agent for loans to its customers. The Prime Rate shall change on each day on which the Agent announces a change in such Prime Rate. "Prime Rate Loan" means an Advance or a Draw which bears interest as provided in Section 2.11(a). "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal) at such time of such Bank's Commitment divided by the combined Commitments of all Banks. "Real Property" shall mean Borrower's Real Property. -20- "Record" means the grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Bank with respect to any Loan referred to in such Note. "Regulations D, G, T, U and X" mean, respectively, Regulations D, G, T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be amended or supplemented from time to time. "Regulatory Change" means, with respect to the Banks, any change enacted or adopted after the date of this Agreement in United States federal or state law or regulations or any foreign law or regulations (including, without limitation, Regulation D) or the adoption or publication after the date of this Agreement of any interpretations, directives or requests (whether or not having the force of law) applying to a class of banks, including the Banks, by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Request for Advance" means a written request by the Borrower to the Agent for an Advance of funds as a Loan hereunder, which written request will be in the form of Exhibit B-1 hereto. "Request for Letter of Credit" means a written request by the Borrower for the issuance of a Letter of Credit for the account of the Borrower hereunder, which written request will be in the form of Exhibit B-2 hereto. "Required Banks" means, at any particular time, those Banks having 66 2/3% of the Loans or, if there are no Loans outstanding, at least 66 2/3% of the Commitments. "Requirement of Law" means, as to any Person, any law (statutory or common), ordinance, treaty, code, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its assets to which the Person or any of assets is subject. "Reserve Requirement" means, for any Interest Period for any LIBOR Rate Loan, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall include any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes -21- deposits by reference to which the LIBOR Base Rate is to be determined as provided in the definition of "LIBOR Base Rate" in this Section 1.1, or (ii) any category of extensions of credit or other assets which includes LIBOR Rate Loans. "Revolving Loans" means all Advances of funds by the Banks to the Borrower pursuant to the Revolving Loans Commitment, and all Draws under Letters of Credit, which Loans will be evidenced by the Revolving Note. "Revolving Loans Commitment" means the commitment of the Banks to Advance Revolving Loans and Swing Loans to the Borrower or to issue Letters of Credit for the account of the Borrower from time to time in the aggregate amount of $25,000,000.00 as provided in Section 2.1. "Revolving Loans Scheduled Maturity Date" means September 30, 2000. "Revolving Note" means the promissory notes in the aggregate principal amount of $25,000,000, made by the Borrower and payable to the order of the Banks, substantially in the form of Exhibit A-1 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein. "Revolving Note Record" means a Record with respect to a Revolving Note. "Secured Party" has the meaning ascribed to such term in the Security Agreements, Pledge Agreements and the Deeds of Trust. "Security Agreement" means a Security Agreement and Assignment from certain Guarantors substantially in the form of Exhibit E hereto. "Security Interest" means the Liens created, or purported to be created, by the Loan Instruments. "Senior Debt" means the Loans. "Subordinated Debt" means (i) the Monfort Subordinated Notes and (ii) any other Debt of the Borrower that is subordinated on terms and conditions, and that is subject to other terms and conditions, satisfactory in form and substance to the Required Banks. "Subsidiary" or "Subsidiaries" of a Person means, any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interest -22- (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refers to a Subsidiary of the Borrower. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency option or any other, similar transaction ( including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swing Loan" means an amount advanced by the Swing Loan Lender pursuant to Section 2.2 hereof. "Swing Loan Commitment" means the commitment of the Swing Loan Lender to Advance Swing Loans to the Borrower from time to time as provided in Section 2.1. "Swing Loan Lender" means Bank One, Colorado, N.A. "Swing Loan Note" means any promissory note in the form of Exhibit A-3. "Term Loan" means the Advance of funds by the Banks to the Borrower pursuant to the Term Loan Commitment, which Loans will be evidenced by the Term Notes. "Term Loan Commitment" means the commitment of each Bank to Advance the Term Loan to the Borrower in a single Advance, as provided in Section 2.1. "Term Note" means the promissory notes in the aggregate principal amount of $20,000,000 evidencing the Term Loan, made by the Borrower and payable to the order of the Banks, substantially in the form of Exhibit A-2 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein. "Term Loan Record" means a Record with respect to a Term Loan. "Term Loan Scheduled Maturity Date" means September 30, 2002. "Total Debt" means, at any time, the Debt of the Borrower and Subsidiaries on a consolidated basis for the -23- purposes of calculating the financial covenants in Section 5.2(a), the Applicable Margin and the Letter of Credit Rate at such time. "Trailing Four Quarter EBITDA" means, with respect to the Borrower, the EBITDA for the immediately preceding four fiscal quarters of the Borrower. "Type" means a type of Advance, being a Prime Rate Loan or a LIBOR Rate Loan, as the case may be. "Uniform Commercial Code" means the Uniform Commercial Code as in effect from time to time in the State of Colorado. SECTION 1.2 Accounting Terms and Determinations. Except ----------------------------------- as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, all calculations for purposes of determining compliance with the terms of this Agreement shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered to the Agent hereunder shall be prepared in accordance with GAAP applied for all periods to the extent practicable on a basis consistent with that used in the preparation of the financial statements identified in Section 4.1(f), so as to fairly present the -------------- financial condition and results of operations of the applicable Person. ARTICLE II COMMITMENT; AMOUNTS AND TERMS OF THE ADVANCES AND LETTERS OF CREDIT SECTION 2.1 Commitment. Each Bank severally agrees, on the terms and subject to the conditions contained in this Agreement and the Loan Instruments, to make Loans to the Borrower for the account of the Borrower in accordance with the provisions of this Section 2.1. (a) Revolving Loans Commitment. Pursuant to the Revolving Loans Commitment, from the Effective Date until the first to occur of the Revolving Loans Scheduled Maturity Date and the Maturity Date, each Bank severally agrees to Advance funds to the Borrower as Revolving Loans and issue for the account of the Borrower Letters of Credit up to the maximum face amount of the Letter of Credit Sublimit, provided, however, that at no time shall the Banks be required to Advance Revolving Loans to the Borrower or to issue Letters of Credit for the account of the Borrower if, after such Advance or issuance of such Letter of Credit -24- the sum of the principal amount of Revolving Loans outstanding plus the face amount of Letters of Credit outstanding is in excess of the Maximum Revolving Credit Amount; and provided further, that no Bank shall be required to Advance Revolving Loans and participate in Letters of Credit in an aggregate amount exceeding the Bank's Revolving Loan Commitment as described on Schedule 2.1. All Draws honored by the Banks shall constitute Revolving Loans. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow funds Advanced to the Borrower as Revolving Loans. (b) Term Loan Commitment. Pursuant to the Term Loan Commitment, each Bank severally agrees to Advance, on the Effective Date, a Term Loan to the Borrower, in a single Advance, in a principal amount not exceeding the Bank's Term Loan Commitment as described on Schedule 2.1. (c) Swing Loan Commitment. (i) Pursuant to the Swing Loan Commitment and subject to the terms and conditions of this Agreement, the Swing Loan Lender agrees to make, from time to time from the Effective Date to the first to occur of the Revolving Loans Scheduled Maturity Date or the Maturity Date, one or more Swing Loans to the Borrower in an aggregate unpaid principal amount not to exceed the lesser of (a) the Revolving Loans Commitment at such time minus the sum of the aggregate unpaid principal amount of all Revolving Loans and Swing Loans outstanding at such time and the aggregate amount of the Letters of Credit outstanding at such time and (b) $2,500,000. (ii) Upon demand made to all of the Banks by the Swing Loan Lender, which demand may be made before or after an Event of Default, each Bank (other than the Swing Loan Lender) shall irrevocably and unconditionally purchase from the Swing Loan Lender, without recourse or warranty, an undivided interest and participation in the Swing Loans then outstanding, by paying to the Swing Loan Lender, without reduction or deduction of any kind, including but not limited to reductions or deductions for set-off, recoupment or counterclaim, in Dollars immediately available to the Swing Loan Lender, an amount equal to such Bank's Pro Rata Share of the principal amount of all Swing Loans then outstanding, and thereafter, except as otherwise provided in the second succeeding sentence, the Banks' respective interests in such Swing Loans, and the -25- remaining interest of the Swing Loan Lender in such Swing Loans, shall in all respects be treated as Revolving Loans under this Agreement, but such Swing Loans shall continue to be evidenced by the Swing Note, and shall continue to be due and payable by the Borrower in accordance with Section 2.7(d). If any Bank does not pay any amount which it is required to pay forthwith upon the Swing Loan Lender's demand therefor, the Swing Loan Lender shall be entitled to recover such amount on demand from such Bank, together with interest thereon, at the Federal Funds Rate for the first three Business Days, and thereafter at the Prime Rate, for each day from the date of such demand, if made prior to 2:00 p.m. (Denver, Colorado time) on any Business Day, and if made thereafter on any Business Day, or made on any day that is not a Business Day, from the next Business Day following the date of such demand, until the date such amount is paid to the Swing Loan Lender by such Bank. If such Bank does not pay such amount forthwith upon the Swing Loan Lender's demand therefor, and until such time as such Bank makes the required payment, the Swing Loan Lender's remaining interest in the applicable Swing Loan shall continue to include the amount of such unpaid participation obligation. SECTION 2.2 Advances. (a) The Banks agree, on the terms and conditions set forth herein, (a) to make Advances to the Borrower of Revolving Loans (as LIBOR Rate Loans or as Prime Rate Loans) from time to time on any Business Day from and after the Effective Date through the first to occur of the Revolving Loans Scheduled Maturity Date and the Maturity Date, (b) to make an Advance to the Borrower of the Term Loan (as a LIBOR Rate Loan or a Prime Rate Loan) in a single Advance on the Effective Date and each LIBOR Rate Loan shall be in an amount not less than $1,000,000 or in integral multiples of $250,000 in excess thereof, and each Prime Rate Loan shall be in an amount not less than $500,000 or in integral multiples of $100,000 in excess thereof, except that an Advance of a Prime Rate Loan may be in an amount equal to the entire unused Revolving Loans Commitment. The total number of individual LIBOR Rate Loan Advances outstanding at any time shall not exceed three (3) for the Revolving Loans and one (1) for the Term Loan. (b) Pursuant to the Swing Loan Commitment, from the Effective Date until the first to occur of the Revolving Loans Scheduled Maturity Date or the Maturity Date, the Swing Loan Lender agrees to make Swing Loan Advances in an amount not less than $50,000 or in integral multiples of -26- $10,000 in excess thereof. All Swing Loan Advances shall be made as Prime Rate Loans. All Swing Loans shall be credited to the Borrower's Account. SECTION 2.3 Making the Advances. (a) Request for Advance, Revolving Loans and Term Loan. Each Revolving Loan and Term Loan Advance shall be made after delivery by the Borrower to the Agent of a Request for Advance, duly executed by an Authorized Signatory, delivered to the Agent (i) in the case of a Prime Rate Loan, not later than 11:00 a.m.(Denver, Colorado time) on the Business Day which is the date of the proposed Advance and (ii) in the case of a LIBOR Rate Loan, not later than 11:00 a.m. (Denver, Colorado time) on the third Business Day prior to the date of the proposed Advance. The Request for Advance shall specify (i) the date and amount of the Advance, (ii) whether a Revolving Loan or Term Loan is requested, (iii) the Type of Advance requested, and (iv) if a LIBOR Rate Loan is requested, the initial Interest Period therefor. Promptly upon receipt of such Request for Advance, the Agent shall notify the Banks thereof and of their Pro Rata Share of such proposed Advance. Not later than 2:00 p.m. (Denver, Colorado time) on the date of such Advance, subject to fulfillment of the applicable conditions set forth in Article III, the Agent will make such Advance available to the Borrower in same day funds by depositing such funds in the Borrower's Account. (b) Swing Loan Request. Each Swing Loan Advance shall be made after notice by the Borrower to the Swing Loan Lender ("Notice of Swing Loan Request"). Each Notice of Swing Loan Request shall be by telephone, telex or telecopier, confirmed immediately in writing, specifying therein the requested (a) date of such Swing Loan, (b) amount of such Swing Loan and (c) the maturity of such Swing Loan (which maturity shall be no later than the seventh Business Day after the requested date of such Advance). Each Notice of Swing Loan Request shall constitute a representation and warranty by the Borrower as of the time of such notice that the conditions specified in Sections 3.1 and 3.2 have been fulfilled at such time. The Swing Loan Lender will make such Swing Loan Advance available to the Borrower in same day funds by depositing such funds in the Borrower's Account (i) not later than the close of business on the date of such notice if such notice is given not later than 11:00 a.m. (Denver, Colorado time) on the date of the proposed Swing Loan Advance, or (ii) not later than the close of business on the date after -27- such notice if such notice is given later than 11:00 a.m. (Denver, Colorado time) on the date of the proposed Swing Loan Advance. Within the limits of the Swing Loan Commitment, the Borrower may borrow under this Section 2.3, repay pursuant to Section 2.7 and reborrow under this Section 2.3. (c) Request for Advance Irrevocable. Each Request for Advance from the Borrower to the Agent shall be irrevocable and binding on the Borrower. In the case of any request for a LIBOR Rate Loan the Borrower shall indemnify the Banks against any loss, cost or expense incurred by the Banks as a result of any failure to fulfill on or before the date specified in such notice for such Advance the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Banks to fund the Advance when the Advance, as a result of such failure, is not made on such date. (d) Availability of Funds, Revolving Loans and Term Loan. Not later than 2:00 p.m.(Denver, Colorado time)on the proposed day of the Advance of any Revolving Loan, each of the Banks will make available to the Agent, at its address referred to in Section 8.2, in immediately available funds, the amount of such Bank's Pro Rata Share of the requested Revolving Loan. Upon receipt from each Bank of such amount and upon receipt of the documents required by Sections 3.1 and 3.2 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Revolving Loan made available to the Agent by the Banks. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place the amount of its Pro Rata Share of the requested Revolving Loan shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Pro Rata Share of any requested Revolving Loan Advance. (e) Advances by Agent. The Agent may, unless notified to the contrary by any Bank prior to an Advance, reasonably assume that such Bank has made available to the Agent on such day the amount of such Bank's Pro Rata Share of the Revolving Loan to be made on such day, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Bank -28- makes available to the Agent such amount on a date after such day of Advance, such Bank shall pay to the Agent on demand an amount equal to the product of (a) the Federal Funds Rate each day included in such period, times (b) the amount of such Bank's Pro Rata Share of such Revolving Loan, times (c) a fraction, the numerator of which is the number of days that elapse from and including such day of Advance to the date on which the amount of such Bank's Pro Rata Share of such Revolving Loan shall become immediately available to the Agent, and the denominator of which is 360. A statement of the Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Agent by such Bank. If the amount of such Bank's Pro Rata Share of such Revolving Loan is not made within three (3) Business Days following such Advance, the Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to such Revolving Loan. SECTION 2.4 Letters of Credit. (a) Letter of Credit Commitment. Upon the terms and subject to the conditions of this Agreement, the Issuing Bank shall, from time to time during the period from the Effective Date through the tenth Business Day preceding the Maturity Date, issue one or more Letters of Credit for the account of the Borrower; provided, that the aggregate principal amount of all Letters of Credit shall not exceed at any time the lesser of (A) the aggregate amount of the Revolving Loans Commitment at such time minus the aggregate unpaid principal amount of all Revolving Loans outstanding at such time and (B) the Letter of Credit Sublimit. (b) Terms of Letters of Credit and Applications. Applications for each Letter of Credit shall be in a form and shall contain such terms as shall be reasonably satisfactory to the Issuing Bank. Each Letter of Credit that is issued, extended or renewed shall be in a form and contain such terms as shall be reasonably satisfactory to the Issuing Bank. Each such Letter of Credit shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision),International Chamber of Commerce Publication No. 500 or any successor version. (c) Renewals and Extensions. Each Letter of Credit shall be denominated only in Dollars and shall expire on or before the first anniversary of the issuance thereof (provided, that, any Letter of Credit may -29- include terms that provide for the automatic renewal thereof for successive one-year periods so long as such terms include a provision whereby the Issuing Bank shall be entitled to elect that any such renewal shall not occur if the conditions set forth in Sections 3.1 and 3.2 could not be fulfilled at such time, and the Issuing Bank shall give notice of such election to the beneficiary thereof) and in any event not later than the fifth Business Day preceding the Maturity Date. Any extension of the expiry date, or automatic renewal, of a Letter of Credit to a date beyond the first anniversary of the issuance thereof shall constitute an "issuance" of such Letter of Credit for all purposes hereof on, in the case of any such extension, the date on which such extension shall have been granted and, in the case of any such automatic renewal, on the tenth Business Day preceding the last day on which the Issuing Bank is entitled to give notice of its election that any such renewal shall not occur. (d) Issued on Business Day. Letters of Credit shall be issued only on a Business Day, and shall be used for the corporate purposes of the Borrower or the Subsidiaries. (e) Request for Letter of Credit. The Borrower shall request the issuance of a Letter of Credit by furnishing to the Agent and the Issuing Bank a Request for Letter of Credit or such other notice as shall be reasonably satisfactory to the Issuing Bank. The Request for Letter of Credit shall, among other things, specify the date of the requested issuance of the Letter of Credit. Subject to approval of the form and terms of the Letter of Credit as requested and to the other terms and conditions hereof, the Issuing Bank will issue the Letter of Credit and make delivery thereof to the Borrower or as the Borrower shall have instructed the Issuing Bank, on the date of requested issuance, provided that the Issuing Bank will not be required to issue the Letter of Credit prior to (i) the close of business on the second Business Day after it has received the Request for Letter of Credit, if the Request for Letter of Credit is received by 11:00 a.m. (Denver, Colorado time) of the date of receipt, or (ii) the close of business on the third Business Day after it has received the Request for Letter of Credit, if the Request for Letter of Credit is received on or after 11:00 a.m. (Denver, Colorado time) of the date of receipt. (f) Participations. Upon the date of issuance of a Letter of Credit, the Issuing Bank shall be deemed to -30- have granted to each Bank (other than the Issuing Bank), and each Bank (other than the Issuing Bank) shall be deemed to have acquired from the Issuing Bank without further action by any party hereto, a participation in such Letter of Credit and any Draw that may at any time be made thereunder, to the extent of such Bank's Pro Rata Share thereof. (g) Notice of Draw. The Issuing Bank shall promptly notify the Borrower of its receipt of each Draw request with respect to a Letter of Credit, stating the date and amount of the Draw requested thereby and the date and amount of each Draw disbursed pursuant to such request. The failure of the Issuing Bank to give, or delay in giving, any such notice shall not release or diminish the obligations hereunder of the Borrower in respect of such Draw. (h) Payment of Draw. The Borrower shall, on the day it receives notice of each Draw, if such notice is received prior to 11:00 a.m. (Denver, Colorado time) on such day, and on the Business Day following the day it receives such notice, if such notice is received after 11:00 a.m. (Denver, Colorado time) on such day, reimburse such Draw by paying to the Issuing Bank in immediately available funds the amount of the payment made by the Issuing Bank with respect to such Draw, together with interest thereon at a rate per annum equal to the Letter of Credit Rate as in effect from time to time until the day such reimbursement is made if such Draw is not reimbursed on the day notice is received. In the event that the Borrower shall fail to make any such payment when due and for so long as such failure shall be continuing, the Issuing Bank may give notice of such failure to the Agent and each Bank, which notice shall include the amount of such Bank's Pro Rata Share of such Draw, whereupon each such Bank (other than the Issuing Bank) shall promptly remit such amount to the Agent for the account of the Issuing Bank as provided in Section 2.4(i). (i) Participation in Draw. Each Bank (other than the Issuing Bank) shall, in the event it receives the notice from the Issuing Bank pursuant to Section 2.4(g) at or before 12:00 noon (Denver Time) on any Business Day, fund its participation in any unreimbursed Draw by remitting to the Agent, no later than 2:00 p.m. (Denver, Colorado Time) on such day, in immediately available funds, its Pro Rata Share of the reimbursement obligation in respect of each Draw. The Agent shall, in the event it receives such funds from such Bank at or before 2:00 p.m. (Denver, Colorado -31- Time) on any day, no later than 4:00 p.m. (Denver, Colorado Time) on such day, make available the amount thereof to the Issuing Bank, in immediately available funds. Any amount payable by any Bank to the Agent for the account of the Issuing Bank under this Section 2.4(i), and any amount payable by the Agent to the Issuing Bank under this Section 2.4(i), shall bear interest for each day from the date due (and including such day if paid after 2:00 p.m. (Denver, Colorado Time), in the case of any such payment by a Bank to the Agent, or 4:00 p.m. (Denver, Colorado Time), in the case of any such payment by the Agent to the Issuing Bank, on such day) in accordance with this Section 2.4(i) until the date it is received by the Issuing Bank at a rate equal to the Federal Funds Rate until (and including) the third Business Day after the date due and thereafter at the Prime Rate. Each Bank shall, upon the demand of the Issuing Bank, reimburse the Issuing Bank, to the extent the Issuing Bank has not been reimbursed by the Borrower after demand therefor, for the reasonable costs and expenses (including reasonable legal fees) incurred by it (other than as a result of its willful misconduct or gross negligence) in connection with the collection of amounts due under, the administration of, and the preservation and enforcement of any rights conferred by, the Letters of Credit or the performance of the Issuing Bank's obligations under this Agreement in respect thereof (other than its obligation to make Loans in its capacity as a Bank), to the extent of such Bank's Pro Rata Share (as of the time such costs and expenses are incurred) of the amount of such costs and expenses. The Issuing Bank shall refund any costs and expenses reimbursed by such Bank that are subsequently recovered from the Borrower in an amount equal to such Bank's Pro Rata Share thereof. (j) Obligations of Banks. The obligation of each Bank to make available to the Issuing Bank the amounts set forth in this Section 2.4 shall be absolute, unconditional and irrevocable under any and all circumstances without reduction for any set-off or counterclaim of any nature whatsoever, and may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to any qualification or exception and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Instruments; -32- (ii) the existence of any claim, set off, defense or other right which the Borrower or any Subsidiary may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, the Issuing Bank, any Bank or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower or any Subsidiary and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Instrument; or (v) the occurrence of any Default. (k) Waiver of Liability; Indemnity. (i) Without affecting any rights the Banks may have under Applicable Law, the Borrower agrees that none of the Banks, the Issuing Bank, the Agent or their respective officers or directors shall be liable or responsible for, and the obligations of the Borrower to the Banks, the Issuing Bank and the Agent hereunder shall not in any manner be affected by: (A) the use that may be made of any Letter of Credit or the proceeds thereof by the beneficiary thereof or any other Person or any acts or omissions of such beneficiary or any other Person; (B) the validity or genuineness of documents presented in connection with any Draw, or of any endorsements thereon, even if such documents should, in fact, prove to be in any or all respects, invalid, fraudulent or forged; or (C) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit or any other action taken or omitted to be taken by any Person under or in connection with any Letter of Credit, except that the Borrower shall have a claim against the Issuing Bank and the Issuing Bank shall be liable to the Borrower, in each case to the extent and only to the extent of any damages suffered by the Borrower that are caused by (1) the Issuing Bank's willful misconduct or -33- gross negligence (as determined by a court of competent jurisdiction) in determining whether documents presented under any Letter of Credit issued by the Issuing Bank complied with the terms of such Letter of Credit or (2) the Issuing Bank's willful failure (as determined by a court of competent jurisdiction) to pay under such Letter of Credit after the presentation to it of documents strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, in determining whether to pay under any Letter of Credit, the Issuing Bank shall not have any obligation relative to the other Banks other than to determine that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit, regardless of any notice or information to the contrary. Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Issuing Bank any resulting liability to any Bank. (ii) In addition to any other amounts payable under this Agreement, the Borrower agrees to protect, indemnify, pay and hold the Issuing Bank harmless from and against any and all claims, costs, charges and expenses (including reasonable attorneys' fees) which the Issuing Bank may incur or be subject to as a consequence, direct or indirect, of the issuance of, or payment of any Draw under, any Letter of Credit, other than as a result of the gross negligence or willful misconduct of the Issuing Bank as determined by a court of competent jurisdiction. (iii) The Issuing Bank shall not be responsible for: (A) the validity, accuracy, genuineness or legal effect of any document submitted by any party in connection with the issuance of Letters of Credit, (B) the validity of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, (C) errors, omissions, interruptions or delays in transmissions or delivery of -34- any messages, by mail, cable, telecopy, telex or otherwise, (D) the misapplication by the beneficiary of any Letter of Credit of the proceeds of any Draw under such Letter of Credit, and (E) any consequence arising from causes beyond the control of the Issuing Bank, including, without limitation, any governmental acts. SECTION 2.5 Fees. (a) Commitment Fee. The Borrower agrees to pay to the Agent a commitment fee (the "Commitment Fee") on the average daily unused portion of the Revolving Loans Commitment at the rate of one-half of one percent (1/2%) per annum, payable in arrears on the last day of each fiscal quarter of the Borrower, and payable on the Maturity Date. The Commitment Fee payable with respect to the Revolving Loans will be calculated for the period from the Effective Date through the first to occur of the Revolving Loans Scheduled Maturity Date and the Maturity Date, and shall be based upon the amount by which the daily average of the aggregate principal amount of Revolving Loans and Swing Loans outstanding and face amount of Letters of Credit outstanding is less than $25,000,000 or such lesser amount as may have been established by the Borrower pursuant to Section 2.6. (b) Letter of Credit Fees. Upon issuance, extension or renewal of each Letter of Credit, the Borrower will promptly pay the Issuing Bank, in advance, (i) with respect to, standby Letters of Credit a fee equal to the product of the Letter of Credit Rate, then in effect, times the aggregate face amount of the Letter of Credit, and (ii) with respect to documentary Letters of Credit a fee equal to the product of .50% times the Letter of Credit Rate, then in effect, times the aggregate face amount of the Letter of Credit. A portion of such fee equal to 0.25% of such face amount to be for the account of the Issuing Bank and the remainder shall be distributed to each Bank in accordance with its Pro Rata Share. Such fee will not be refunded if the Letter of Credit is terminated by -35- agreement prior to the date of expiration thereof, or if a Draw occurs under the Letter of Credit. The Borrower will also pay the Issuing Bank, for its own account, its usual and customary issuance, modification, negotiation, transfer and similar processing and administration fees and charges for documentary letters of credit as are in effect from time to time. (c) Other Fees. The Borrower shall pay certain Underwriting, Administrative and other fees as required by the letter agreement ("Fee Letter") among the Borrower, the Arranger and the Agent dated June 24, 1997. SECTION 2.6 Reduction of the Revolving Loans Commitment. The Borrower shall have the right at any time, upon at least three (3) Business Days' notice to the Agent, to terminate in whole or reduce in part the unused portion of the Revolving Loans Commitment, provided that each partial reduction of the Revolving Loans Commitment shall be in the amount of not less than $1,000,000 or an integral multiple thereof. Any such termination or reduction of the Commitment shall be irrevocable and permanent. Promptly after receiving such notice from the Borrower, the Agent will notify the Banks of the substance thereof. The Revolving Loans Commitments of the Banks shall be reduced pro rata pursuant to the notice or, as the case may be, terminated. SECTION 2.7 Repayment. (a) Voluntary Repayment. The Borrower may repay the principal amount of the Loans at any time, at its election, (i) in the case of a Prime Rate Loan, on any Business Day, without prior notice, and (ii) in the case of LIBOR Rate Loans, upon not less than three (3) Business Days prior notice to the Agent, subject to Breakage Costs provided for in Section 2.12. Any such voluntary repayment of the Loans shall be in the principal amount of not less than (y) $500,000 for Prime Rate Loans and in integral multiples of $100,000 thereafter and (z)$1,000,000 for LIBOR Rate Loans and in integral multiples of $250,000 thereafter. Any voluntary repayment of the Term Loan shall be accompanied by payment of all accrued but unpaid interest applicable to the principal amount of the Term Loan so repaid. (b) Installment Payments of Term Loan. The Borrower will repay the Term Loan in quarterly installment payments of principal, commencing on March 31, 1998 and on the last day of each quarter thereafter, in -36- accordance with the following: Quarterly Repayment Principal Date Payment Amount March 31, 1998 $675,000 June 30, 1998 $675,000 September 30, 1998 $875,000 December 31, 1998 $875,000 March 31, 1999 $875,000 June 30, 1999 $875,000 September 30, 1999 $1,070,000 December 31, 1999 $1,070,000 March 31, 2000 $1,070,000 June 30, 2000 $1,070,000 September 30, 2000 $1,070,000 December 31, 2000 $1,200,000 March 31, 2001 $1,200,000 June 30, 2001 $1,200,000 September 30, 2001 $1,200,000 December 31, 2001 $1,250,000 March 31, 2002 $1,250,000 June 30, 2002 $1,250,000 September 30, 2002 $1,250,000 (c) Mandatory Repayment. (i) The Borrower will repay the Loans in full on demand upon the acceleration of the due date of any of the Loans by the Agent pursuant to Article VI hereof. (ii) Within not more than five (5) Business Days after notice by the Agent to the Borrower that the principal amount of Revolving Loans and face amount of Letters of Credit outstanding exceed the Borrowing Base, the Borrower will repay the applicable Loan in an amount sufficient to eliminate the excess. (iii) The Borrower shall pay to the Agent Net Proceeds within not more than five (5) Business Days after the Borrower shall receive Net Proceeds from(x) Dispositions, (y) any equity securities issuance or sale, provided that payment of amounts due under the Braswell Earn Out Agreement(which payment shall not exceed $6,000,000)may be made if Net Proceeds of such issuance or sale exceed $20,000,000, or (z) insurance recoveries and condemnation and eminent domain awards. Collateral shall be released from the liens of the Collateral Documents upon any Disposition of such Collateral, -37- provided that (i) no Event of Default has occurred and (ii) the Borrower shall have made the mandatory repayment required under the terms of this Section 2.7. (iv) On or before the fifth Business Day following the Borrower's delivery of the Compliance Certificate for the fiscal year ending December 31, 1998 and annually thereafter the Borrower will pay to the Agent 50% of the Excess Cash Flow. (d) Repayment of Swing Loans. Swing Loans shall be paid in full by the Borrower on or before the seventh Business Day after the date of the Swing Loan Advance. Swing Loan repayments shall be made by the Borrower directly to the Swing Loan Lender. Such repayments shall be for the account of the Swing Loan Lender. Outstanding Swing Loans may be repaid from the proceeds of Revolving Loans Advances. Any repayment of a Swing Loan shall be in a minimum amount of $50,000 or integral multiples of $10,000 in excess thereof(or such lesser amount as may be agreed to by the Swing Loan Lender). (e) Application of Repayments. All voluntary Loan repayments received by the Agent from the Borrower will be applied to the Revolving Loans and Term Loans as the Borrower shall instruct the Agent in writing concurrently with the payment, and in the absence of such written instructions, will be applied first to repayment of the Revolving Loans. All mandatory Loan repayments will be applied to reduce the Term Loans until the Term Loans are paid in full, then to the repayment of the Revolving Loans. All repayments of the Term Loans will be applied to the installment payments due with respect to the Term Loans in inverse order of maturity. SECTION 2.8 Distribution of Payments by the Agent. ------------------------------------- The Agent shall promptly distribute to each Bank its Pro Rata Share of each payment received by the Agent under the Loan Instruments for the account of the Banks by credit to an account of such Bank at the Agent's Office or by wire transfer to an account of such Bank. Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks under the Loan Instruments that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Bank on such due date a -38- corresponding amount with respect to the amount then due such Bank. If and to the extent the Borrower shall not have so made such payment in full to the Agent and the Agent shall have so distributed to any Bank a corresponding amount, such Bank shall, on demand, repay to the Agent the amount so distributed together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent at the Prime Rate. SECTION 2.9 Promissory Notes. (a) The Revolving Notes. The Revolving Loans shall be evidenced by promissory notes of the Borrower in substantially the form of Exhibit A-1 hereto (each a "Revolving Note"), dated as of the Effective Date and completed with appropriate insertions. One Revolving Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Revolving Loans Commitment or, if different, the outstanding amount of all Revolving Loans made (or held) by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of an Advance of any Revolving Loan or at the time of receipt of any payment of principal on such Bank's Revolving Note, an appropriate notation on such Revolving Note Record reflecting the making of such Revolving Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Loans set forth on such Bank's Revolving Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount shall not affect the obligation of the Borrower hereunder or under any Revolving Note to make payments of principal of or interest on any Revolving Note when due. (b) Term Notes. The Term Loans shall be evidenced by promissory notes of the Borrower in substantially the form of Exhibit A-2 hereto (each a "Term Note"), dated the Effective Date and completed with appropriate insertions. One Term Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Term Loan Commitment and representing the obligation of the Borrower to pay to such Bank such principal amount or, if less, the outstanding amount of such Bank's Term Loan Commitment, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made a notation on such Bank's Term Note Record reflecting the original principal amount of such Bank's Term Loan Commitment and, at or about the time of such Banks' -39- receipt of any principal payment on such Bank's Term Note, an appropriate notation on such Bank's Term Note Record reflecting such payment. The aggregate unpaid amount set forth on such Bank's Term Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank's Term Note Record shall not affect the obligation of the Borrower hereunder or under any Term Note to make payments of principal of and interest on any Term Note when due. (c) Swing Loan Note. The Swing Loans shall be evidenced by promissory notes of the Borrower in substantially the form of Exhibit A-3 hereto (each a "Swing Loan Note"), dated the Effective Date and completed with appropriate insertions. SECTION 2.10 Pro Rata Treatment. Except to the extent otherwise provided herein, (a) Loans shall be made by the Banks pro rata in accordance with their respective Commitments, (b) Loans of the Banks shall be converted and continued pro rata in accordance with their respective amounts of Loans of the Type and, in the case of LIBOR Rate Loans, having the Interest Period being so converted or continued, (c) each reduction in the Revolving Loans Commitment and the Term Loan Commitment shall be made pro rata in accordance with the respective amounts thereof and (d) each payment of the principal of or interest on the Loans, reimbursement of a Draw under Letters of Credit or of Commitment or Letter of Credit Fees shall be made for the account of the Banks pro rata in accordance with their respective amounts thereof then due and payable. SECTION 2.11 Interest. The Borrower shall pay interest on the unpaid principal amount of each Loan from the date of the Advance thereof or the date of the Draw comprising such Loan until such principal amount has been repaid in full, at the following rates per annum: (a) Prime Rate Loans. During such periods as such Loan is a Prime Rate Loan, at a rate per annum equal at all times to the Prime Rate plus Applicable Margin or the Default Rate, whichever is applicable. Prime Rate Interest plus the Applicable Margin shall be payable monthly in arrears, on the first day of each month. Interest accruing at the Default Rate shall be payable on demand. (b) LIBOR Rate Loans. During such periods as such Loan is a LIBOR Rate Loan, at a rate per annum during the Interest Period for such Loan equal to the LIBOR Rate plus the Applicable Margin or the Default Rate, -40- whichever is applicable. LIBOR Rate interest plus the Applicable Margin will be payable on termination of the Interest Period applicable to the Loan, and, if such Interest Period is longer than 3 months, then every 3 months. Interest accruing at the Default Rate shall be payable on demand. (c) Default Rate Interest. Subject to the provisions of Section 6.2, all outstanding Loans will bear interest at the Default Rate during all periods when an Event of Default has occurred and remains outstanding hereunder. SECTION 2.12 Yield Protection. In order to protect the yield of the Banks in connection with the Advances to be made hereunder, the Borrower agrees as follows. (a) Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Banks of agreeing to make or making, funding or maintaining LIBOR Rate Loans, then the Borrower shall from time to time, upon demand by a Bank, pay to such Bank additional amounts sufficient to compensate the Bank for such increased cost. A certificate as to the amount of such increased cost, shall be submitted to the Borrower by Agent. Such certificate shall show in reasonable detail the Bank's computations of its increased costs. Notwithstanding the foregoing, there shall be no duplication of costs to the Borrower as the result of the application of Section 2.12(b). Such certificate of increased costs shall be conclusive and binding for all purposes, absent manifest error. (b) Additional Interest. The Borrower shall pay to the Banks, so long as the Banks shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency liabilities (as such term is defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time), additional interest on the unpaid principal amount of each LIBOR Rate Loan, from the date of the Advance thereof until the principal amount thereof is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBOR Rate for the Interest Period for such Loan from -41- (ii) the rate obtained by dividing such LIBOR Rate by a percentage equal to 100% minus the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for the Banks with respect to liabilities or assets consisting of or including Eurocurrency liabilities having a term equal to such Interest Period, payable on each date on which interest is payable on such Loan. Such additional interest shall be determined by the Agent and notified to the Borrower. (c) Increased Capital. If a Bank determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and that the amount of such capital is increased by or based upon the existence of the Bank's commitment to lend hereunder and other commitments of this type, then, upon demand by the Bank, the Borrower shall immediately pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank or such corporation in the light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of the Bank's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower by the Agent or a Bank, shall be conclusive and binding for all purposes, absent manifest error. Such certificate shall show in reasonable detail the Agent's or the Bank's computations. (d) Breakage Costs. If any payment of principal of any LIBOR Rate Loan is made other than on the last day of the Interest Period for such Loan as a result of acceleration of the maturity of the Loans and the Notes pursuant to Section 6.2 or for any other reason, the Borrower shall, upon demand, pay to the Bank any amounts required to compensate the Bank for additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated -42- profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Bank to fund or maintain such Advance. SECTION 2.13 Conversion of Loans; Change of Interest Periods. At any time, with respect to Prime Rate Loans, and at any time not less than three (3) Business Days prior to the end of the then current Interest Period for any LIBOR Rate Loan, the Borrower may elect, by delivery to the Bank of an Interest Period/Conversion Notice in the form of Exhibit B-3 duly executed by an Authorized Signatory, to Convert the Type of Advance or, with respect to LIBOR Rate Loans, to select an Interest Period for such Advance as permitted herein. If the Borrower fails to select the duration of any Interest Period for any LIBOR Rate Loan in the foregoing manner, such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Prime Rate Loan. SECTION 2.14 Illegality, Etc. (a) Notwithstanding any other provision of this Agreement, if the Agent or a Bank shall notify the Borrower that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for a Bank to perform its obligations hereunder to make LIBOR Rate Loans or to fund LIBOR Rate Loans hereunder, (i) the obligation of the Bank to make, or to Convert Loans into LIBOR Rate Loans shall be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist and (ii) the Borrower shall prepay in full all LIBOR Rate Loans of the Bank then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if the Banks may lawfully continue to maintain LIBOR Rate Loans to such day, or immediately, if the Banks may not lawfully continue to maintain LIBOR Rate Loan, unless the Borrower, within five (5) Business Days of notice from the Bank, Converts all LIBOR Rate Loans of the Bank then outstanding into Prime Rate Loans in accordance with Section 2.13. (b) If, with respect to any LIBOR Rate Loan, a Bank notifies the Borrower that the LIBOR Rate for any Interest Period for such Advance will not adequately reflect the cost to the Bank, in the Bank's reasonable judgement, of making, funding or maintaining such LIBOR Rate Loan for such Interest Period, such LIBOR Rate Loan will automatically, on the last day of the then existing Interest Period therefor, Convert into a Prime Rate Loan, and the obligation of the Bank to make, or -43- to Convert Advances into, LIBOR Rate Loans shall be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist. Upon receipt of such notice, the Borrower may revoke any Request for Advance or Interest Period/Conversion Notice then submitted by it. If the Borrower does not revoke such request or notice, the Bank shall make, convert or continue the Loan, as proposed by the Borrower, in the amount specified in the applicable request or notice submitted by the Borrower, but such Loan shall be made, converted or continued as a Prime Rate Loan instead of a LIBOR Rate Loan. SECTION 2.15 Payments and Computations. (a) The Borrower shall make each payment under any Loan Instrument not later than 12:00 noon (Denver, Colorado time) on the day when due in Dollars to the Agent at its address referred to in Section 8.2 in same day funds. (b) The Borrower hereby authorizes the Agent, if and to the extent payment is not made when due, subject to the expiration of applicable grace periods, under any Loan Instrument, to charge from time to time against the Borrower's Account or any or all other accounts of the Borrower with the Agent any amount so due. (c) All computations of interest and of Fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Commitment Fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error, on the Borrower and the Banks. (d) Whenever any payment under any Loan Instrument shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or the Commitment Fee, as the case may be; provided, however, if such extension would cause payment of interest on or principal of LIBOR Rate Loans to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. -44- SECTION 2.16 Effect of Letters of Credit on Revolving Loans Commitment Utilization. For purposes of determining whether any additional Advances may be made to the Borrower under the Revolving Loans Commitment, or whether any additional Letters of Credit may be issued for the account of the Borrower, and for purposes of establishing the unused portion of the Revolving Loans Commitment in order to calculate the Commitment Fee, the face amount of each Letter of Credit shall be added to the outstanding principal amount of all outstanding Revolving Loans to determine whether any portion of the Maximum Revolving Credit Amount then in effect remains unutilized. SECTION 2.17 Cash Collateralization of Letters of Credit. If the due date for payment of the Loans is accelerated by the Banks pursuant to Section 6.2, the Borrower will immediately deliver to the Issuing Bank in immediately available funds an amount equal to the undrawn amount of all Letters of Credit outstanding. Such funds shall be maintained in a blocked interest bearing account at the Issuing Bank. By such delivery, the Borrower will pledge such funds to the Issuing Bank and grant to the Issuing Bank a security interest in such funds, and in all interest which may be earned thereon while held by the Issuing Bank, to secure payment of all Draws under any such Letters of Credit. Upon expiration of each Letter of Credit, the Issuing Bank will refund to the Borrower a portion of such funds in an amount equal to the undrawn amount of the expiring Letter of Credit. Upon expiration of the last outstanding Letter of Credit, the Issuing Bank will refund to the Borrower all remaining funds so delivered to the Issuing Bank, and all interest earned thereon while such funds were held by the Issuing Bank, less all Draws. SECTION 2.18 Borrowing Base. Not later than the initial Advance or initial issuance of a Letter of Credit, and thereafter not later than 25 days after the conclusion of each month, the Borrower will deliver to the Agent a Borrowing Base Certificate, in the form of Exhibit B-4, duly executed by an Authorized Signatory, which Borrowing Base Certificate will set forth the information contained therein as of the end of the preceding month. The Banks will have the right to request and the Borrower will promptly provide reasonable additional information concerning the information set forth in the Borrowing Base Certificate. Within five (5) days after receipt of the Borrowing Base Certificate, the amount set forth therein as the Borrowing Base shall become the Borrowing Base under this Agreement unless prior to the end of such period the Banks shall have given notice to the Borrower that a different amount is effective as the Borrowing Base. The Borrowing Base so established shall remain effective until the Bank elects to redetermine the Borrowing Base, subject to the terms of this Agreement, whether based upon the next monthly Borrowing Base Certificate submitted by the Borrower to the Bank, or at any other time, in the Bank's sole -45- discretion. For purposes of determining the applicable Borrowing Base, (i) Eligible Accounts Receivable shall be valued at eighty percent (80%) of the amount thereof and (ii) Eligible Inventory shall be valued at sixty percent (60%) of the amount thereof. The value of Eligible Inventory shall be determined on a first in, first out basis, and shall be the cost thereof except for finished goods, which will be valued at the lesser of cost or wholesale sale price thereof. During the construction of the Borrower's plant in Oregon, the Borrowing Base Certificate shall reflect a reserve, equal to the remaining projected construction cost of the plant, that shall be a deduction from the Borrowing Base. The amount of the reserve shall be satisfactory to the Agent. Upon provision of evidence satisfactory to the Agent by the Borrower of the payment of expenses budgeted for the construction of the plant, the reserve for the construction of the plant will be reduced on the Borrowing Base Certificate. ARTICLE III CONDITIONS OF LENDING SECTION 3.1 Conditions Precedent to Initial Advance or Issuance of Initial Letter of Credit. The obligation of the Banks to make its initial Advance of the Loans or issue the initial Letter of Credit is subject to the satisfaction (or waiver by the Banks in their sole discretion) of the following conditions precedent: (a) that the Agent shall have received on or before the day of such Advance or issuance of such Letter of Credit the following, each dated as of the Effective Date, in form and substance satisfactory to the Agent: (i) The Notes, duly executed by Authorized Signatories on behalf of the Borrower. (ii) The Guaranties, duly executed by the Guarantors. (iii) A Deed of Trust from and duly executed by Authorized Signatories on behalf of the Borrower pertaining to all of Borrower's owned Real Property. (iv) A Security Agreement from and duly executed by Authorized Signatories on behalf of the Borrower, pertaining to the Borrower's Equipment, Accounts Receivable, Inventory and all other personal property of the Borrower. -46- (v) A Collateral Assignment of Leases in the form of Exhibit F-2 duly executed by Authorized Signatories on behalf of the Borrower pertaining to the portion of Borrower's owned Real Property consisting of leasehold interests. (vi) The Pledge Agreement, duly executed by the Borrower, pertaining to Borrower's shares of stock in Guarantors together with the original stock certificates subject thereto and stock powers therefor, and pertaining to Borrower's Equipment and the Borrower's Accounts Receivable and Inventory and all the other personal property of the Borrower except the personal property subject to other Collateral Documents. (vii) A Deed of Trust from and duly executed by each Guarantor pertaining to the Real Property owned by such Guarantor. (viii) A Security Agreement from and duly executed by each Guarantor pertaining to such Guarantor's portion of Guarantors' Equipment, such Guarantor's Accounts Receivable, such Guarantor's Inventory and all other personal property of each such Guarantor except the personal property subject to other Collateral Documents. (ix) Uniform Commercial Code Financing Statements pertaining to the Security Agreements, the Pledge Agreement and the Collateral Assignments of Leases, duly executed by the Borrower and the Guarantors, respectively, as the Agent may request. (x) Title insurance commitments in ALTA form pertaining to Borrower's owned Real Property, in form and content and issued by a title insurance company or companies reasonably acceptable to the Agent, in an amount equal to the fair market value of such Real Property insuring the Agent's first and prior Lien on all such parcels established pursuant to the Deeds of Trust and Collateral Assignments of Leases, together with a revolving credit endorsement and such other endorsements and affirmative coverages as the Agent may request, subject only to Permitted Liens and other Liens and exceptions approved by the Banks in their sole discretion, in all cases constituting the unconditional commitment of such title insurance company or companies to issue title insurance policies in favor of the Agent on the terms of such title insurance commitments promptly after the recording by -47- such title insurance company or companies of the Deeds of Trust and Collateral Assignments of Leases. (xi) Lien searches of the appropriate public offices demonstrating that no Lien is of record with respect to the Borrower or any Guarantor except (i) Liens which will be terminated or released upon the consummation of the Circuit Test Acquisition or upon repayment of the Borrower's obligations under the Existing Loan Agreement and (ii) Permitted Liens. (xii) Certificates of insurance, in form and substance satisfactory to the Agent from an independent insurance broker dated as of the Effective Date, identifying insurers, types of insurance, insurance limits, policy terms, and identifying the Agent (on behalf of the Banks) as additional insured and loss payee. (xiii) The Borrower's Omnibus Certificate, duly executed by Authorized Signatories on behalf of the Borrower. (xiv) A Guarantor's Omnibus Certificate, on behalf of each of the Guarantors, duly executed by Authorized Signatories on behalf of each of such Persons. (xv) The favorable opinion of Holme Roberts & Owen LLP, legal counsel to the Borrower and the Guarantors, substantially in the form of Exhibit H-1 and H-2 hereto and local counsel opinions, substantially in form of Exhibit H-3 and otherwise satisfactory to the Banks and the Agent, with respect to matters involving the laws of Oregon, Kentucky and Florida . (xvi) Certificates from the Colorado, Oregon, Kentucky and Florida Secretaries of State of recent date pertaining to the Borrower and to the Guarantors incorporated in such states, (a) confirming that each of such Persons is duly incorporated and in good standing in the state of its incorporation, and in such other states as the Agent may request. (xvii) A Borrowing Base Certificate August 31,1997 and Compliance Certificate, effective as of June 30, 1997, with respect to Eligible Accounts Receivable and Eligible Inventory, duly executed by the Borrower. These certificates shall include applicable information from Circuit Test, Circuit Test International and Airhub Services effective as of August 30, 1997 and certified as true and correct by the Borrower. -48- (xviii) Phase I Environmental Assessments of all of Borrower's owned Real Property and Guarantors' owned Real Property and the AlliedSignal leased premises(excluding such parcels as the Agent may approve in its sole discretion), in form and content and prepared by consultants, reasonably acceptable to the Agent, indicating the absence of conditions which would warrant a Phase II Environmental Assessment of such Real Property, provided, however that this condition will be waived with respect to the AlliedSignal leased premises when the Agent receives evidence satisfactory to it that the Banks will be indemnified under the AlliedSignal Acquisition Agreements against Environmental Claims relating to such leased premises. (xix) A Landlord's Waiver and Consent for each of the Borrower's or Guarantor's leased business premises located in Ft. Lauderdale, Florida and Oregon (101. 115 and 125 South Elliot Road leases only) executed by the landlord for such premises. (xx) Such other documents as the Agent and the Banks may reasonably request to effect the purposes of this Agreement and the other Loan Instruments. (b) The Deeds of Trust identified in (a)(iii) and (a)(vii) shall have been duly recorded and the Uniform Commercial Code Financing Statements identified in (a)(ix) above shall have been duly filed except that such Deeds of Trust and Uniform Commercial Code Financing Statements pertaining to the Persons to be acquired pursuant to the Circuit Test Acquisition shall be delivered to the Agent in recordable form and duly executed. (c) The Agent shall have received evidence satisfactory to it that all amounts due from the Borrower to the lender under the Existing Loan Agreement have been paid in full out of the proceeds of the Loans on the Effective Date, or provision for payment thereof in a manner acceptable to the Agent in its sole discretion, shall have been made by the Borrower and approved by the Agent, and the Agent shall have received executed termination statements, in form satisfactory for filing, evidencing the termination of the security interests in the Borrower's properties which secured the Existing Loan Agreement. (d) The Agent and Banks shall have received evidence satisfactory to them, in their sole discretion, that the transactions contemplated by the Circuit Test -49- Acquisition Agreement shall be ready for closing in accordance with the terms of such agreement and that all parties thereto have agreed to complete the closing thereof promptly after the Initial Advance is made or the initial Letter of Credit is issued, (e) All conditions precedent to the advance of any portion of the loan contemplated by the Monfort Subordinated Notes shall have been satisfied, or this condition shall have been waived by the Required Banks. (f) The Borrower shall have paid to the Agent the Fees, the applicable Letter of Credit Fees, and all fees and expenses set forth in Section 8.4, including, without limitation, all accrued and unpaid legal fees and disbursements and the reasonable estimate of the Agent of the attorneys fees and disbursements incurred by it through the closing (provided that such estimate shall not thereafter preclude final settling of accounts between the Agent and the Borrower with respect to attorneys fees and disbursements incurred by the Agent hereunder). SECTION 3.2 Conditions Precedent to All Advances and Issuance of All Letters of Credit. The obligation of the Banks to make each Advance (including the initial Advance) and to issue each Letter of Credit shall be subject to the satisfaction (or written waiver by the Required Banks in their sole discretion) of the following further conditions precedent that on the date of such Advance: (a) the following statements shall be true: (i) Except as provided in Section 3.2(a)(ii), the representations and warranties contained in Section 4.1 of this Agreement and in the Guaranties, are correct on and as of the date of such Advance, before and after giving effect to such Advance and to the application of the proceeds therefrom, or before and after issuance of such Letter of Credit, as the case may be, as though made on and as of such date, (ii) The information contained in the Schedules to this Agreement is correct, except that the Borrower may amend such Schedules at the time of a Request for Advance if such amendment to the Schedule does not disclose an Event of Default or a Material Adverse Effect, (iii) No event has occurred and is continuing, or would result from such Advance or from the application of the proceeds therefrom, or would result from the -50- issuance of such Letter of Credit, which constitutes a Default or an Event of Default hereunder, and (iv) No change shall have occurred in the financial condition or business of the Borrower or any Guarantor which would constitute a Material Adverse Effect (other than any such changes resulting from the closing of the Circuit Test Agreement and Allied Signal Agreements); and (b) the Agent shall have received a Request for Advance or a Request for Letter of Credit, as applicable, with respect to the Advance or Letter of Credit and such other approvals, opinions or documents as the Agent may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1 Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) Corporate Existence. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Colorado. Each of Current, Circuit Test and CT LLC Acquisition is a corporation duly incorporated, validly existing and in good standing under the laws of the State of its incorporation. Airhub Services and CT International are limited liability companies duly incorporated, validly existing and in good standing under the laws of Kentucky and Florida, respectively. The capital structure and shareholders of the Borrower and the Guarantors are set forth in Schedule 4.1(a). (b) Powers, Etc. The Borrower and each of the Guarantors (a) has the power and authority to carry on its business as now conducted and to own or hold under lease the assets and properties it purports to own or hold under lease; (b) is duly qualified, licensed or registered to transact its business and is in good standing in every jurisdiction in which failure to be so qualified, licensed or registered could have a Material Adverse Effect; (c) has the power and authority to execute and deliver this Agreement and each of the other Loan Instruments to which it is or will be a party and to perform all of its obligations hereunder and thereunder; and (d) conducts its business -51- under the names (and only the names) set forth in Schedule 4.1(b) hereto; and (e) is qualified to do business in each of the states listed on Schedule 4.1(b). (c) Authorization; No Conflict. The execution, delivery and performance by the Borrower of each Loan Instrument to which it is or will be a party are within the Borrower's powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's Articles of Incorporation or Bylaws, (ii) any law or judgement, order, writ, injunction, decree or consent of any court binding on or affecting the Borrower, (iii) any contract to which the Borrower is a party, or by which the Borrower or its properties are bound; and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto) upon or with respect to any of its properties. The execution, delivery and performance by each of the Guarantors of each Loan Instrument to which such Person is or will be a party are within the such Person's respective corporate powers, have been duly authorized by all necessary corporate or limited liability company, as applicable, action by such Person, and do not contravene (i) such Person's articles of incorporation or by-laws, or (ii) any law or any contractual restriction binding on or affecting such Person, and do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto) upon or with respect to any of such Person's properties. (d) Approvals. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower or the Guarantors of any Loan Instrument to which any such Person is or will be a party except as indicated in Schedule 4.1(d), all of which have been duly obtained and are in full force and effect. (e) Enforceability. This Agreement is, and each other Loan Instrument to which the Borrower will be a party when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. Each Loan Instrument to which each Guarantor will be a party when delivered hereunder will be the legal, valid and binding obligation of each such Person, enforceable against such Persons, respectively, in accordance with its terms. -52- (f) Financial Statements. The unaudited pro forma consolidated balance sheets of the Borrower and the Guarantors as at December 31, 1996, and the related consolidated statements of income and retained earnings of the Borrower and the Guarantors for the fiscal year then ended, as disclosed in the proxy statement mailed to the Borrower's shareholders in connection with the Circuit Test Acquisition, and the unaudited balance sheets of the Borrower and the Guarantors as at June 30, 1997, and the related consolidated statements of income and retained earnings of the Borrower and Guarantors for the fiscal quarter then ended, copies of which have been furnished to the Banks, fairly present the financial condition of the Borrower and the Guarantors as at such date and the results of the operations of the Borrower and the Guarantors for the period ended on such date, all in accordance with Regulation S-X promulgated under the Securities Exchange Act of 1934, and since December 31, 1996, there has been no material adverse change in such condition or operations except as disclosed in Schedule 4.1(f) hereto. (g) Litigation. Except as set forth in Schedule 4.1(g) hereto, there is no pending, or to the Borrower's knowledge, threatened action or proceeding affecting the Borrower or any of its properties or business activities or any of the Guarantors or their respective properties or business activities, before any court, governmental agency or arbitrator, in which there is a reasonable possibility of a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any Loan Instrument to which the Borrower or any Guarantor will be a party. (h) Federal Reserve Regulations. None of the Advances to be provided to the Borrower hereunder will be used in violation of Regulations G, T, U or X. The Borrower is not engaged in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock (within the meaning of Regulations G, T, U and X). No part of the proceeds of any extension of credit hereunder, whether directly or indirectly, and whether immediately, incidentally or ultimately, will be used (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the -53- provisions of the Regulations of the Board of governors of the Federal Reserve system, including Regulations G, T, U or X. (i) Investment Company Act. The Borrower is not an "investment company' or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) ERISA. (i) The Borrower and Guarantors neither maintain nor contribute to any Employee Benefit Plan or Multiemployer Plan other than those specified in Schedule 4.1(j). (ii) The Borrower and the Guarantors are in compliance in all material respects with all applicable provisions of ERISA and the Code with respect to all Employee Benefit Plans. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such Plan has been determined to be exempt from federal income tax under Section 501(a) of the Code. The actuarial present value of all accumulated benefit obligations under each Plan, as disclosed in the most recent actuarial report with respect to such Plan, do not exceed the fair market value of the assets of such Plan. No material liability has been insured by the Borrower, any Guarantor or any of their ERISA Affiliates which remains unsatisfied for any taxes, penalties or other amount (other than contributions in the ordinary course) with respect to any Employee Benefit Plan or any Multiemployer Plan, and to the best knowledge of the Borrower no such material liability is expected to be incurred. (iii) The Borrower and the Guarantors have not (a) engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code; (b) incurred any liability to the Pension Benefit Guaranty Corporation which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid; (c) failed to make a required contribution or payment to a Multiemployer Plan; or (d) failed to make a required installment or other required payment under Section 412 of the Code. (iv) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan or -54- Multiemployer Plan maintained or contributed to by the Borrower or any Guarantor. (v) No material proceeding, claim (other than routine claims for benefits) lawsuit and/or investiga tion is existing or, to the Borrower's knowledge, threatened concerning or involving any Employee Benefit Plan or Multiemployer Plan maintained or contributed to by the Borrower or any Guarantor. (k) Compliance with Laws. The Borrower and the Guarantors are in compliance with all applicable laws, ordinances, treaties, rules, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities in respect of the conduct of their respective businesses and the ownership of their respective properties, except such noncompliance as would not, individually or in the aggregate, have a Material Adverse Effect on the Borrower or a Guarantor's Adverse Effect on any Guarantor. (l) Payment of Debts and Taxes. (i) The Borrower and each Guarantor: (a) has filed all required federal and material state and local tax returns with appropriate taxing authorities respecting its operations, assets and properties; and (b) has paid or caused to be paid all taxes shown on those returns to the extent due, and has paid all tax or other assessments imposed by Governmental Authorities, except in either case taxes which are being contested in good faith and for which adequate bonds or other sureties as required by law have been posted by the Borrower or Guarantor. (ii) The Borrower and each Guarantor is current in its payment of Debts (other than Debt in an aggregate amount not to exceed $1,000,000.00) and performance of material obligations under Material Agreements (other than taxes) except those being contested in good faith. (m) Indebtedness, Guaranties. (i) Schedule 4.1(m), Part I contains a complete and accurate list of all Debt of the Borrower and each of the Guarantors, whether individual, joint, several or otherwise, and whether fixed or contingent, including commitments, lines of credit and other credit availabilities, identifying with respect to each the respective parties, amounts and maturities. -55- (ii) Schedule 4.1(m), Part II contains a complete and accurate list of all guarantees or other surety arrangements or undertakings of the Borrower and each of the Guarantors for obligations of any other Person (except for negotiable instruments endorsed for collection or deposit in the ordinary course of business), whether individual, joint, several or otherwise, identifying with respect to each of the parties, amounts and maturities. (n) Material Agreements. Except as set forth in Schedule 4.1(n), and except for the Loan Instruments, the Borrower and the Guarantors are not a party to any Material Agreements. The Borrower and each Guarantor is in material compliance with all Material Agreements and has not received any notices from counter parties thereto asserting violations of any such Material Agreements by the Borrower or any Guarantor or asserting rights to terminate or modify any of such Material Agreements. (o) Properties, Inventory and Equipment. The Borrower owns or leases the real property identified in Part I of Schedule 4.1(o) (the "Borrower's Real Property") and owns the Equipment and Inventory in the states identified in Schedule 4.1(o). The Guarantors own or lease the real property identified in Part II of Schedule 4.1(o) (the "Guarantors' Real Property") and own the Equipment and Inventory in the states identified in Schedule 4.1(o). The Borrower's Equipment and Inventory is located in the states set forth in Part I of Schedule 4.1(o). The Guarantors' Equipment and Inventory is located in the states listed in Part II of Schedule 4.1(o). The Borrower has good, marketable and insurable title to, or valid leasehold interests in, all of Borrower's owned Real Property and good title to Borrower's Equipment and the other assets of the Borrower, free and clear of all Liens, other than the Liens identified in Part III of Schedule 4.1(o) and other Permitted Liens. The Guarantors have good, marketable and insurable title to, or valid leasehold interests in, all of Guarantors' Real Property and good title to Guarantors' Equipment and the other assets of the Guarantors, free and clear of all Liens, other than the Liens identified in Part IV of Schedule 4.1(o) and other Permitted Liens. (p) Financial Condition. Neither the Borrower nor any Guarantor is entering into the arrangements contem plated by this Agreement and the other Loan Instruments with actual intent to hinder, delay or defraud either present or future creditors of the Borrower or any -56- Guarantor. On and as of the date of execution hereof by the Borrower, and on and as of the date of each Advance hereunder by the Banks, on a pro forma basis after giving effect to the transactions contemplated by the Loan Instruments and to all indebtedness (including Debt) incurred or to be created in connection herewith: (i) the present fair saleable value of the assets of the Borrower and each Guarantor, respectively, (on a going concern basis) will exceed the probable liability of the Borrower and each Guarantor, respectively, on its indebtedness (including Debt and contingent obligations); (ii) the Borrower and each Guarantor, respectively, has not incurred, nor does Borrower intend to or believe it will incur, nor will Borrower permit any Guarantor to incur indebtedness (including Debt and contingent obligations) beyond its ability to pay such indebtedness as such indebtedness matures (taking into account the timing and amounts of cash to be received from any source, and of amounts to be payable on or in respect of such indebtedness); and the amount of cash available to the Borrower and Guarantors after taking into account all other anticipated uses of funds is anticipated to be sufficient to pay all such amounts on or in respect of its respective indebtedness (including Debt and contingent liabilities) when such amounts are required to be paid; and (iii) the Borrower and each Guarantor will have sufficient capital with which to conduct its present and proposed business, and the assets of the Borrower and each Guarantor, respectively, do not constitute unreasonably small capital with which to conduct its present or proposed business. (q) Insurance. The Borrower and each of the Guarantors currently maintains with financially sound and reputable insurers insurance concerning its assets and business, with such deductibles and retentions and having coverages against risks, losses or damages as are customarily carried by reputable companies in the same or similar businesses, such insurance being in amounts no less than those amounts which are customary for such companies under similar circumstances, which third-party insurance coverages are identified in Schedule 4.1(q). (r) Full Disclosure. No representation or warranty contained in this Agreement or in any other Loan Instrument to which the Borrower is a party, or in any -57- other document furnished from time to time by the Borrower to the Bank pursuant to this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading in any material respect as of the date made or deemed to be made. Except as may be set forth herein or in any of the Schedules hereto, there is no fact known to the Borrower which has had, or is reasonably expected to have, a Material Adverse Effect. (s) No Default. No Default or Event of Default has occurred and is continuing. (t) Status of Loans as Senior Debt. All Debt of the Borrower to the Banks and the Agent in respect of the Loans constitutes "Senior Debt" or "Senior Indebtedness" (or the analogous term used therein) under the terms of the Monfort Subordinated Notes or of any other instrument evidencing or pursuant to which there is issued indebtedness which purports to be Subordinate Debt of the Borrower. (u) Swap Obligations. Neither the Borrower nor any of its Subsidiaries has incurred any outstanding obligations under any Swap Contracts, other than Permitted Swap Obligations. The Borrower has undertaken its own independent assessment of its consolidated assets, liabilities and commitments and has considered appropriate means of mitigating and managing risks associated with such matters and has not relied on any swap counterparty or any Affiliate of any swap counterparty in determining whether on not to enter into any Swap Contract. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.1 Affirmative Covenants. So long as any of the Notes shall remain unpaid or any Letter of Credit remains outstanding, or the Banks shall have any Commitment hereunder, or any obligation of the Borrower or any Guarantor hereunder or under any Loan Instrument has not been fully performed, the Borrower will, unless the Required Banks shall otherwise consent in writing: (a) Use of Proceeds. Subject to compliance by the Borrower with all of the terms and conditions hereof, use the Advances exclusively to pay amounts due under -58- the Existing Loan Agreement, to perform its obligations under the Circuit Test, Inc Agreement and the Allied Signal Agreement and for any corporate purpose of the Borrower or any Guarantor. Letters of Credit issued hereunder may be for any corporate purpose of the Borrower or any Guarantor. (b) Reporting and Notice Requirements. Provide to each Bank: (i) as soon as available, and in any event within 90 days after the end of each fiscal year of the Borrower, audited consolidated statements of income, retained earnings and cash flow for the Borrower and the Guarantors for such fiscal year and the related audited consolidated balance sheets of the Borrower and the Guarantors as of the end of such fiscal year, setting forth in comparative form the corresponding consolidated figures for such fiscal year and the prior fiscal year, each accompanied by a report of the Borrower's independent public accountants (who shall be a nationally recognized firm or otherwise satisfactory to the Agent), which reports shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower in accordance with GAAP without material qualification; (ii) simultaneously with the delivery of the annual financial statements referred to in Section 5.1(b)(i) above, a report of the independent auditors who audited such statements stating that, in connection with their audit of such statements (and without conducting any procedures other than those customarily conducted in a year-end audit), such auditors have obtained no knowledge of any condition or event which constitutes a Default or Event of Default hereunder, or if such auditors have obtained knowledge of any such condition or event, specifying in such report each such condition or event of which they have knowledge and the nature and status thereof; provided, however, that such auditors shall not be liable to the Banks by reason of any failure to obtain knowledge of any condition or event which constitutes a Default or Event of Default that would not be disclosed in the course of their audit examination; (iii) as soon as available, and in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated budget for the Borrower and the Guarantors for the following fiscal year, and an operating plan for the Borrower and the Guarantors for -59- the then current fiscal year and the two following fiscal years, in a form and at a level of detail reasonably acceptable to the Agent; (iv) within 45 days after the conclusion of each fiscal quarter of the Borrower, a Compliance Certificate signed by the chief executive officer or chief financial officer of the Borrower, in the form of Exhibit B-5, (i) to the effect that no Default or Event of Default is in existence, (ii)setting forth in reasonable detail the computations necessary to demonstrate compliance by the Borrower with the financial covenants set forth in Section 5.2(a), (iii) the computations in reasonable detail of the Total Debt to Trailing Four Quarter EBITDA ratio referred to in the definitions of Applicable Margin and Letter of Credit Rate and (iv)(if applicable) reconciliations to reflect any relevant changes in GAAP since the Effective Date. (v) as soon as available, and in any event within 45 days after the end of each fiscal quarter, (A) a Form 10-Q filed by the Borrower with the Securities and Exchange Commission; and (B) a backlog summary report in form and substance reasonably satisfactory to the Agent; (vi) within 25 days after the end of each month, (A) a Borrowing Base Certificate;(B) a listing and aging of all Accounts Receivable of the Borrower and the Guarantors (with all of the foregoing to be in form and at a level of detail reasonably acceptable to the Agent) and (C) an inventory summary report in form and substance reasonably satisfactory to the Agent; (vii) promptly upon receipt thereof, copies of all "management letters" received by the Borrower from the Borrower's independent accountants; (viii) as soon as possible, and in any event within 35 days after the Borrower knows or has reason to know thereof, notice of any ERISA Event; (ix) promptly upon the occurrence thereof, notice of any Default or Event of Default describing the same in reasonable detail, together with a report concerning the steps which the Borrower is taking or will take to remedy such Default or Event of Default; (x) promptly on the occurrence thereof, notice of any Material Adverse Effect describing the same in reasonable detail, together with a report concerning -60- the steps which the Borrower is taking or will take to eliminate such Material Adverse Effect; (xi) promptly after receipt of written request from the Agent or the Required Banks, such other information concerning the Borrower or any of the Guarantors, and concerning their respective businesses, operations, assets or financial condition (including accounts payable listings and agings, fixed asset schedules and information concerning leases) as the Agent or Required Banks may reasonably request; provided that so long as no Event of Default has occurred, such request for information shall be limited to one request per month and (xii) promptly upon the occurrence thereof, notice of all changes in the articles of incorporation or by laws of the Borrower or any of the Guarantors, or in the following executive officers of the Borrower or Guarantors, Jack Calderon, Allen S. Braswell, Jr. or Stuart Fuhlendorf; and (xiii) promptly after the furnishing thereof to the shareholders of the Borrower copies of all financial statements, reports and proxy statements so furnished; and (xiv) promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (c) Maintenance of Existence, Etc. Except as provided in Section 5.2(b), maintain its corporate existence and cause each Guarantor to maintain its corporate existence, and maintain and cause each Guarantor to maintain their respective material rights, privileges and franchises. (d) Compliance With Laws. Comply and cause each Guarantor to comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over each such Person or their respective business, except where the failure to comply would not have a Material Adverse Effect. (e) Insurance. (i) Maintain the third-party insurance identified in Schedule 4.1(q), provided, however, that in no event -61- shall such insurance be for an amount less than the the replacement cost of the assets so insured. (ii) Without limiting the obligations of the Borrower under this Section 5.1(e), in the event the Borrower fails to maintain the insurance required by the foregoing provisions of this Section 5.1(e), then the Banks may, but shall have no obligation to, procure insurance covering the interests of the Banks, in such amounts and against such risks as the Banks shall deem appropriate, and the Borrower will reimburse the Banks in respect of any premiums paid by the Banks as provided in Section 8.4. (f) Material Agreements. Perform, and cause Guarantors to perform, all of each such Person's obligations under the Material Agreements in substantial compliance with all terms and conditions thereof. (g) Obligations and Taxes. Pay and cause Guarantors to pay each such Person's Debt in excess of $1,000,000 and other obligations in accordance with their terms and pay and discharge promptly all Federal and material State and local taxes, and all material governmental assessments and charges or levies imposed upon any such Person or upon such Person's income or profits or in respect of its assets or business, or in any event before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower or such Guarantor, as applicable, shall have set aside on its books adequate reserves in accordance with GAAP with respect thereto. (h) Maintaining Records; Access to Properties and Inspections. Maintain, and cause all Guarantors to maintain, all financial records in accordance with GAAP and permit, and cause all Guarantors to permit, after two weeks notice unless an Event of Default has occurred, any Bank employees or other representatives approved by the Borrower (which approval shall not be unreasonably withheld) designated by the Agent or the Required Banks to visit and inspect the properties of the Borrower or of any Guarantor, and to inspect their respective financial and business records and make extracts therefrom and copies thereof, all at reasonable times and in a manner so as not to -62- unreasonably disrupt the operations of the Borrower or of such Guarantors and as often as reasonably requested, and permit, and cause Guarantors to permit, any such employees or representatives to discuss the affairs, finances and condition of the Borrower and Guarantors with the officers and other representatives thereof, including the Borrower's independent accountants if a representative of the Borrower is present and if the Agent has notified the Borrower not less than 24 hours prior to such meeting of the issues that will be discussed. (i) Environmental and Safety Matters. (i) Comply and cause Guarantors to comply with all Environmental and Safety Laws applicable to the Borrower and the Guarantors, respectively, in all material respects. (ii) Keep its properties and facilities and cause Guarantors to keep their facilities and properties free from any Liens arising under any applicable Environmental and Safety Laws. (iii) If the Banks at any time have reason to believe that any property or facility owned or operated by the Borrower or any Guarantor has been or may be operated in violation of any Environmental or Safety Laws applicable thereto or contaminated with any Hazardous Materials in excess of levels allowed by Environmental or Safety Laws or subject to any government-imposed obligation to conduct any environmental investigation or clean-up, any of which in the good faith judgement of the Banks may impair in any material respect the ability of the Borrower or any Guarantor to satisfy any obligations of the Borrower hereunder or under any Loan Instrument, the Borrower shall, upon the written request of the Banks, at the Borrower's sole cost and expense, conduct such investigation or study, through retention of a consulting firm reasonably satisfactory to the Banks, as is necessary in the good faith judgment of the Banks to demonstrate that no such impairment could reasonably be expected to have a Material Adverse Effect. (j) Deposit Balances. Maintain, and cause the Guarantors to maintain, their respective primary operating, payroll and investment deposit account balances with the Bank One, Colorado, N.A. or its Affiliates, except for accounts maintained in locations where the Agent and its Affiliates have no bank. -63- (k) Interest Rate Protection. The Borrower will on or prior to a date that is (a) 30 days after the Effective Date, and thereafter until the date that is 180 days after the Effective Date maintain in full force and effect in accordance with the terms thereof, Interest Rate Protection Agreements in form and substance satisfactory to the Agent with respect to a notional principal amount not less than $15,000,000 and (b) 180 days after the Effective Date, and thereafter maintain in full force and effect in accordance with the terms thereof, Interest Rate Protection Agreements in form and substance satisfactory to the Agent with respect to a notional principal amount not less than $20,000,000. (l) Surveys. In the event that the Borrower has not completed the issuance or sale of its equity securities in an amount in excess of $20,000,000 by December 31, 1997, the Borrower, at its expense shall provide to the Agent, on or before March 31, 1998, a current ALTA/ACSM survey of the real property described in the Deeds of Trust prepared by a surveyor acceptable to the Agent showing the legal description of the land, the location of all improvements thereon, the location of any recorded easements or other restrictions affecting the land, the flood plain status of the land and a description and the date of the map or maps reviewed, (m) Audit of Accounts Receivable and Inventory. (A) Engage an accounts receivable and inventory field auditor, satisfactory to the Required Banks, to commence and complete within the thirty (30) day period immediately after the Effective Date, a field examination and audit, in scope satisfactory to the Required Banks, and to permit such auditor to copy all of the Borrower's and the Guarantors' financial books, records, journals and other records and data relating to the Collateral to the extent that the Agent deems necessary in regard to the Banks' rights under the Loan Instruments. (B) After the field examination and audit described above has been completed, at the request of the Agent or the Required Banks, no more often than annually, so long as there is no Event of Default, the Borrower shall permit, and cause the Guarantors to permit, the Agent or representatives of the Agent to conduct during regular business hours a field -64- examination and inspection of the Collateral, including the Eligible Accounts Receivable and the Eligible Inventory and to audit and copy all of the Borrower's and the Guarantors' financial books, records, journals and other records and data relating to the Collateral to the extent that the Agent deems necessary in regard to the Banks' rights under the Loan Instruments. (C) Borrower shall promptly pay or reimburse the Agent for the actual cost of all field examinations and audits including all out of pocket expenses for travel, food and lodging. (n) Acquisition of Tucson Real Property. At the earlier of an Event of Default or March 13, 1998 Borrower shall acquire good and marketable title to that 20.5 acre parcel of real property commonly known as 1159 West Drexel Road, Tucson, Arizona (the "Drexel Road Property"). Immediately upon acquisition of the Drexel Road Property, Borrower shall grant to the Agent a Deed of Trust on such real property, and at its expense, provide to the Agent an ALTA form title insurance policy, in form and content satisfactory to the Agent, issued by a title insurance company acceptable to the Agent. The title insurance policy shall insure the Agent's first and prior lien in the Drexel Road Property, subject only to Permitted Liens or such other Liens approved by the Agent, and shall contain such endorsements as the Agent may request. The title insurance policy shall be in such amount as the Agent may reasonably require. If the Borrower does not acquire the Drexel Road Property on or before March 13, 1998, then at Agent's request, Borrower shall immediately assign to the Agent its rights in the Property Acquisition Agreement dated September 23, 1997 between the Borrower and Granite Properties Incorporated and its rights in the account held by Asset Preservation Inc. relating to the purchase of the Drexel Road Property (the "Escrow"). Borrower shall not amended, modify, assign or terminate its rights in such Property Acquisition Agreement or the Escrow without the prior written consent of the Agent. (o) AlliedSignal Acquisition Agreements. On or before December 31, 1997, Borrower shall furnish to the Agent the written Consent to Assignment of Contracts with respect to the AlliedSignal Acquisition Agreements from AlliedSignal and its Affiliates, as applicable, provided, however, this covenant shall be waived if the -65- Borrower receives Net Proceeds in excess of $20,000,000.00 from an issuance or sale of its equity securities. (p) Greeley Phase I Environmental Assessment. On or before thirty (30) Business Days after the Effective Date, Borrower shall furnish to the Agent, in form and content and prepared by consultants, reasonably acceptable to the Agent, a Phase I Environmental Assessment for Borrower's owned Real Property in Greeley, Colorado, indicating the absence of conditions which would warrant a Phase II Environmental Assessment of such Real Property. (q) Further Assurances. Execute and deliver such further documents and do such other acts and things as the Banks may reasonably request in order to effect fully the purposes of this Agreement and each of the other Loan Instruments and to provide for payment of the Loans and all other amounts due hereunder within the scope of this Agreement. SECTION 5.2 Negative Covenants. So long as any of the Notes shall remain unpaid or any Letter of Credit remains outstanding, or the Banks shall have any Commitment hereunder, or any obligation of the Borrower or any Guarantor hereunder or under any Loan Instrument has not been fully performed, the Borrower will not, unless the Required Banks shall otherwise consent in writing: (a) Financial Covenants. (i) Maximum Senior Debt to EBITDA Ratio. As of the end of any Fiscal Quarter, fail to maintain on a consolidated basis a ratio of (y) Senior Debt to (z) EBITDA of not greater than Measured as of the quarter ending Maximum Ratio - ------------------ --------------------- 09/30/97 3.00 12/31/97 3.00 03/31/98 2.50 06/30/98 2.50 09/30/98 2.50 12/31/98 2.25 03/31/99 2.25 06/30/99 2.25 09/30/99 2.25 12/31/99 2.00 03/31/00 2.00 06/30/00 2.00 -66- 09/30/00 2.00 12/31/00 1.75 03/31/01 1.75 06/30/01 1.75 09/30/01 1.75 12/31/01 1.75 (ii) Maximum Total Debt to EBITDA Ratio. As of the end of any Fiscal Quarter fail to maintain on a consolidated basis a ratio of (y) Total Debt to (z) EBITDA of not greater than Measured as of the quarter ending Maximum Ratio - ------------------ --------------------- 09/30/97 4.00 12/31/97 4.00 03/31/98 3.50 06/30/98 3.50 09/30/98 3.50 12/31/98 3.25 03/31/99 3.25 06/30/99 3.25 09/30/99 3.25 12/31/99 3.00 03/31/00 3.00 06/30/00 3.00 09/30/00 3.00 12/31/00 2.75 03/31/01 2.75 06/30/01 2.75 09/30/01 2.75 12/31/01 2.75 (iii) Minimum Fixed Charge Coverage Ratio. Fail to maintain Trailing Four Quarter EBITDA to Fixed Charges of not less than Measured as of the quarter ending Maximum Ratio - ------------------ --------------------- 09/30/97 N/A 12/31/97 1.75 03/31/98 1.75 06/30/98 1.75 09/30/98 1.75 12/31/98 1.75 03/31/99 1.75 06/30/99 1.75 09/30/99 1.75 -67- 12/31/99 2.00 03/31/00 2.00 06/30/00 2.00 09/30/00 2.00 12/31/00 2.00 03/31/01 2.00 06/30/01 2.00 09/30/01 2.00 12/31/01 2.00 (iv) Minimum EBITDA to Interest Expense As of the end of any Fiscal Quarter fail to maintain on a consolidated basis a ratio of (y) EBITDA to (z) Interest Expense of not less than Measured as of the quarter ending Maximum Ratio 12/31/97 3.5 03/31/98 350 06/30/98 .50 09/30/98 3.50 12/31/98 3.50 03/31/99 3.50 06/30/99 3.50 09/30/99 3.50 12/31/99 4.50 03/31/00 4.50 06/30/00 4.50 09/30/00 4.50 12/31/00 4.50 03/31/01 4.50 06/30/01 4.50 09/30/01 4.50 12/31/01 4.50 (v) Minimum Net Worth. For each fiscal year identified below, fail to maintain a minimum Net Worth of the Borrower and all Subsidiaries on a consolidated basis in an amount equal to the following: Measured at each 12/31 Minimum Net Worth equal to fiscal year end("FYE") (A) For FYE 12/31/98 $26,613,000 plus 75% of FYE 12/31/97's Net Income -68- (B) For FYE 12/31/99 (A) above plus 75% of FYE 12/31/98's Net Income (C)For FYE 12/31/00 (B) above plus 75% of FYE 12/31/99's Net Income For FYE 12/31/01 (C) above plus 75% of FYE 12/31/00's Net Income (vi) Maximum Annual Capital Expenditures. For each fiscal year identified below, make Capital Expenditures for the Borrower and all Subsidiaries on a consolidated basis in excess of the following: Measured as of the fiscal year ending Maximum Amount FYE 12/31/98 $8,500,000 FYE 12/31/99 $7,250,000 FYE 12/31/00 $6,500,000 FYE 12/31/01 $7,750,000 (b) Prohibition of Fundamental Changes. Effect, or permit to be effected with respect to any Guarantor, any transaction of merger, consolidation, recapitaliza tion, reorganization, liquidation or dissolution except any Subsidiary may merge, consolidate or reorganize with, or liquidate and transfer its assets to,(i) the Borrower, provided that the Borrower is the continuing or surviving corporation or (ii) any Subsidiary provided that if any transaction shall be between a Guarantor and a Subsidiary, the Guarantor shall be the continuing or surviving corporation, and except for any such transactions if the Borrower survives and there is no Default or Event of Default or Material Adverse Effect. Nothing herein shall prohibit any sales or purchases of stock and assets that are contemplated by the Circuit Test Acquisition Agreement, the AlliedSignal Acquisition Agreements and the Braswell Earn-Out Agreement. (c) Limitation on Liens. Create or suffer to exist, or permit any Guarantor to create or suffer to exist, any Liens on any assets of any such Person, except for (A) Permitted Liens and (B) purchase money Liens in an aggregate amount of $2,500,000.00 for assets acquired by such Persons, provided that any such purchase money Liens are limited to the asset(s) acquired. (d) Debt. Create, incur or suffer to exist, or permit any Guarantor to create, incur or suffer to exist, any Debt except, (i) Debt hereunder, (ii) intercompany Debt -69- (iii) Debt of such Persons in effect on the date hereof as reflected in the financial statements identified in Section 4.1(f), (iv) Debt consisting of trade payables incurred in the ordinary course of business and (v) other Debt in the aggregate principal amount of $2,500,000.00, of which purchase money security interest Liens may not exceed $2,500,000.00. (e) Guarantees. Create or become liable, directly or indirectly, or permit any Guarantor to create or become liable, directly or indirectly, with respect to any guarantee of the obligation of any other Person except, (i) guarantees resulting from the endorsement of instruments for collection in the ordinary course of business,(ii) guarantees in effect on the date hereof and disclosed in the financial statements identified in Section 4.1(f), (iii) the Guaranties of the Guarantors in favor of the Bank as contemplated hereby and (iv) guarantees of performance or obligations of any Subsidiary by the Borrower, if such Obligations were directly incurred or maintained by the Borrower would not violate any provision of any Loan Instrument. (f) Investments, Loans, Advances, etc. The Borrower shall not directly or indirectly purchase or otherwise acquire, hold or invest in the securities of any Person, acquire control of any Person, make loans or advances or enter into any agreement or other arrangement for the purpose of providing funds or credit to any Person (other than guaranties permitted hereunder), or enter into any partnership, joint venture or other entity or business arrangement with or make any equity investment in any Person, or offer or agree to do so, and will not permit any Guarantor to do so except for: (i) loans or advances between the Borrower and any wholly owned Subsidiary; (ii) securities issued or guarantied by the United States of America; (iii) except as provided in Section 5.1(j), and except for deposit accounts for payment of ordinary course of business expenses by the Borrower and Guarantors, with respect to which no limits concerning the deposit bank apply, deposits in domestic commercial banks that have, or are members of a group of domestic commercial banks that has, consolidated total assets of not less than one billion dollars, or investments in the certificates of deposit, commercial paper or other permissible market rate instruments offered by any such bank, the holding company of any such bank or subsidiary of any such holding company; (iv) normal business banking accounts in federally insured institutions in amounts not exceeding the limits of such insurance; (v) commercial -70- paper or other short-term debt securities rated not less than "A" or its equivalent by Standard & Poor's Corporation or Moody's Investors Service, Inc.; (vi) investments constituting Permitted Swap Obligations or payments or advances under Swap Contracts relating to Permitted Swap Obligations; (vii) acquisition of the Drexel Road Property pursuant to Section 5.1(n) and (viii) other investments not exceeding $500,000 in the aggregate at any one time in Persons that are not Affiliates of the Borrower or any Guarantor. (g) Sales of Assets. Make any Disposition of assets of the Borrower, or permit any Guarantor to make any Disposition of assets of such Guarantor other than (i) sales of inventory in the ordinary course of business or (ii) Dispositions of obsolete or surplus equipment or other assets or (iii) up to $1,000,000 in fair market value of other Dispositions each fiscal year or (iv) Dispositions provided for under the AlliedSignal Acquisition Agreement or (v)Dispositions of its assets to the Borrower or a Subsidiary. (h) Transactions with Affiliates. Except for transactions existing on the Effective Date, enter into or permit any Subsidiary to enter into any transaction or series of transactions, whether or not related or in the ordinary course of business of the Borrower, with any Affiliate of the Borrower or any Subsidiary (except for transactions between the Borrower and its Subsidiaries and between wholly owned subsidiaries of the Borrower and a Subsidiary), other than pursuant to the reasonable requirements of the Borrower's or such Subsidiaries's business and on terms and conditions no less favorable to the Borrower or any Subsidiary than would be obtainable by the Borrower or any Subsidiary at the time in a comparable arm's-length transaction with a Person not an Affiliate of the Borrower or any Subsidiary. (i) Modification of Certain Documents; Performance of Material Agreements. Amend its articles of incorporation or bylaws in a manner adverse to the Bank; or amend, modify, cancel, terminate, waive any default under or breach of, in any manner any Material Agreement other than in the ordinary course of business or permit any Guarantor to do any of the foregoing; or enter into any new agreement that is inconsistent with the obligations of the Borrower or Guarantor under any Loan Instrument to which such Person is a party, without the prior written consent of the Required Banks, which consent shall not be unreasonably withheld. The Borrower further agrees that it will not -71- be in default under, or otherwise fail to perform and will not permit any Guarantor to be in default under or otherwise fail to perform all of its material obligations under any of the Material Agreements to which any such Person is a party. (j) Dividends. Declare or pay or permit any Guarantor to declare or pay cash or stock dividends or other distributions with respect to the Borrower's stock or Guarantor's stock, except that any Guarantor may declare and pay dividends and make distributions to the Borrower. (k) Accounting. Change, or permit any Guarantor to change its respective fiscal years or accounting methods or practices (except to conform to changes in GAAP). If any preparation of the financial statements referred to in Section 4.1(f), hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a material change in the method of calculation of financial covenants, standards or terms found in this Agreement, the Borrower will, and will cause each Guarantor to, enter into good faith negotiations with the Bank in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the Borrower's consolidated financial condition shall be the same after such changes as if such changes had not been made. Unless and until such provisions have been so amended, the provisions of this agreement shall govern and the financial covenants hereunder shall be calculated using GAAP as in effect prior to such changes. (l) Subordinated Debt. The Borrower shall not, and shall not permit any Subsidiary, to amend, waive, terminate or otherwise modify any Subordinated Debt or any Subordinated Debt loan instrument, or directly or indirectly, voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Debt or other Debt. (m) Change of Address; Business Name(s). Except upon not less than 30 days prior written notice to the Agent, change or permit any Guarantor to change the address at which the Borrower or such Guarantor maintains its chief executive offices and principal place of business; nor conduct its business activities under any names other than those set forth -72- Schedule 4.1(b) hereto unless the Borrower notifies the Agent of any such new name not less than 30 days prior to beginning use of such new name, except that no more than seven days notice shall be required in the case of a new name resulting from an acquisition of a business or assets by the Borrower. ARTICLE VI EVENTS OF DEFAULT SECTION 6.1 Events of Default. Each of the following events shall constitute an Event of Default hereunder: (a) Payments under the Agreement and the Notes. The Borrower shall fail to pay any principal of, or interest on, the Notes when the same become due and payable or the Borrower shall fail to pay any Fees or other amount due the Bank from the Borrower hereunder and such failure, in the case of a payment other than a payment of principal shall continue for five (5) Business Days. (b) Representations and Warranties. Any representa tion or warranty made by the Borrower or any of the Guarantors (or any of their respective officers, if applicable) under or in connection with any Loan Instrument shall prove to have been incorrect in any material respect when made. (c) Other Loan Instrument Obligations. (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.2, or (ii) the Borrower shall fail to perform or observe any term, covenant or agreement contained in any Loan Instrument to which it is a party (other than any such failures addressed by subsections (a), (b) and (c)(i) above in this Section 6.1) and such failure continues unremedied for a period of 15 days after the Borrower receives notice or otherwise has actual knowledge thereof, or (iii) any Guarantor shall fail to perform or observe any term, covenant or agreement contained in any Loan Instrument to which they are a party, and such failure under clause (i), (ii) or (iii) continues unremedied for a period of 15 Business Days after the chief executive officer, chief financial officer, controller or treasurer of any such Person receives notice or otherwise has actual knowledge thereof. -73- (d) Other Debt. The Borrower or any Guarantor shall fail to pay any principal of or premium or interest on any Debt which is outstanding in a principal amount of at least $1,000,000 in the aggregate (but excluding Debt evidenced by the Notes) of such Person, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof. (e) Insolvency. The Borrower or any of the Guarantors shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of the Guarantors seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Borrower or any Guarantor shall take any corporate action to authorize any of the actions set forth above in this subsection (e). -74- (f) Judgments. Any non-interlocutory judgment or order for the payment of money which is not covered by existing insurance in excess of $1,000,000 shall be rendered against the Borrower or any Guarantor and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. (g) Termination of Certain Loan Instruments. Any provision of this Agreement, the Notes, the Deeds of Trust, the Security Agreements, the Guaranties, the Pledge Agreement or the Collateral Assignment of Leases shall for any reason cease to be valid and binding on the Borrower or Guarantors (as the case may be), or the Borrower or any of the Guarantors shall so state in writing. (h) Collateral Liens. The Deeds of Trust, Security Agreements, Pledge Agreement or Collateral Assignment of Leases shall, after delivery thereof pursuant hereto, for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority security interest in any of the collateral purported to be covered thereby. SECTION 6.2 Bank's Rights Upon an Event of Default. Upon -------------------------------------- the occurrence and during the continuation of any Event of Default the Agent (i) may, by notice to the Borrower, declare the obligation of the Banks to make Advances and to issues Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) may, by notice to the Borrower, declare the Notes, all accrued interest on the Loans and all other amounts payable under this Agreement, the Notes and any other Loan Instrument to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower, (iii) with respect to outstanding Letters of Credit as to which drafts or demands for payment have not been presented, may, by notice to the Borrower, require the Borrower to provide cash collateral in the face amount of such Letters of Credit in accordance with Section 2.17 hereof and (iv) may ------------ exercise the Banks rights and remedies under the Loan Instruments and such other rights and remedies as may be available to the Banks at law or in equity; provided, however, that in the event -------- ------- of an actual or deemed entry of an order for relief with respect to the Borrower or any of the Guarantors under the Federal Bankruptcy Code, (A) the obligation of the Banks to make Advances and to issue Letters of Credit shall automatically be terminated -75- and (B) the Advances, the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII THE AGENT SECTION 7.1 Appointment and Powers. Each Bank hereby irrevocably appoints and authorizes Bank One, Colorado, N.A., and Bank One, Colorado, N.A. hereby agrees, to act as the agent for and representative (within the meaning of Section 9-105(m) of the Uniform Commercial Code) of such Bank under the Loan Instruments with such powers as are delegated to the Agent and the Secured Party by the terms thereof, together with such other powers as are reasonably incidental thereto. The Agent's duties shall be purely ministerial and it shall have no duties or responsibilities except those expressly set forth in the Loan Instruments. The Agent shall not be required under any circumstances to take any action that, in its judgment, (a) is contrary to any provision of the Loan Instruments or Applicable Law or (b) would expose it to any Liability or expense against which it has not been indemnified to its satisfaction. The Agent shall not, by reason of its serving as the Agent, be a trustee or other fiduciary for any Bank. SECTION 7.2 Limitation on Agent's Liability. Neither the Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them under or in connection with the Loan Instruments, except for its or their own gross negligence, willful misconduct or knowing violations of law. The Agent shall not be responsible to any Bank for (a) any recitals, statements, representations or warranties contained in the Loan Instruments or in any certificate or other document referred to or provided for in, or received by any of the Banks under, the Loan Instruments, (b) the validity, effectiveness or enforceability of the Loan Instruments or any such certificate or other document, (c) the value or sufficiency of the Collateral or (d) any failure by the Borrower or other parties to the Loan Instruments to perform any of their obligations under the Loan Instruments. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact so long as the Agent was not grossly negligent in selecting or directing such agents or attorneys-in-fact. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or given by or on behalf of the proper Person or Persons, and -76- upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. As to any matters not expressly provided for by the Loan Instruments, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Instruments in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. SECTION 7.3 Defaults. The Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment to it of principal of or interest on Loans or fees) unless the Agent has received notice from a Bank or the Borrower specifying such Default and stating that such notice is a "Notice of Default." In the event that the Agent has knowledge of such a non-payment or receives such a notice of the occurrence of a Default, the Agent shall give prompt notice thereof to the Banks. In the event of any Default, the Agent shall (a) in the case of a Default that constitutes an Event of Default, take any or all of the actions referred to in Section 6.2 if so directed by the Required Banks and (b) in the case of any Default, take such other action with respect to such Default as shall be reasonably directed by the Required Banks. Unless and until the Agent shall have received such directions, in the event of any Default, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Banks. SECTION 7.4 Rights as a Bank. Each Person acting as the Agent that is also a Bank shall, in its capacity as a Bank, have the same rights and powers under the Loan Instruments as any other Bank and may exercise the same as though it were not acting as the Agent, and the term "Bank" or "Banks" shall include such Person in its individual capacity. Each Person acting as the Agent (whether or not such Person is a Bank) and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower and other parties to the Loan Instruments and their Affiliates as if it were not acting as the Agent, and such Person and its Affiliates may accept fees and other consideration from the Borrower and other parties to the Loan Instruments and their Affiliates for services in connection with the Loan Instruments or otherwise without having to account for the same to the Banks. SECTION 7.5 Indemnification. The Banks agree to indemnify the Agent (to the extent not reimbursed by the Borrower and other parties to the Loan Instruments under the Loan Instruments), ratably on the basis of the respective principal amounts of the Loans outstanding made by the Banks (or, if no Loans are at the time outstanding, ratably on the basis of their -77- respective Commitments), for any and all Liabilities, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including the costs and expenses that the Borrower and other parties to the Loan Instruments are obligated to pay under the Loan Instruments) in any way relating to or arising out of the Loan Instruments or any other documents contemplated thereby or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from gross negligence, willful misconduct or knowing violations of law by the Agent. SECTION 7.6 Non-Reliance on Agent and Other Banks. Each Bank agrees that it has made and will continue to make, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it deems appropriate, its own credit analysis of the Borrower, its own evaluation of the Collateral and its own decision to enter into the Loan Instruments and to take or refrain from taking any action in connection therewith. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower or other parties to the Loan Instruments of the Loan Instruments or any other document referred to or provided for therein or to inspect the properties or books of the Borrower or any Subsidiary thereof or the Collateral. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent under the Loan Instruments, the Agent shall have no obligation to provide any Bank with any information concerning the business, status or condition of the Borrower or any other party to the Loan Instruments or any Subsidiary thereof, the Loan Instruments or the Collateral that may come into the possession of the Agent or any of its Affiliates. SECTION 7.7 Execution and Amendment of Loan Instruments on Behalf of the Banks. Each Bank hereby authorizes the Agent to (a) execute and deliver, in the name of and on behalf of such Bank, (i) the Security Agreements, the Guaranty Agreements, the Deeds of Trust and the Pledge Agreement, (ii) all Uniform Commercial Code financing and continuation statements and other documents the filing or recordation of which are, in the determination of the Agent, necessary or appropriate to create, perfect or maintain the existence or perfected status of the Security Interest and (iii) any other Loan Instrument requiring execution by or on behalf of such Bank, and (b) release Collateral from the Security Interest to the extent that such Collateral has been disposed of in accordance with Section 5.2(g). The Agent shall consent to any amendment of any term, covenant, agreement or condition of the Security Agreements, the Guaranty Agreements, the Deeds of Trust and the -78- Pledge Agreement, or to any waiver of any right thereunder, if, but only if, the Agent is directed to do so in writing by the Required Banks; provided, however, that (i) the Agent shall not be required to consent to any such amendment or waiver that affects its rights or duties and (ii) the Agent shall not, unless directed to do so in writing by each Bank, (A) consent to any assignment by any Bank of any of its rights or obligations under any such agreement or (B) release any Collateral from the Security Interest, except as specified in clause (b) above. SECTION 7.8 Resignation of the Agent. The Agent may at any time give notice of its resignation to the Banks and the Borrower. Upon receipt of any such notice of resignation, the Required Banks may, with the consent of the Borrower which shall not be unreasonably withheld, appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the resigning Agent's giving of notice of resignation, then the resigning Agent may, on behalf of the Banks and after consultation with the Borrower, appoint a successor Agent. Upon the acceptance by any Person of its appointment as a successor Agent, (a) such Person shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the resigning Agent and the resigning Agent shall be discharged from its duties and obligations as Agent under the Loan Instruments and (b) the resigning Agent shall promptly transfer all Collateral within its possession or control to the possession or control of the successor Agent and shall execute and deliver such notices, instructions and assignments as may be necessary or desirable to transfer the rights of the Agent with respect to the Collateral to the successor Agent. After any resigning Agent's resignation as Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Amendments; Waivers. Any term, covenant, agreement or condition of the Borrower Loan Instruments may be amended, and any right under the Borrower Loan Instruments may be waived, if, but only if, such amendment or waiver is in writing and is signed by (a) in the case of an amendment or waiver with respect to the Borrower Loan Instruments referred to in Section 7.7(a), the Agent, (b) in the case of an amendment or waiver with respect to any other Borrower Loan Instrument, the Required Banks and, if the amendment or waiver would affect the rights and duties of the Agent, by the Agent, and(c) in the case -79- of an amendment with respect to any Borrower Loan Instrument, by the Borrower; provided, however, that no amendment or waiver shall be effective, unless in writing and signed by each Bank affected thereby, to the extent it (i) changes the amount of such Bank's Commitment, (ii) reduces the principal of or the rate of interest on such Bank's Loans or Note, the amount of such Bank's Letter of Credit Participations or any fees payable to such Bank hereunder, (iii) postpones any date fixed for any reduction of the Revolving Loan Commitments or any payment of principal of or interest on such Bank's Loans, Note, Letter of Credit Participations or any fees payable to such Bank hereunder, (iv) except as provided in this Agreement, releases any Collateral from the Security Interest, or (v) amends Section 2.10, this Section 8.1, the definition of "Required Banks" contained in Section 1.1 or any other provision of this Agreement requiring the consent or other action of all of the Banks. Unless otherwise specified in such waiver, a waiver of any right under the Borrower Loan Instruments shall be effective only in the specific instance and for the specific purpose for which given. No election not to exercise, failure to exercise or delay in exercising any right, nor any course of dealing or performance, shall operate as a waiver of any right of the Agent or any Bank under the Borrower Loan Instruments or Applicable Law, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of the Agent or any Bank under the Borrower Loan Instruments or Applicable Law. SECTION 8.2 Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at: EFTC Corporation 9351 Grant Street Horizon Terrace 6th Floor Denver, Colorado Attn: Stuart W. Fuhlendorf Vice President and CFO Telecopy: (303)451-8210 -80- with a copy to: Martha Traudt Collins, Esq. Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, Colorado 80203 Telecopy: (303)866-0200 and if to the Agent, at its address at: Bank One, Colorado, N.A. 1125 Seventeenth Street, 3rd Floor Denver, CO 80202 Attn: David L. Ericson, Vice President Telecopy: (303) 297-4435 with a copy to: Ted R. Sikora II, Esq. Davis, Graham & Stubbs LLP 370 Seventeenth Street 47th Floor Denver, CO 80202 Telecopy: (303) 893-1379 or, as to each Party, at such other address as shall be designated by such Party in a written notice to the other Party. All such notices and communications shall, when telecopied, telegraphed, telexed or cabled, be effective when telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, or when personally delivered. Any notice, if mailed and properly addressed with first class postage prepaid, return receipt requested, shall be deemed given three Business Days after deposit in the U.S. mail. Except that notices to the Banks pursuant to the provisions of Article II shall not be effective until received by the Bank. SECTION 8.3 Remedies. The remedies provided in the Loan Instruments are cumulative and not exclusive of any remedies provided by law. SECTION 8.4 Costs, Expenses and Taxes. The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Instruments and the other documents to be delivered under the Loan Instruments, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its -81- rights and responsibilities under the Loan Instruments. The Borrower further agrees to pay on demand all reasonable costs and expenses, if any (including reasonable counsel, consultants and appraisers fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Instruments and the other documents to be delivered under the Loan Instruments, including, without limitation, reasonable counsel, consultants and appraisers fees and expenses in connection with the enforcement of rights under this Section 8.4, expressly including all such costs and expenses incurred by the Agent and the Banks in connection with or during the pendency of any bankruptcy or insolvency proceedings involving the Borrower or any Guarantor. In addition, the Borrower shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution, delivery, filing and recording of the Loan Instruments and the other documents to be delivered under the Loan Instruments, and agrees to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes. SECTION 8.5 Right of Set-off. Upon the occurrence and during the continuance of any Event of Default the Banks are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Banks to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Instrument, whether or not the Banks shall have made any demand under such Loan Instrument and although such obligations may be unmatured. The Banks agree promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Banks under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Banks may have. SECTION 8.6 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Banks and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Banks. Any assignment of rights or interests herein by the Borrower without such prior written consent of the Bank will be void and ineffective. It is expressly agreed that the Banks may transfer interests herein to other lending institutions by way of assignment or participation agreement as an to the extent permitted by Section 8.13. -82- SECTION 8.7 Indemnity. The Borrower agrees to indemnify the Agent and the Banks, and their respective directors, officers, employees and agents for, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to the extensions of credit hereunder or any actual or proposed use by the Borrower of the proceeds of any extensions of credit hereunder or the past, present or future business activities of the Borrower including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses that are determined pursuant to a final, non-appealable order of a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of the Person to be indemnified). SECTION 8.8 Consent to Exclusive Jurisdiction. Any legal action or other proceeding with respect to this Agreement or any other Loan Instrument shall be brought exclusively in the courts of competent jurisdiction of the State of Colorado or of the United States located in the City and County of Denver, and by execution and delivery of this Agreement, each of the Borrower and the Banks consents, for itself and in respect of its property, to the exclusive jurisdiction of those courts. Each of the Borrower and the Banks irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any other Loan Instrument. The Borrower and the Banks each waive personal service of any summons, complaint or other process which may be made by any other means permitted by Colorado law. SECTION 8.9 Waiver of Jury Trial and Certain Damages. Each of the Borrower and the Banks hereby waives, to the extent permitted by applicable law, trial by jury in any litigation in any court with respect to, in connection with, or arising out of this Agreement or any other Loan Instrument or the validity, protection, interpretation, collection or enforcement thereof; and the Borrower hereby waives, to the extent permitted by applicable law, the right to interpret set off or counterclaim or cross-claim in connection with any such litigation, irrespective of the nature of set off, counterclaim or cross-claim except to the extent that the failure so to assert a set off, counterclaim or cross-claim would permanently preclude the prosecution of or recovery upon the same. Notwithstanding anything contained in this Agreement or any other Loan Instrument to the contrary, no claim may be made by the Borrower against the Banks for any lost profits or any special, indirect or consequential damages in -83- respect of any breach or wrongful conduct (other than willful misconduct constituting actual fraud) in connection with, arising out of or in any way related to the transactions contemplated hereunder or under any other Loan Instrument, or any act, omission or event occurring in connection therewith; and the Borrower hereby waives, releases and agrees not to sue upon any such claim for any such damages. The Borrower agrees that this Section 8.9 is a specific and material aspect of this Agreement and acknowledges that the Bank would not extend to the Borrower the credit provided for herein if this Section 8.9 were not part of this Agreement. SECTION 8.10 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of Colorado, without giving effect to any conflict of law or choice of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado. SECTION 8.11 Inconsistent Provisions. In the event of any inconsistency or conflict between the terms of this Agreement and the terms of any other Loan Instrument, the provisions of this Agreement will be controlling. SECTION 8.12 Sharing of Recoveries. Each Bank agrees that, if, for any reason, including as a result of (a) the exercise of any right of counterclaim, set-off, banker's lien or similar right, (b) its claim in any applicable bankruptcy, insolvency or other similar law being deemed secured by a Debt owed by it to the Borrower and any Guarantor, including a claim deemed secured under Section 506 of the Bankruptcy Code, or (c) the allocation of payments by the Agent or the Borrower or any Guarantor in a manner contrary to the provisions of Section 2.10, such Bank shall receive payment of a proportion of the aggregate amount due and payable to it hereunder as principal of or interest on the Loans or fees that is greater than the proportion received by any other Bank in respect of the aggregate of such amounts due and payable to such other Bank hereunder, then the Bank receiving such proportionately greater payment shall purchase Participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the rights of the other Banks hereunder so that all such recoveries with respect to such amounts due and payable hereunder (net of costs of collection) shall be pro rata; provided that if all or part of such proportionately greater payment received by the purchasing Bank is thereafter recovered by or on behalf of the Borrower or any Guarantor from such Bank, such purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such Bank to the extent of such recovery, but without interest (unless the purchasing Bank is required to pay interest on the amount recovered to the Person recovering -84- such amount, in which case the selling Bank shall be required to pay interest at a like rate). The Borrower expressly consents to the foregoing arrangements and agrees that any holder of a participation in any rights hereunder so purchased or acquired pursuant to this Section 8.12 shall, with respect to such participation, be entitled to all of the rights of a Bank under Sections 2.10, 7.4, 7.5 and 7.7 (subject to any condition imposed on a Bank hereunder with respect thereto) and may exercise any and all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted to the holder of such participation for Loans in the amount of such participation. SECTION 8.13 Assignments and Participations. (a) Assignments. (i) The Borrower may not assign any of its rights or obligations under the Borrower Loan Instruments without the prior written consent of (A) in the case of the Borrower Loan Instruments referred to in Section 7.7(a), the Agent and (B) in the case of any of the other Borrower Loan Instruments, the Issuing Bank and each Bank, and no assignment of any such obligation shall release such Borrower therefrom unless the Agent, the Issuing Bank and each Bank, as applicable, shall have consented to such release in a writing specifically referring to the obligation from which such Borrower is to be released. (ii) Each Bank may from time to time assign any or all of its rights and obligations under the Borrower Loan Instruments to one or more Persons; provided that, except in the case of the grant of a security interest to a Federal Reserve Bank (which may be made without condition or restriction), no such assignment shall be effective unless (A) the assignment is consented to by the Borrower (unless an Event of Default exists) the Issuing Bank and the Agent, such consents not to be unreasonably withheld, (B) in the case of a partial assignment, the assignment shall involve the assignment of not less than $5,000,000 of the assignor Bank's Commitment and there shall at no time be more than five Banks and the assignment is consented to by the Borrower, such consent not to be unreasonably withheld, (C) a Notice of Assignment in the form of Exhibit I with respect to the assignment, duly executed by the assignor and the assignee, shall have been given to the Borrower, the Issuing Bank and the Agent, (D) except in the case of an assignment by the Bank that is the Agent, the Agent shall have been paid an assignment fee of $3,500, (E) unless otherwise agreed to by each of -85- the Banks, such assignment is made on or after the earlier of the date that is 90 days following the Effective Date and the date on which the general syndication of the credit facility provided for herein is completed, as specified by the Agent and (F) in the case of an assignment of any Revolving Loan, Revolving Loan Commitment, Term Loan or Letter of Credit Participation to any assignee, the assignment shall include a pro rata portion of all of the Revolving Loans, Revolving Loan Commitments, Term Loan and Letter of Credit Participations of the assignor Bank. Upon any effective assignment, the assignor shall be released from the obligations so assigned and, in the case of an assignment of all of its Loans and Commitment, shall cease to be a Bank. In the event of any effective assignment by a Bank, the Borrower shall issue new Notes to the assignee Bank (against, other than in the case of a partial assignment, receipt of the existing Note of the assignor Bank). Notwithstanding the foregoing, no Bank may assign any of its rights and obligations under the Borrower Loan Instruments prior to the date on which the general syndication or the credit facility provided for herein is completed, as specified by the Agent, other than in accordance with the agreement of such Banks entered into prior to the Effective Date with respect thereto. Nothing in this Section 8.13 shall limit the right of any Bank to assign its interest in the Loans and its Notes to a Federal Reserve Bank as collateral security under Regulation A of the Board of Governors of the Federal Reserve System, but no such assignment shall release such Bank from it obligations hereunder. (b) Participations. Each Bank may from time to time sell or otherwise grant participations in any or all of its rights and obligations under the Borrower Loan Instruments. In the event of any such grant by a Bank of a participation, such Bank's obligations under the Loan Instruments to the other parties thereto shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, and the Borrower, the Issuing Bank, the Agent and the other Banks may continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations thereunder. A Bank may not grant to any holder of a participation the right to require such Bank to take or omit to take any action under the Loan Documents, except that a Bank may grant to any such holder the right to require such holder's consent to (i) reduce the principal of or the rate of interest on such Bank's Loans, Note or the amount of such Bank's Letter of Credit Participations or any fees payable to -86- such Bank hereunder, (ii) postpone any date fixed for any reduction of the Revolving Loan Commitments or any payment of principal of or interest on such Bank's Loans, Note or the amount of such Bank's Letter of Credit Participations or any fees payable to such Bank hereunder, (iii) permit any Loan Party to assign any of its obligations under the Loan Instruments to any other Person or (iv) release any Collateral from the Security Interest except as required or contemplated by the Loan Instruments. Each holder of a participation in any rights under the Borrower Loan Instruments, if and to the extent the applicable participation agreement so provides, shall, with respect to such participation, be entitled to all of the rights of a Bank as fully as though it were a Bank under Sections 2.10, 2.12, 8.1 and 8.7 (subject to any conditions imposed on a Bank hereunder with respect thereto) and may exercise any and all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted to the holder of such participation for Loans in the amount of such participation; provided, however, that no holder of a participation shall be entitled to any amounts that would otherwise be payable to it with respect to its participation under Section 2.10 or 2.12 unless (x) such amounts are payable in respect of Regulatory Changes that are enacted, adopted or issued after the date the applicable participation agreement was executed or (y) such amounts would have been payable to the Bank that granted such participation if such participation had not been granted. SECTION 8.14 Survival of Representations and Warranties. All representations and warranties of the Borrower contained in this Agreement or of any of its subsidiaries contained in any other Loan Instrument shall survive delivery of the Notes and the making of the Loans and the issuance of the Letters of Credit. SECTION 8.15 Counterparts. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving the Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. -87- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers, as of the date first above written. EFTC CORPORATION By: /s/ Stuart W. Fuhlendorf Vice President and CFO BANK ONE, COLORADO, N.A. as Agent and as a Bank By: /s/ David L. Ericson Vice President -88- EX-99.2 9 PLEDGE AGREEMENT PLEDGE AND SECURITY AGREEMENT EFTC CORPORATION THIS PLEDGE AND SECURITY AGREEMENT, dated as of September 30, 1997, is by EFTC CORPORATION, a Colorado corporation ("Pledgor") to BANK ONE, COLORADO, N.A., ("Agent") for the ratable benefit of the Banks under that certain Credit Agreement dated as of September 30, 1997, by and among Pledgor (as Borrower thereunder), Agent, and the Banks, with such Credit Agreement, as hereafter amended, modified or extended by the parties thereto referred to as the "Credit Agreement". Recitals A. The Banks are willing to extend credit facilities to Pledgor subject to the terms and conditions of the Credit Agreement. One of the terms of the Credit Agreement is the requirement for execution and delivery of this Pledge Agreement by Pledgor. B. In order to induce the Banks to enter into the Credit Agreement, Pledgor is willing to enter into this Pledge Agreement to secure the due and punctual performance of the obligations of Pledgor under the Credit Agreement. AGREEMENT NOW, THEREFORE, the parties hereto agree as follows: 1. Defined Terms. (a) As used herein, the following terms shall have the following meanings: "Pledge Agreement" shall mean this Pledge and Security Agreement, as the same may be further amended, supplemented or otherwise modified from time to time. "Pledged Collateral" shall mean the Pledged Stock and all Proceeds. "Pledged Stock" shall mean the shares of capital stock or limited liability company membership interests of each Subsidiary Issuer listed in Schedule I hereto, in each case together with all stock certificates, options, warrants or rights of any nature whatsoever that may be issued or granted by any Subsidiary Issuer to the Pledgor in respect of the Pledged Stock while this Pledge Agreement is in effect. "Proceeds" shall have the meaning given thereto by C.R.S. 4-9-306. "Subsidiary Issuer" shall mean each of the companies listed on Schedule 1 hereto, each of which is a wholly-owned Subsidiary of Pledgor except that Pledgor owns a 51% membership interest in of Circuit Test International, L.C. and Airhub Services Group, LLC. (b) Unless otherwise defined herein, the capitalized terms used herein which are defined in, or by reference in, the Credit Agreement shall have the meanings specified therein. (c) The words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Pledge Agreement as a whole and not to any particular provision of this Pledge Agreement, and section, subsection, exhibit and schedule references are to this Pledge Agreement unless otherwise specified. 2. Pledge and Grant of Security Interest. For value received and to induce the Banks to make the Loans and otherwise to extend credit to Borrower, Pledgor, for the ratable benefit of the Banks, hereby pledges, charges, assigns, transfers and delivers, by way of a first lien, security interest and assignment, to Agent, and grants a security interest to Agent in, all of its right, title and interest in and to the Pledged Collateral as security for all present and future obligations and liabilities of all kinds of Pledgor to the Banks under the Loan Instruments or hereunder, whether incurred by Pledgor as maker, endorser, drawer, acceptor, guarantor, accommodation party or otherwise, and whether due or to become due, secured or unsecured, absolute or contingent, joint or several, and howsoever or whensoever incurred by Pledgor or acquired by any Bank (collectively referred to as the "Obligations"). 3. Delivery; Stock Powers; Endorsements. All certificates or instruments representing or evidencing the Pledged Stock pledged pursuant to Section 2 hereof have previously been delivered or are being delivered to and held by Agent concurrently with the execution of this Pledge Agreement and are in suitable form for transfer by delivery, endorsed in blank or accompanied by duly executed undated instruments of transfer or assignments in blank, having attached thereto or to such certificates all requisite federal, state or provincial stock transfer tax stamps, all in form and substance satisfactory to Agent. UCC-1 financing statements pertaining to uncertificated membership interests in limited liability Subsidiary Issuers are being delivered to Agent concurrently with the execution of this Pledge Agreement and are in suitable form so that when filed will perfect the first priority security interest of the Agent in such securities. 4. Warranties, Covenants and Agreements of Pledgor. Pledgor warrants, covenants and agrees that: (a) the Subsidiary Issuers are all of the directly-owned Subsidiaries of the Pledgor, and the Pledged Stock, consisting of the shares of the Subsidiary Issuers listed on Schedule 1 hereto, is all of the issued and outstanding common stock or other equity interests in the Subsidiary Issuers, except that the membership interest of Pledgor in each of Circuit Test International, L.C. and Airhub Services Group, LLC listed on Schedule 1 and pledged hereby represents 51% of the issued and outstanding of each of those companies. (b) except for the security interests granted hereby, (i) Pledgor is, and as to Pledged Collateral acquired after the date hereof, Pledgor shall and will be at the time of acquisition, the owner and holder of the Pledged Collateral free from any adverse claim, security interest, encumbrance, lien, charge, or other right, title or interest of any person other than Agent and covenants that at all times the Pledged Collateral will be and remain free of all such adverse claims, security interests, or other liens or encumbrances; (ii) Pledgor has full power and lawful authority to enter into this Pledge and Security Agreement and to sell, assign and transfer the Pledged Collateral to Agent and to grant to Agent a first and prior security interest therein as herein provided, all of which have been duly authorized by all necessary corporate action; (iii) the execution and delivery and the performance hereof are not in contravention of any charter, article of incorporation or by-law provision, or of any indenture, agreement or undertaking to which Pledgor is a party or by which Pledgor or its property is bound; (iv) this Pledge and Security Agreement constitutes the valid and legally binding obligation of Pledgor enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (v) Pledgor will defend the Pledged Collateral against all claims and demands of all persons at any time claiming the same or any interest therein. Any officer, agent or representative acting for or on behalf of Pledgor in connection with this Pledge and Security Agreement or any aspect hereof, or entering into or executing this Pledge and Security Agreement on behalf of Pledgor, has been duly authorized to do so, and is fully empowered to act for and represent Pledgor in connection with this Pledge and Security Agreement and all matters related thereto or in connection therewith. (c) (i) Pledgor has not heretofore signed any financing statement or security agreement which covers any of the Pledged Collateral, and no such financing statement or security agreement is now on file in any public office (other than such financing statements and security agreements, if any, which have been terminated or will be terminated as of the Effective Date). (ii) As long as any amount remains unpaid on any of the Obligations or under any agreements entered into in connection with the Obligations, except as expressly permitted by any such agreements, (A) Pledgor will not enter into or execute any security agreement or financing statement covering the Pledged Collateral, other than those security agreements and financing statements in favor of Agent hereunder, and further (B) there will not be on file in any public office any financing statement or statements (or any documents or papers filed as such) covering the Pledged Collateral, other than financing statements in favor of Agent hereunder, unless in any case the prior written consent of Agent shall have been obtained. (iii) At the request of Agent, Pledgor will join Agent in executing such documents as Agent may determine from time to time to be necessary or desirable under provisions of any applicable laws in effect where the Pledged Collateral is located or where Pledgor conducts business; without limiting the generality of the foregoing, Pledgor agrees to join Agent, at Agent's request, in executing one or more financing statements or other instruments in form satisfactory to Agent, and Pledgor will pay the costs of filing or recording the same, or of filing or recording this Pledge Agreement, in all public offices at any time and from time to time whenever filing or recording of any such financing statement or of this Pledge Agreement is deemed by Agent to be necessary or desirable. In connection with the foregoing, it is agreed and understood between the parties hereto (and Agent is hereby authorized to carry out and implement this agreement and understandings, and Pledgor hereby agrees to pay the costs thereof) that Agent may, at any time or times, file as a financing statement any counterpart, copy or reproduction of this Pledge Agreement. (d) In the event that Pledgor receives any promissory notes or evidences of indebtedness of Borrower or any Subsidiary Issuer, Pledgor shall hold the same in trust as property of the Banks and forthwith assign, pledge and deliver the same to Agent for the ratable benefit of the Banks. 5. Rights of Agent and Pledgor Related to Pledged Collateral. Agent may from time to time following the occurrence of an Event of Default, as defined in Section 7 hereof: (a) Transfer any of the Pledged Collateral into the name of Agent or its nominee. (b) Notify parties obligated on any of the Pledged Collateral to make payment to Agent of any amounts due or to become due thereunder. (c) Enforce collection of any of the Pledged Collateral by suit or otherwise; surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligation of any nature of any party with respect thereto; and exercise all other rights of Pledgor in any of the Pledged Collateral, except as hereinafter provided with respect to income from or interest on the Pledged Collateral and except that, prior to an Event of Default, Pledgor may exercise its voting and consensual rights with respect to any Pledged Collateral constituting voting securities. (d) Take possession or control of any proceeds of the Pledged Collateral. Until the occurrence of an Event of Default, Pledgor shall have the right to receive all income from or interest on the Pledged Collateral, and if Agent receives any such income or interest prior to the occurrence of an Event of Default, Agent shall pay the same promptly to Pledgor, except that in the case of securities or other property distributed by way of a dividend or otherwise with respect to the Pledged Collateral, such securities or other property (other than cash) shall be promptly delivered to Agent to be held as Pledged Stock or other Pledged Collateral hereunder. Upon the occurrence of an Event of Default, Pledgor will not demand or receive any income from or interest on the Pledged Collateral, and if Pledgor receives any such income or interest without any demand by it, the same shall be held by Pledgor in trust for Agent in the same medium in which received, shall not be commingled with any assets of Pledgor and shall be delivered to Agent in the form received, properly endorsed to permit collection, not later than the next business day following the day of its receipt. Agent shall promptly apply the net cash received from such income or interest to payment of any of the Obligations, provided that Agent shall account for and pay over to Pledgor any such income or interest remaining after payment in full of the Obligations then outstanding. So long as no Event of Default or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing: (i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement or the Credit Agreement; provided, however, that Pledgor shall not exercise or refrain from exercising any such right if, in Agent's judgment, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and, provided, further, that upon the request of Agent, Pledgor shall give Agent at least five days' written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such rights; and (ii) Agent shall execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies and other instruments as Pledgor may reasonably request for the purpose of enabling Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above. Agent shall never be under any obligation to collect, attempt to collect, protect or enforce the Pledged Collateral or any security therefor, which Pledgor agrees and undertakes to do at Pledgor's expense, but Agent may do so in its discretion at any time after the occurrence of an Event of Default and at such time Agent shall have the right to take any steps by judicial process or otherwise as it may deem proper to effect the collection of all or any portion of the Pledged Collateral or to protect or to enforce the Pledged Collateral or any security therefor. All expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred or paid by Agent in connection with any such collection or attempt to collect the Pledged Collateral or actions to protect or enforce the Pledged Collateral or any security therefor shall be borne by Pledgor or reimbursed by Pledgor to Agent upon demand. The proceeds received by Agent as a result of any such actions in collecting or enforcing or protecting the Pledged Collateral shall be held by Agent without liability for interest thereon and shall be promptly applied by Agent as Agent may deem appropriate toward payment of any of the Obligations secured hereby in such order or manner as Agent may elect. In the event Agent shall pay any taxes, assessments, interests, costs, penalties or expenses incident to or in connection with the collection of the Pledged Collateral or protection or enforcement of the Pledged Collateral or any security therefor, Pledgor, upon demand of Agent, shall pay to Agent the full amount thereof with interest at a rate per annum (based on a 360-day year for the actual number of days involved) from the date expended by Agent until repaid equal to the sum of three percent (3%) plus the Prime Rate in effect under and defined by the Credit Agreement. So long as Agent shall be entitled to any such payment, this Pledge Agreement shall operate as security therefor as fully and to the same extent as it operates as security for payment of the other Obligations secured hereunder, and for the enforcement of such repayment, Agent shall have every right and remedy provided hereunder for enforcement of payment of the Obligations. 6. Further Assurances; Agent as Agent. Pledgor agrees to take such actions and to execute such stock or bond powers and such other or different writings as Agent may request (and irrevocably authorizes Agent to execute such writings as Pledgor's agent and attorney-in-fact) further to perfect, confirm and assure Agent's security interest in the Pledged Collateral and to assist Agent's realization thereon including, without limitation, the right to receive, indorse, and collect all instruments made payable to Pledgor representing any dividend, interest payment or other distribution in respect of the Pledged Collateral or any part thereof except to the extent Pledgor is entitled to receive any cash dividend pursuant to Section 5. 7. Event of Default. The occurrence of any of the following shall constitute an "Event of Default" hereunder: (a) Failure of Pledgor to pay any Obligation (including any installment of principal or interest thereon) when due and payable (after the expiration of any grace period provided by the applicable Loan Instruments), whether at maturity, by notice of intention to prepay or otherwise; (b) Default in the timely performance by Pledgor of any obligation or covenant contained herein or an Event of Default under the Credit Agreement or any other Collateral Document to which Pledgor is a party; (c) Any representation or warranty made by Pledgor herein or in any other agreement with or instrument delivered to Agent, or any statement or representation made in any certificate, report or opinion delivered in connection herewith or in connection with any such other agreement or instrument that proves to be false or misleading in any material respect when made; or (d) The insolvency of Pledgor, the admission by Pledgor of its inability to pay its debts as they become due, the commencement of any case by or against Pledgor under any bank ruptcy or insolvency law (and, in the event such case is not instituted by Pledgor, it shall remain undismissed or unstayed for a period 30 days or any of the actions sought in such proceeding shall occur), or the making by Pledgor of any assignment for the benefit of creditors. 8. Rights and Remedies of Agent Upon Default. If an Event of Default shall have occurred: (a) Agent shall have and may exercise with reference to the Pledged Collateral and the Obligations any or all of the rights and remedies of a secured party under the Uniform Commercial Code ("UCC"), as applicable, and as otherwise granted herein or under any other applicable law or under any other agreement now or hereafter in effect executed by Pledgor, including, without limitation, the right and power to sell, at public or private sale or sales, or otherwise dispose of, or otherwise utilize the Pledged Collateral and any part or parts thereof in any manner authorized or permitted under said UCC after default by a debtor, and to apply the proceeds thereof toward payment of any costs and expenses and attorneys' fees and expenses thereby incurred by Agent and toward payment of the Obligations in such order or manner as Agent may elect. Specifically and without limiting the foregoing, Agent shall have the right to take possession of all or any part of the Pledged Collateral or any security thereof and of all books, records, papers and documents of Pledgor or in Pledgor's possession or control relating to the Pledged Collateral which are not already in Agent's possession, and for such purpose may enter upon any premises upon which any of the Pledged Collateral or any security therefor or any of said books, records, papers and documents are situated and remove the same therefrom without any liability for trespass or damages thereby occasioned. To the extent permitted by law, Pledgor expressly waives any notice of sale or other disposition of the Pledged Collateral and all other rights or remedies of Pledgor or formalities prescribed by law relative to sale or disposition of the Pledged Collateral or exercise of any other right or remedy of Agent existing after default hereunder; and to the extent any such notice is required and cannot be waived, Pledgor agrees that if such notice is given in the manner provided in Section 14 hereof at least ten days before the time of the sale or disposition, such notice shall be deemed reasonable and shall fully satisfy any requirement for giving of said notice. Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed thereof, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) Upon notice by Agent to Pledgor, Agent or its nominee or nominees shall have the sole and exclusive right to exercise all voting and consensual powers pertaining to the Pledged Collateral or any part thereof and may exercise such powers in such manner as Agent may elect. (c) All dividends, payments of interest and other distributions of every character made upon or in respect of the Pledged Collateral or any part thereof shall be deemed to be Pledged Collateral and shall be paid directly to and shall be held by Agent as additional Pledged Collateral pledged under and subject to this Pledge Agreement. (d) All rights to marshaling of assets of Pledgor, including any such right with respect to the Pledged Collateral, are hereby waived by Pledgor. (e) All recitals in any instrument of assignment or any other instrument executed by Agent incident to sale, lease, transfer, assignment or other disposition, lease or utilization of the Pledged Collateral or any part thereof hereunder shall be full proof of the matters stated therein and no other proof shall be requisite to establish full legal propriety of the sale or other action taken by Agent or of any fact, condition or thing incident thereto, and all requisites of such sale or other action or of any fact, condition or thing incident thereto shall be presumed conclusively to have been performed or to have occurred. 9. Special Provisions for Pledged Stock. Pledgor hereby acknowledges that the sale by Agent of any of the Pledged Stock pursuant to the terms hereof in compliance with applicable federal or state securities laws (as now in effect or as hereafter amended, or any similar statute hereafter adopted with similar purpose or effect, the "Securities Laws") may require strict limitations as to the manner in which Agent or any subsequent transferee of the Pledged Stock may dispose of such securities. Pledgor understands that in order to protect Agent's interest it may be necessary to sell the Pledged Stock at a price less than the maximum price attainable if a sale were delayed or were made in another manner, such as a public offering requested under the Securities Laws. Pledgor has no objection to a sale in such a manner. 10. Application of Proceeds by Agent. In the event Agent sells or otherwise disposes of the Pledged Collateral in the course of exercising the remedies provided for in Section 8 hereof, any amounts held, realized or received by Agent pursuant to the provisions hereof, including the proceeds of the sale of any of the Pledged Collateral or any part thereof, shall be applied by Agent first toward the payment of any costs and expenses incurred by Agent in enforcing this Pledge Agreement, in realizing on or protecting any Pledged Collateral and in enforcing or collecting any Obligations or any guaranty thereof, including, without limitation, the reasonable, actual attorneys' fees and expenses incurred by Agent (all of which costs and expenses are secured by the Pledged Collateral), all of which costs and expenses Pledgor agrees to pay, and then as provided in the Credit Agreement. Any amounts and any Pledged Collateral remaining after such application and after payment to the Banks of all of the Obligations in full shall be paid or delivered to Pledgor, its successor or assigns, or as a court of competent jurisdiction may direct. Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which Agent accords its own property, it being understood that Agent shall not have any responsibility for (x) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not Agent has or is deemed to have knowledge of such matters or (y) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. 11. Absolute Interest. (a) So long as any Obligations are unsatisfied, all rights of Agent hereunder, and all obligations of Pledgor hereunder, shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of any provision of the Credit Agreement, any agreement with respect to the Obligations or any other agreement or instrument relating to any of the foregoing, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any other agreement or instrument, (iii) any exchange, release or non-perfection of any Pledged Collateral, or any release or amendment or waiver of or any consent to or departure from any guarantee, for all or any of the Obligations or (iv) any other circumstance which might constitute a defense available to, or a discharge of, Pledgor in respect of the Obligations or this Pledge Agreement. (b) This Pledge Agreement shall not be construed as relieving Pledgor from full liability on the Obligations and any and all future and other indebtedness secured hereby and for any deficiency thereon. (c) Agent is hereby subrogated to all of Pledgor's interests, rights and remedies in respect to the Pledged Collateral and all security now or hereafter existing with respect thereto and all guaranties and endorsements thereof and with respect thereto. 12. Termination. This Pledge Agreement and the security interests created hereunder shall terminate when all the Obligations have been indefeasibly paid in full and when Agent has no further obligation to extend credit under the Credit Agreement, at which time Agent shall execute and deliver to Pledgor all documents which Pledgor shall reasonably request to evidence termination of such security interest and shall return physical possession of any Pledged Collateral then held by Agent to Pledgor; provided, however, that all indemnities of Pledgor contained in this Pledge Agreement shall survive, and remain in full force and effect regardless of the termination of the security interest of this Pledge Agreement. 13. Additional Information. Pledgor agrees to furnish Agent from time to time such additional information and copies of such documents relating to this Pledge Agreement, the Pledged Collateral, the Obligations and Pledgor's financial condition to the extent and at such times as provided under Section 5.1(h) of the Credit Agreement as Agent may reasonably request. 14. Notices. Any communication, notice or demand to be given hereunder shall be in writing (including telex and facsimile communication) and mailed, sent by facsimile, or delivered, if to Pledgor, EFTC Corporation 9351 Grant Street Horizon Terrace, 6th Floor Denver, Colorado 80229 Attention: Stuart Fuhlendorf Vice President and Chief Financial Officer Facsimile: (303) 451-8210 and if to Agent, Bank One, Colorado, N.A. 1125 Seventeenth Street, 3rd Floor Denver, Colorado 80202 Attention: David L. Ericson Vice President Facsimile: (303) 297-4435 as to each party, at such other address or numbers as shall be designated by either party hereto to the other party in a written notice. All such notices and communications shall be effective (a) when received, if mailed by registered or certified mail or physically delivered, (b) five (5) days after being sent by mail, if sent by ordinary mail, and (c) upon confirmation of transmission, if sent by telex or telecopier, addressed in each case as aforesaid. 15. Indemnity and Expenses. The Pledgor agrees to indemnify Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Pledge Agreement (including, without limitation, enforcement of this Pledge Agreement and other Collateral Documents, and all claims and demands of all persons at any time claiming the Pledged Collateral or any interest therein), except claims, losses or liabilities resulting from Agent's gross negligence or willful misconduct. Pledgor agrees to pay on demand all out-of-pocket expenses of the Agent (including the reasonable fees and expenses of Agent's attorneys, experts and agents) in any way relating to the enforcement or protection of the rights of the Banks hereunder and further agrees that the Pledged Collateral secures such payment. 16. No Waiver; Cumulative Rights. No failure on the part of Agent to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Agent of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy and power hereby granted to Agent or allowed it by law or other agreement shall be cumulative and not exclusive of any other and may be exercised by Agent from time to time. 17. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, WITHOUT, HOWEVER, GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF. PLEDGOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY (a) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF MAY BE INSTITUTED IN ANY COURT OF APPROPRIATE JURISDICTION IN THE CITY AND COUNTY OF DENVER, COLORADO; (b) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF SUCH ACTION, SUIT OR PROCEEDING OR ANY CLAIM OF FORUM NON CONVENIENS; (c) SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, FOR THE PURPOSES OF SUCH ACTION, SUIT OR PROCEEDING; (d) WAIVES ANY IMMUNITY FROM JURISDICTION TO WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN ANY SUCH COURT, AND WAIVES ANY IMMUNITY FROM THE MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE IN ANY SUCH COURT, ANY JUDGMENT FOR MONEY OBTAINED IN SUCH ACTION, SUIT OR PROCEEDING AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY IMMUNITY FROM EXECUTION; AND (e) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING BROUGHT BY PLEDGOR AGAINST AGENT OR OTHER LENDING PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF SHALL BE INSTITUTED IN SUCH COURTS. 18. JURY TRIAL. PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE SUBJECT MATTER HEREOF. THE PROVISIONS OF THIS SECTION 18 ARE A MATERIAL INDUCEMENT FOR AGENT AND THE BANKS TO ENTER INTO THIS PLEDGE AGREEMENT AND THE CREDIT AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN. PLEDGOR HEREBY ACKNOWLEDGES THAT IT HAS REVIEWED THE PROVISIONS OF THIS SECTION 18 WITH ITS INDEPENDENT COUNSEL. 19. Inconsistency of Agreements. In case of any inconsistency between this Pledge Agreement and the Credit Agreement, the provisions of the Credit Agreement shall be controlling except with respect to Sections 1 and 2 hereof as to which the terms of this Pledge Agreement shall be controlling. 20. Execution in Counterparts. This Pledge Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed as of the date first above written. EFTC CORPORATION By:/s/ Name: Stuart W. Fuhlendorf Title: Vice President and Chief Financial Officer BANK ONE, COLORADO, N.A. By: /s/ Name: David L. Ericson Title: Vice President SCHEDULE I Pledge and Security Agreement EFTC CORPORATION DESCRIPTION OF PLEDGED STOCK OF SUBSIDIARY ISSUERS
Stock % Shares ISSUER Class of Stock Certificate No. of Shares Outstanding No. by Pledgor
ACKNOWLEDGMENT AND CONSENT The undersigned, CURRENT ELECTRONICS, INC. (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warrant or covenant or the occurrence of any of the events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. CURRENT ELECTRONICS, INC. By: /s/ Name:Stuart W. Fuhlendorf Title: ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By: /s/ Name: David L. Ericson Title: Vice President ACKNOWLEDGMENT AND CONSENT The undersigned, CIRCUIT TEST, INC. (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warrant or covenant or the occurrence of any of the events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. CIRCUIT TEST, INC. By: /s/ Name:Stuart W. Fuhlendorf Title: ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By: /s/ Name: David L. Ericson Title: Vice President ACKNOWLEDGMENT AND CONSENT The undersigned, CTLLC ACQUISTION CORP. (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warrant or covenant or the occurrence of any of the events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. CTLLC ACQUISITION CORP. By: /s/ Name:Stuart W. Fuhlendorf Title: ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By: /s/ Name: David L. Ericson Title: Vice President ACKNOWLEDGMENT AND CONSENT The undersigned, CIRCUIT TEST INTERNATIONAL, LC (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warrant or covenant or the occurrence of any of the events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. CIRCUIT TEST INTERNATIONAL, LC By: /s/ Name: Stuart W. Fuhlendorf ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By: /s/ Name: David L. Ericson Title: Vice President ACKNOWLEDGMENT AND CONSENT The undersigned, AIRHUB SERVICES GROUP, LLC (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of September 30, 1997 (the "Pledge Agreement") made by EFTC CORPORATION ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warrant or covenant or the occurrence of any of the events described in Sections 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. AIRHUB SERVICES GROUP, LLC By: /s/ Name:Stuart W. Fuhlendorf Title: ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By: /s/ Name: David L. Ericson Title: Vice President EX-99.3 10 SECURITY AGREEMENT SECURITY AGREEMENT AND ASSIGNMENT THIS SECURITY AGREEMENT AND ASSIGNMENT is entered into as of September 30, 1997 by and between EFTC CORPORATION, a Colorado corporation (the "Debtor") and BANK ONE, COLORADO, N.A., a national banking association (the "Agent"), for the ratable benefit of the Banks under that certain Credit Agreement dated as of September 30, 1997, by and among the Debtor (as Borrower thereunder), Agent and the Banks, with such Credit Agreement, as hereafter amended, modified or extended by the parties thereto referred to as the "Credit Agreement." Section 1 DEFINITIONS Section 1.1 Specific Definitions. The following definitions shall apply: (a) "Account Debtors" means Debtor's customers and all other persons who are obligated or indebted to Debtor in any manner, whether directly or indirectly, primarily or secondarily, contingently or otherwise, with respect to Accounts or General Intangibles. (b) "Accounts" shall have the meaning set forth at Section 2.1(a). (c) "Agent" shall have the meaning assigned to it in the Recitals hereto. (d) "Banks" shall have the meaning assigned to it in the Recitals hereto. (e) "Code" shall mean the Uniform Commercial Code of the State of Colorado. (f) "Credit Agreement" shall have the meaning assigned to it in the Recitals hereto, and pursuant to which this Security Agreement and Assignment is given. (g) "Debtor" shall have the meaning assigned to it in the Recitals hereto. (h) "Debtor's Notes" shall mean any promissory notes made by Debtor in favor of Agent, including, without limitation: a. Debtor's Promissory Note (Revolving Loan) dated September 30, 1997, in the original principal amount of $25,000,000.00; b. Debtor's Promissory Note (Term Loan) dated September 30, 1997, in the original principal amount of $20,000,000.00; c. Debtor's Promissory Note (Swing Loan) dated September 30, 1997, in the original principal amount of $2,500,000.00; and d. Any and all modifications, extensions and renewals of any of the foregoing and any and all future advances or readvances to Debtor whether pursuant to any of the foregoing promissory notes or otherwise; (i) "Debtor's Obligations" shall mean the full and prompt payment and performance of all of the indebtedness, obligations, covenants, agreements and liabilities of Debtor to Agent, together with all interest and other charges thereon, whether direct or indirect, existing, future, contingent or otherwise, due or to become due, under or arising out of or in connection with (i) Debtor's Notes; (ii) any pledge or guaranty; (iii) any overdraft; (iv) any Loan Document and (v) any and all modifications, extensions and renewals of any of the foregoing. (j) "Debtor's Books" means all of Debtor's books and records including, but not limited to: minute books; ledgers; records indicating, summarizing, or evidencing Debtor's assets, liabilities, and the Accounts; all information relating to Debtor's business operations or financial condition; and all computer programs, disk or tape files, printouts, runs, and other computer-prepared information. (k) "Equipment" shall have the meaning set forth at Section 2.1(c). (l) "Event of Default" shall have the meaning set forth in Section 9. (m) "General Intangibles" shall have the meaning set forth at Section 2.1(d). (n) "Guarantor" and "Guarantors" shall mean, respectively, any one or more of CIRCUIT TEST INTERNATIONAL, L.C., a Florida limited liability company ("CT International"); CURRENT ELECTRONICS, INC., an Oregon corporation ("Current Electronics"); CTLLC ACQUISITION CORP., a Florida corporation ("CTLLC Acquisition"); CIRCUIT TEST, INC., a Florida corporation ("Circuit Test"); and AIR HUB SERVICES GROUP, LLC, a Kentucky limited liability company ("Air Hub Services"). (o) "Inventory" shall have the meaning set forth at Section 2.1(b). (p) "Lien" means any security interest, mortgage, pledge, assignment, lien, or other encumbrance of any kind, including any interest of a vendor under a conditional sale contract or consignment and any interest of a lessor under a capital lease. (q) "Loan Documents" shall mean the Credit Agreement, Debtor's Notes, this Security Agreement and Assignment, and any other instrument now or hereafter given to evidence, secure or guaranty Debtor's Obligations. -2- (r) "Permitted Lien" means: (i) Liens imposed by any governmental authority for taxes, assignments or charges not yet due or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; (ii) carriers' warehousemen's, mechanics', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business not yet delinquent or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; (iii) pledges or deposits under workers' compensation, unemployment insurance and other social security legislation; (iv) purchase money Liens securing payment by the Debtor of a portion of the purchase price of any asset; and (v) any attachment or judgment Lien either in existence less than 30 calendar days after the entry thereof, or with respect to which execution has been stayed, or with respect to which payment in full above any deductible is covered by insurance. (s) "Proceeds" shall have the meaning set forth in Section 2.1(g). (t) "Secured Obligations" shall mean Debtor's Notes, Debtor's Obligations and "Secured Party Expenses." (u) "Secured Party Expenses" means: (i) all costs and expenses (including, without limitation, taxes and insurance premiums) required to be paid by Debtor under this Security Agreement and Assignment or under any of the other Loan Documents that are paid or advanced by Agent; (ii) filing, recording, publication, and search fees paid or incurred by Agent in connection with Agent's transactions with Debtor, (iii) costs and expenses incurred by Agent to correct any default or enforce any provision of the Loan Documents or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, and preparing for sale and/or advertising to sell the Collateral, whether or not a sale is consummated (including reasonable counsel, consultant and appraiser fees and expenses); (iv) costs and expenses of suit incurred by Agent as Agent in enforcing or defending the Loan Documents or any portion thereof, and (v) Agent's reasonable attorney fees and expenses incurred (before or after execution of this Security Agreement and Assignment) in advising Agent with respect to, or in structuring, drafting, reviewing, negotiating, amending, terminating, enforcing, defending, or otherwise concerning, the Loan Documents or any portion thereof, irrespective of whether suit is brought. Section 1.2 Uniform Commercial Code Terms. Terms used in this Security Agreement and Assignment, other than those defined in this Section 1.1, have the meanings accorded to them in the Uniform Commercial Code of the State of Colorado. -3- Section 1.3 Construction. (a) Unless the context of this Security Agreement and Assignment clearly requires otherwise, the plural includes the singular, the singular includes the plural, the part includes the whole, "including" is not limited, and "or" has the inclusive meaning of the phrase "and/or." The words "hereof," "herein," "hereunder," and other similar terms in this Security Agreement and Assignment refer to this Security Agreement and Assignment as a whole and not exclusively to any particular provision of this Security Agreement and Assignment. (b) It is intended that the Credit Agreement expresses the primary understandings and agreements of the parties. In the event of any inconsistency or conflict between the terms of this document and the terms of the Credit Agreement, the provisions of the Credit Agreement shall control. Any schedule required by this document which duplicates the requirement of a schedule attached to the Credit Agreement shall be deemed to be fulfilled by the schedule to the Credit Agreement. Capitalized terms used but not defined herein, and defined in the Credit Agreement, shall have the meaning given thereto in the Credit Agreement. Section 2 SECURITY INTEREST Section 2.1 Grant of Security Interest. In order to secure prompt payment and performance of Debtor's Obligations, Debtor hereby grants to Agent a continuing first-priority pledge and security interest in the following property of Debtor (the "Collateral"), whether now owned or existing or hereafter acquired or arising and regardless of where located: (a) All Accounts, which shall mean all accounts, contract rights, notes, drafts, instruments, documents, chattel paper, and obligations in any form owing to Debtor arising out of the sale or lease of goods or the rendition of services by Debtor whether or not earned by performance; all credit insurance, guaranties, letters of credit, advices of credit, and other security for any of the above; all merchandise returned to or reclaimed by Debtor; and Debtor's Books relating to any of the foregoing. (b) All Inventory, which shall mean any and all goods, supplies, wares, merchandise, and other tangible personal property, including raw materials, work in process, supplies and components, and finished goods, whether held for sale or lease or to be furnished under any contract for service or so leased or furnished, or used or consumed in Debtor's business, and also including products of and accessions to inventory, packing and shipping materials, and all documents of title, whether negotiable or nonnegotiable, representing any of the foregoing. -4- (c) All Equipment, which shall mean all equipment, fixtures, machinery, machine tools, office equipment, furniture, furnishings, motors, motor vehicles, tractors, trailers, non-titled vehicles, tools, dies, parts, jigs, goods, all attachments, accessories, accessions, parts, replacements, substitutions, additions, and improvements thereto, and all supplies used or to be used in connection therewith, including without limitation those items of Equipment set forth on Schedule 2.1(c) attached. (d) All General Intangibles, which shall mean all general intangibles, choses in action, causes of action, and all other personal property of every kind and nature (other than goods and Accounts), including, without limitation: (i) all tax refunds, (ii) all inventions, processes, production methods, proprietary information, know-how and trade secrets used or useful in the business of Debtor, (iii) all trade names, trademarks, and service marks; all trademark and service mark registrations (other than intent to use applications for trademarks and service marks, if any) and applications for trademark and service mark registrations and all renewals of trademark and service mark registrations, all rights relating thereto, including without limitation, the right to recover for all past, present and future infringements thereof, and all other rights of any kind whatsoever accruing thereunder or pertaining thereto, together with the goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark, and service mark, (iv) all logos, copyrights, patents and applications for patents, (v) all licenses or other agreements relating to any of the foregoing, (vi) all information, customer lists, identifications of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs, and the like pertaining to any present or future operations by Debtor, (vii) all field repair data, sales data and other information relating to sales or service of all present or future products, (viii) all accounting information and all media in which or on which any of the information or knowledge or data or records which pertain to any present or future operations of Debtor may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data, (ix) all licenses, consents, permits, variances, certifications and approvals of any governmental authority or any other person pertaining to any operations now or hereafter conducted by Debtor (including, without limitation, all franchises, licenses, consents, permits, variances, certifications and approvals specifically described on Schedule 2.1(d)(ix) attached), (x) all licenses, franchises, permits or other rights to use any processes, production methods, proprietary information, know-how, trade secrets and software in connection with Debtor's business (including, without limitation, any of the foregoing described on Schedule 2.1(d)(x), attached), (xi) all causes of action, claims and warranties relating to any of the foregoing, (xii) all certificates of deposits evidencing a deposit by Debtor with Agent or any other financial institution, (xiii) all promissory notes payable to Debtor which are determined not to be instruments, (xiv) all Debtor's interest as lessee under all leases of real and personal property (including, without limitation, the leases set forth on Schedule 4.1(o) to the Credit Agreement or any other schedule that is either now or hereafter delivered by Debtor to Agent and incorporated herein by reference) and (xv) all Debtor's interest in contracts and agreements -5- (including, without limitation, the contracts set forth on Schedule 4.1(n) of the Credit Agreement or any other schedule that is either now or hereafter delivered by Debtor to Agent and incorporated herein by reference). (e) Investment Property, which shall mean all certificated or uncertificated securities, security entitlements, security accounts, commodity contracts or commodity accounts. (f) Possessory Collateral, which shall mean notes, drafts, instruments, documents, securities, money, letters of credit, advices of credit, or other assets, properties or indebtedness owned by Debtor or in which Debtor has an interest that now or thereafter are at any time in the possession or control of Agent, Agent's affiliates, custodians, participants and designees or in transit by mail or carrier to Agent, Agent's affiliates, custodians, participants and designees or in the possession of any other third party acting on behalf of Agent, without regard to whether Agent received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Agent had conditionally released the same, and all deposit accounts of Debtor with Agent, Agent's affiliates, custodians, participants and designees, including all demand, time, savings, passbook, or other accounts. (g) Proceeds, which shall mean all proceeds and products of Collateral and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering Collateral; all property received wholly or partly in trade or exchange for Collateral; all claims against third parties arising out of damage, destruction, or decrease in value of the Collateral; all leases of Collateral; and all rents, revenues, issues, profits, and proceeds, arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of the Collateral or any interest therein. (h) Notwithstanding the foregoing, no security interest shall be granted in the AlliedSignal Acquisition Agreements until the Consent to Assignment of Contracts with respect to the AlliedSignal Acquisition Agreements has been furnished to the Borrower or the requirement for such consent has been waived pursuant to Section 5.1(o) of the Credit Agreement. Section 3 PROVISIONS CONCERNING ACCOUNTS Section 3.1 Office and Records of Debtor. Debtor's chief executive office is located at: 9351 Grant Street, Horizon Terrace, Sixth Floor, Denver, Colorado 80202. Debtor maintains all of its records with respect to its Accounts in Colorado. Debtor shall not maintain its chief executive office or its records with respect to its Accounts at any other location except after thirty (30) days prior written notice to the Agent. -6- Section 3.2 Representations. Debtor represents and warrants that each Eligible Account Receivable of the Debtor at the time of its assignment to Agent (a) will be owned solely by Debtor; (b) will be for a liquidated amount maturing as stated in Debtor's Books; (c) will be a bona fide existing obligation created by the final sale and delivery of goods or the rendition of services to Account Debtors by Debtor in the ordinary course of its business; and (d) will not be subject to any known deduction, offset, counterclaim, return privilege, or other condition, except as reflected on Debtor's Books. Section 3.3 Shipment Arrangements. After two (2) weeks notice, unless an Event of Default has occurred then promptly upon the request of the Agent, Debtor shall deliver to Agent, as Agent may request no more often than annually, so long as an Event of Default has not occurred, original delivery receipts, customer purchase orders, shipping instructions, bills of lading, and other documentation respecting shipment arrangements. Absent such a request by Agent, copies of all such documentation shall be held by Debtor as custodian for Agent. Section 3.4 Agent's Rights. Upon and after the occurrence of an Event of Default and at any time Agent reasonably believes an Event of Default has occurred or is likely to occur with the passage of time, any officer, employee, or agent of Agent shall have the right, at any time or times hereafter, in the name of Agent or its nominee (including Debtor), to verify the validity, amount, or any other matter relating to any Accounts by mail, telephone, or otherwise; and all reasonable costs thereof shall be payable by Debtor to Agent. At such time, Agent or its designee may at any time notify customers or Account Debtors that Accounts have been assigned to Agent or of Agent's security interest therein and collect the same directly and charge all collection costs and expenses to Debtor's account. Section 3.5 Post Default Rights. After a declared Event of Default hereunder, no discount, credit, or allowance shall be granted by Debtor to any Account Debtor and no return of merchandise shall be accepted by Debtor without Agent's consent. Agent may thereafter settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms that Agent considers advisable, and in such cases, Agent will credit Debtor's account with only the net amounts received by Agent in payment of such disputed Accounts, after deducting all Agent Expenses incurred in connection therewith. Section 4 PROVISIONS CONCERNING INVENTORY Section 4.1 Locations. Schedule 4.1(o) of the Credit Agreement is a true and correct list showing all states where inventory is located (except for Inventory in transit), including, without limitation, facilities leased and operated by Debtor and locations neither owned nor leased by Debtor, and showing all such places where Inventory of Debtor has been located in the past four -7- months. Such list indicates whether the premises are those of a warehouseman or other party. No Inventory will be removed from states set forth in such Schedule except for the purpose of sale in the ordinary course of Debtor's business provided that inventory may be moved from one location set forth in such Schedule to another in the ordinary course of Debtor's business. Debtor will promptly notify Agent of any new inventory location. Section 4.2 Inventory, Books and Records. Debtor shall keep all Inventory in good order and condition and shall maintain full, accurate, and complete books and records with respect to Inventory at all times. Section 4.3 Inspection of Collateral. Agent may, during Debtor's usual business hours and consistent with Section 5.1(m) of the Credit Agreement, inspect and examine the Inventory and check and test the same as to quality, quantity, value, and condition. Section 4.4 Sales of Inventory. Subject to the rights of Agent upon the occurrence of an Event of Default, Debtor may sell Inventory in the ordinary course of its business (which does not include a transfer in full or partial satisfaction of indebtedness or a transfer for less than fair equivalent value). Section 4.5 Warehouses and Landlords. Except as set forth on Schedule 4.1(o) of the Credit Agreement, Inventory is not now and shall not at any time hereafter be stored with a bailee, warehouse, or similar party without Agent's prior written consent. Section 5 PROVISIONS CONCERNING EQUIPMENT Section 5.1 Maintenance and Repair. Debtor shall keep and maintain Equipment material to its business in good operating condition and repair and make all necessary repairs thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Debtor shall immediately notify Agent of any material loss or damage to the Equipment. Section 5.2 Fixtures. Debtor shall not permit any item of Equipment that is not a fixture to become a fixture to real estate or an accession to other property without the prior written consent of Agent, and the Equipment is now and shall at all times remain personal property except with Agent's prior written consent. If any of the Collateral is or will be attached to real estate in such a manner as to become a fixture under applicable state law and if such real estate is encumbered and such encumbrance attaches to such Collateral, Debtor will obtain from the holder of each Lien or encumbrance a written consent and subordination to the security interest hereby granted, or a written disclaimer of any interest in the Collateral, in a form acceptable to Agent in its reasonable judgment. -8- Section 5.3 Additional Acquisitions. Debtor shall promptly notify Agent in writing of its acquisition, by purchase, lease, or otherwise, of any material after-acquired Equipment, including a description of the Equipment and of its present locations and (if different) its intended permanent locations. Section 6 PROVISIONS CONCERNING GENERAL INTANGIBLES Section 6.1 Title to General Intangibles. Debtor represents and warrants that all of the General Intangibles assigned to Agent or in which Debtor grants Agent a Lien are owned by Debtor. Section 6.2 Intellectual Property. (a) A true and complete schedule setting forth all patents, federal and/or state trademarks, service marks, trade name or brand name registrations and copyright registrations, and all pending applications and applications (other than intent to use applications) to be filed therefore, owned or controlled by Debtor or licensed to Debtor is contained in Schedule 2.1(d)(x) hereto. No licenses, sublicenses, covenants, or agreements have been entered into by Debtor in respect of any of such items, and each such item is in full force and effect, free and clear of all Liens and encumbrances of every nature, is not currently being challenged in any way, and is not involved in any pending (or, to the knowledge of Debtor, threatened) interference proceeding. (b) Concurrently with its execution and delivery of this Security Agreement and Assignment, Debtor shall execute and deliver to Agent collateral assignments of all registered patents, trademarks, trade names, copyrights, and applications (other than intent to use applications) for any of them, in a form satisfactory to Agent and suitable for recording in the records of the registering authority. Section 6.3 Contracts and Leases. (a) Schedule 4.1(o) and Schedule 4.1(n) of the Credit Agreement are, respectively, true and complete lists (i) of all leases of real property and (ii) of all Material Agreements to which Debtor is a party. Debtor represents and warrants that each of the leases, contracts, and other agreements listed on such Schedules is in full force and effect; that neither Debtor nor, to Debtor's knowledge, any other party thereto is in default under or in breach of the terms or conditions of any such lease, contract, or other agreement; and that there has not occurred any event of default or event that, after the giving of notice or the lapse of time or both, would constitute a default under or breach of any such lease. -9- (b) Debtor shall not amend, modify or supplement any Material Agreement or waive any provision thereof other than in the ordinary course of business, without the prior written consent of the Agent, which consent will not be unreasonably withheld. (c) Debtor shall remain liable to perform all of its duties and obligations under any leases, contracts, and agreements included in the Collateral to the same extent as if this Security Agreement and Assignment had not been executed, and Agent shall not have any obligation or liability under such leases, contracts, and agreements by reason of this Security Agreement and Assignment or otherwise. Section 7 OTHER PROVISIONS CONCERNING COLLATERAL Section 7.1 Title. Debtor has good title to the Collateral, and the Liens granted to Agent pursuant to this Security Agreement and Assignment are fully perfected first priority Liens in and to the Collateral with priority over the rights of every person in the Collateral other than the rights of Debtor and other than Permitted Liens, and the Collateral is free, clear, and unencumbered by any Liens in favor of any person other than Agent except for Permitted Liens. Section 7.2 Further Assurances. Debtor shall execute and deliver to Agent, concurrent with Debtor's execution of this Security Agreement and Assignment and at any time or times hereafter at the request of Agent, all financing statements, continuation financing statements, fixture filings, security agreements, chattel mortgages, assignments, endorsements of certificates of title, applications for titles, affidavits, reports, notices, schedules of accounts, letters of authority, and all other documents Agent may reasonably request, in form satisfactory to Agent, to perfect and maintain perfected Agent's Liens in the Collateral and in order to consummate fully all of the transactions contemplated under the Loan Documents. Debtor hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers, employees, or agents designated by Agent) as Debtor's true and lawful attorney with power to sign the name of Debtor on any of the above-described documents or on any other similar documents that need to be executed, recorded, and/or filed in order to perfect or continue perfected Agent's Liens in the Collateral. The appointment of Agent as Debtor's attorney is irrevocable as long as any Secured Obligations are outstanding. Any person dealing with Agent shall be entitled to rely conclusively on any written or oral statement of Agent that this power of attorney is in effect. Section 7.3 Transfer of Collateral. Debtor shall not sell, lease, license, transfer, or otherwise dispose of any interest in any Collateral except for sales of Inventory in the ordinary course of its business (sales of Inventory in full or partial satisfaction of existing obligations of Debtor are not considered to be sales in the ordinary course of business) and except for sales, transfers or other dispositions permitted by Section 5.2(g) of the Credit Agreement. -10- Section 7.4 Agent's Duty of Care. Agent shall have no duty of care with respect to the Collateral except that Agent shall exercise reasonable care with respect to the Collateral in Agent's custody. Agent shall be deemed to have exercised reasonable care if such property is accorded treatment substantially equal to that which Agent accords its own property or if Agent takes such action with respect to the Collateral as the Debtor shall request or agree to in writing, provided that no failure to comply with any such request nor any omission to do any such act requested by the Debtor shall be deemed a failure to exercise reasonable care. Agent's failure to take steps to preserve rights against any parties or property shall not be deemed to be failure to exercise reasonable care with respect to the Collateral in Agent's custody. All risk of loss, damage, or destruction of the Collateral shall be borne by Debtor. Section 7.5 Debtor's Contracts. Debtor shall remain liable to perform its obligations under any contracts and agreements included in the Collateral to the same extent as though this Security Agreement and Assignment had not been entered into, and Agent shall not have any obligation or liability under such contracts and agreements by reason of this Security Agreement and Assignment or otherwise. Section 7.6 Reinstatement of Liens. If at any time after payment in full of all Secured Obligations and termination of Agent's Liens, any payment on Secured Obligations previously made must be disgorged by Agent for any reason whatsoever (including, without limitation, the insolvency, bankruptcy, or reorganization of Debtor or any Guarantor), this Security Agreement and Assignment and Agent's Liens granted hereunder shall be reinstated as to all disgorged payments as though such payments had not been made, and Debtor shall sign and deliver to Agent all documents and things necessary to reperfect all terminated Liens. Section 7.7 Agent Expenses. If Debtor fails to pay any moneys (whether taxes, assessments, insurance premiums, or otherwise) due to third persons or entities, fails to make any deposits or furnish any required proof of payment or deposit, or fails to discharge any Lien prohibited hereby, all as required under the terms of this Security Agreement and Assignment, then Agent may, to the extent that it determines that such failure by Debtor could have a material adverse effect on Agent's interests in the Collateral, in its discretion and with three (3) days prior notice to Debtor, make payment of the same or any part thereof. Any amounts paid or deposited by Agent shall constitute Agent Expenses, shall become part of the Secured Obligations and shall be secured by the Collateral. Any payments made by Agent shall not constitute (a) an agreement by Agent to make similar payments in the future or (b) a waiver by Agent of any Event of Default under this Security Agreement and Assignment. Agent need not inquire as to, or contest the validity of, any such expense, tax, security interest, encumbrance, or Line, and the receipt of the usual official notice for the payment of moneys to a governmental entity shall be conclusive evidence that the same was validly due and owing. -11- Debtor shall immediately and without demand reimburse Agent for all sums expended by Agent that constitute Agent Expenses, and Debtor hereby authorizes and approves all advances and payments by Agent for items constituting Agent Expenses. Section 7.8 Inspection of Collateral and Records. Subject to and consistent with the provisions of Sections 5.1(h) and 5.1(m) of the Credit Agreement, during Debtor's usual business hours, Agent may inspect and examine the Collateral and check and test the same as to quality, quantity, value and condition. Agent shall also have the right at any time or times hereafter, during Debtor's usual business hours or during the usual business hours of any third party having control over the records of Debtor, to inspect and verify Debtor's Books in order to verify the amount or condition of, or any other matter relating to, the Collateral and Debtor's financial condition and to copy and make extracts therefrom. Debtor waives the right to assert a confidential relationship. If any, it may have with any accounting firm and/or service bureau in connection with any information requested by Agent pursuant to this Security Agreement and Assignment and agrees that Agent may directly contact any such accounting firm and/or service bureau in order to obtain such information. Section 8 COVENANTS Section 8.1 Encumbrance of Assets. Debtor shall not create, incur, assume, or permit to exist any Lien on any asset now owned or hereafter acquired by Debtor, except for Liens to Agent and Permitted Liens or as otherwise provided by Section 5.2(c). Section 8.2 Condition and Repair. Debtor shall maintain in good repair and working order all properties used in its business and from time to time shall make all appropriate repairs and replacements thereof. Section 8.3 Insurance. Debtor shall maintain, with financially sound and reputable insurers, insurance with respect to the Collateral against loss or damage of the kinds and in the amounts customarily insured against by corporations of established reputation engaged in the same or similar businesses. Each such policy shall name Agent as an additional insured and, where applicable, as loss payee under a lender loss payable endorsement satisfactory to Agent and shall provide for thirty (30) days' written notice to Agent before such policy is altered or canceled. Debtor shall provide evidence satisfactory to Agent that all such coverages are in full force and effect. Section 9 EVENTS OF DEFAULT Any of the following events shall be deemed an Event of Default or a default hereunder: -12- (a) if default shall be made in payment or performance of any Secured Obligations as and when the same shall become due and payable after the expiration of the applicable grace period, if any; or (b) if Debtor fails to perform or observe any other term, provision, covenant or agreement of this Security Agreement and Assignment (within 15 days of Debtor's receipt of written notice or actual knowledge thereof) or in any of the Loan Instruments to which it is a party, and Debtor shall not cure such failure within the applicable grace period, if any; or (c) if there occurs an event of default under the Credit Agreement or any other Loan Instrument; or (d) if any warranty, representation, certification, financial statement or other information made or furnished at any time pursuant to the terms of this Security Agreement and Assignment, by Debtor or any Guarantor, shall prove to be materially false as of the date made. Section 10 REMEDIES Section 10.1 General Remedies. Upon the occurrence of any Event of Default, in addition to all other rights, powers and remedies conferred herein, in the Credit Agreement or by law, the Agent may declare the Secured Obligations immediately due, payable and performable, including all principal and interest remaining unpaid on the Notes and all other amounts secured hereby, all without demand, presentment or notice, all of which are expressly waived. The Agent shall also have, in addition to all other rights provided herein, in the Credit Agreement, or by law, the rights and remedies of a Agent under the Code and applicable common law (regardless of whether the Code is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the Code applies to the affected Collateral), and further, but not by way of limitation, the Agent may take (and/or may cause one or more of its designees to take) any or all of the following actions upon the occurrence of any Event of Default: (a) Notify other parties with respect to or interested in any item of the Collateral of the Agent's interest therein or of any action proposed to be taken with respect thereto, and direct one or more of those parties to make all payments, distributions and proceeds otherwise payable to the Debtor with respect thereto directly to the Agent or its order until notified by the Agent that all the Secured Obligations have been fully paid and satisfied. (b) Require the Debtor to, and the Debtor hereby agrees that it shall at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent -13- and make it available to the Agent at a place to be designated by the Agent reasonably convenient to both parties. (c) Receive and retain all payments, distributions and proceeds of any kind with respect to any and all of the Collateral. (d) Enter any premises where any item of Collateral may be located, with or without permission or process of law but without breach of the peace, and seize and remove such Collateral or remain upon such premises and use or dispose of such Collateral as contemplated under this Security Agreement and Assignment. (e) Request the judicial appointment of a receiver respecting the Collateral or any portion thereof in any action, suit or proceeding in which claims are asserted against the Collateral by the Agent or its designee, irrespective of the solvency of the Debtor or any other person or the adequacy of any Collateral, and without notice to or the approval of the Debtor, which receiver shall have the power to manufacture, operate, sell, lease or rent such items of Collateral pending the sale of all of the Collateral and to collect the rent, issues and profits therefrom, together with such other powers as may have been requested by the Agent and shall apply the amounts received (net of all proper charges and expenses) to the Obligations as provided in this Security Agreement and Assignment. Such a receiver may serve without bond or under such minimal bond as may be required by applicable law. (f) Reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure. (g) Take any action with respect to the offer, sale, lease or other disposition, and delivery of the whole of, or from time to time any one or more items of, the Collateral, including, without limitation: to sell, assign, lease or otherwise dispose of the whole of, or from time to time any part of, the Collateral, or offer or agree to do so, in any established market or at any broker's board, private sale or public auction or sale (with or without demand on the Debtor or any advertisement or other notice of the time, place or terms of sale, except such reasonable notice of the time and place of any public sale or the time after which a private sale or other disposition may be made as may be required by the Code) for cash, credit or any other asset or property, for immediate or future delivery, and for such consideration and upon such terms and subject to such conditions as the Agent in its sole and absolute discretion may determine. The requirements of reasonable notice shall be met if such notice is mailed or delivered to the Debtor at the address designated at Section 12.4 at least ten (10) days before the time of the sale or disposition. The Agent may purchase (the consideration for which may consist in whole or in part of cancellation of indebtedness) or any other person may purchase the whole or any one or more items of the Collateral so sold free and clear of any and all rights, powers, privileges, remedies and interests of the Debtor (which the Debtor has expressly waived); to postpone or adjourn any such auction, sale or other disposition or cause the -14- same to be postponed or adjourned from time to time to a subsequent time and place, or to abandon or cause the abandonment of the same, all without any advertisement or other notice thereof; and to carry out any agreement to sell any item or items of the Collateral in accordance with the terms and provisions of such agreement, notwithstanding that, after the Agent shall have entered into such an agreement, all the Obligations may have been paid and satisfied in full. Agent may dispose of the Collateral in its then existing condition or, at its election, may take such measures as it deems necessary or advisable to refurbish, repair, improve, process, finish, operate, demonstrate, and prepare for sale the Collateral and may store, ship, reclaim, recover, protect, advertise for sale or lease, and insure the Collateral. (h) Pay, purchase, contest, or compromise any encumbrance, charge, or Lien that, in the opinion of Agent, appears to be prior or superior to its Lien and pay all expenses incurred in connection therewith. (i) Agent may (i) notify Account Debtors to make payment on Accounts, and General Intangibles directly to Agent; (ii) settle, adjust, compromise, extend, or renew Accounts, or General Intangibles, either before or after legal proceedings to collect such Accounts, or General Intangibles have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar documents against any Account Debtor; (iv) prepare and file any notice, assignment, satisfaction, or release of Lien, UCC termination statement, or any similar document; (v) sell or assign Accounts, and General Intangibles, individually or in bulk, upon such terms, for such amounts, and at such time or times as Agent deems advisable; and (vi) complete the performance required of Debtor under any contract or agreement to which Debtor is a party and out of which Accounts, or General Intangibles arise or may arise. Agent may use and operate Debtor's Equipment for all such purposes. (j) Agent may (i) endorse Debtor's name on all checks, notes, drafts, money orders, or other forms of payment of or security for Accounts or other Collateral; (ii) sign Debtor's name on drafts drawn on Account Debtors or issuers of letters of credit; and (iii) notify the postal authorities in Debtor's name to change the address for delivery of Debtor's mail to an address designated by Agent, receive and open all Mail addressed to Debtor, copy all mail, retain all mail relating to Collateral, and hold all other mail available for pickup by Debtor. (k) Exercise any voting, consent, enforcement or other right, power, privilege, remedy or interest of the Debtor pertaining to any item of Collateral to the same extent as if the Agent were the outright owner thereof. (l) Take possession of and thereafter deal with or use from time to time all or any part of the Collateral in all respects as if the Agent were the outright owner thereof. (m) At the Agent's sole and absolute discretion, retain the Collateral or any part thereof in satisfaction of the Secured Obligations. -15- (n) Transfer or cause the transfer of the ownership of all or any part of the Collateral to its own name and have such transfer recorded in any jurisdiction(s) and publicized in any manner deemed appropriate by the Agent. Section 10.2 Non-Judicial Remedies. In granting to the Agent the power to enforce its rights hereunder without prior judicial process or judicial hearing, the Debtor expressly waives, renounces and knowingly relinquishes any legal right which might otherwise require the Agent to enforce its rights by judicial process. In so providing for non-judicial remedies, the Debtor recognizes and concedes that such remedies are consistent with the usage of trade, are responsive to commercial necessity, and are the result of a bargain at arm's length. Nothing herein is intended to prevent the Agent from resorting to judicial process at its option. Section 10.3 Proceeds. The Agent shall collect the cash and non-cash proceeds received from any sale or other disposition or from any other source contemplated by Section 10.1, and, after deducting all costs and expenses incurred by the Agent and any person designated by the Agent to take any of the action enumerated in this Security Agreement and Assignment in connection with such collection and sale or disposition (including reasonable attorneys' disbursements, expenses and reasonable fees and the reasonable fees and expenses of any appraisers or consultants employed by Agent), the Agent in its discretion may retain the same as additional or substitute Collateral or may apply the same in accordance with the terms and provisions of this Security Agreement and Assignment. In the event any funds remain after satisfaction in full of the Secured Obligations, then the remainder shall be returned to the Debtor, subject, however, to any other rights or interests the Agent may have therein under any other instrument, agreement or document or applicable law. Section 10.4 Application of Proceeds. Any funds received from or on behalf of the Debtor (whether pursuant to the terms and provisions of this Security Agreement and Assignment or otherwise) by the Agent shall be applied to the following items in such manner and order as the Agent may determine in its sole and absolute discretion. (a) The payment to or reimbursement for any fees and expenses for which the Agent is entitled to be paid or reimbursed pursuant to any of the provisions of this Security Agreement and Assignment. (b) The payment of accrued and unpaid interest on the Secured Obligations. (c) The payment of the outstanding principal on the Secured Obligations. (d) The payment in full of all other Obligations under this Security Agreement and Assignment. -16- All advances and payments made pursuant to this Security Agreement and Assignment may be recorded by the Agent on its books and records, and such books and records shall be conclusive absent manifest error as to the existence and amounts thereof. Section 10.5 Deficiency. If the amount of all proceeds received with respect to and in liquidation of the Collateral that shall be applied to payment of the Secured Obligations shall be insufficient to pay and satisfy all of the Secured Obligations in full, the Debtor acknowledges that it shall remain liable for any deficiency, together with interest thereon and costs of collection thereof (including attorneys' disbursements, expenses and reasonable fees and the reasonable fees of any appraisers or consultants employed by Agent), and in accordance with the terms and provisions of this Security Agreement and Assignment. Section 10.6 Other Recourse. The Debtor waives any right to require the Agent to proceed against any other person, exhaust or marshal any Collateral or other security for the Secured Obligations, or pursue any other remedy in the Agent's power. Until all of the Secured Obligations shall have been paid in full, the Debtor shall have no right to subrogation and the Debtor waives the right to enforce any remedy which the Agent has or may hereafter have against any other party liable for the Secured Obligations, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by the Agent. Section 10.7 Remedies Not Exclusive. All rights, powers and remedies conferred in this Section 10 are cumulative, and not exclusive, of: (i) any and all other rights and remedies herein conferred or provided for; (ii) any and all other rights, powers and remedies conferred or provided for in the Credit Agreement or in any other Loan Document; and (iii) any and all rights, powers and remedies conferred, provided for or existing at law or in equity, and the Agent shall, in addition to the rights, powers and remedies herein conferred or provided for, be entitled to avail itself of all such other rights, powers and remedies as may now or hereafter exist at law or in equity for the collection of and enforcement of the Secured Obligations and the enforcement of the representations, warranties, agreements, covenants and indemnities contained in this Security Agreement and Assignment, the Credit Agreement and in any other Loan Document. The Agent, in its sole discretion, may proceed to exercise or enforce any right, power, privilege, remedy or interest that the Agent may have under this Security Agreement and Assignment, the Credit Agreement any other Loan Document, or applicable law, without notice except as otherwise expressly provided herein; without pursuing, exhausting or otherwise exercising or enforcing any other right, power, privilege, remedy or interest that the Agent may have against or in respect of the Debtor or the Collateral, or other person or thing, and without regard to any act or omission of the Agent or any other person. The Agent may institute separate proceedings with respect to this Security Agreement and Assignment in such order and at such times as the Agent may elect in its sole and absolute discretion. This Security Agreement and Assignment may be enforced without possession of any Note or its production in any action, suit or proceeding. -17- Section 10.8 Equitable Relief. The Debtor acknowledges that it will be impossible to measure in money the damage to the Agent in the event of a breach of any of the terms and provisions of this Security Agreement and Assignment, and the Debtor agrees that, in the event of any such breach, the Agent will not have an adequate remedy at law, although the foregoing shall not constitute a waiver of any of the Agent's rights, powers, privileges and remedies against or in respect of a breaching party, any Collateral or any other person or thing under this Security Agreement and Assignment or applicable law. It is therefore agreed that the Agent, in addition to all other such rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief, specific performance or such other equitable relief as the Agent may request to exercise or otherwise enforce any of the terms and provisions of this Security Agreement and Assignment and to enjoin or otherwise restrain any act prohibited thereby, and the Debtor will not urge and hereby waives any defense that there is an adequate remedy of law. Section 10.9 License. Agent is hereby granted a license or other right to use, without charge, Debtor's patents, copyrights, trade secrets, technical processes, rights of use of any name, trade names, trademarks, labels, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and Debtor's rights under all licenses and shall inure to Agent's benefit. Section 10.10 Power of Attorney. Debtor hereby appoints Agent (and any of Agent's officers, employees, nominees, designees or agents designated by Agent) as Debtor's attorney, with power after the occurrence of an Event of Default and at any time Agent reasonably believes an Event of Default has occurred or is likely to occur with the passage of time, with respect to the various assets and properties included in the Collateral, and in addition to any other powers of attorney contained herein: (a) to take possession of and endorse (to Agent or otherwise) Debtor's name on any checks, bills of exchange, notes, acceptances, money orders, drafts, or other documents, forms of payment or security received in payment for or on account of those assets and properties; (b) demand, collect and receive any monies due on account of those assets and properties and give receipts and acquittances in connection therewith; (c) negotiate and compromise any claim, and commence, prosecute, defense, settle or withdraw and claims, suits or proceedings pertaining to or arising out of those assets and properties; (d) pay any indebtedness or other liability or perform any other Secured Obligation required to be paid or performed under this Security Agreement and Assignment or the Credit Agreement by the Debtor; (e) prepare and execute on behalf of the Debtor any mortgage, financing statement or other evidence of a security interest contemplated by this Security Agreement and Assignment, or any modification, refiling, continuation or extension thereof; (f) to sign Debtor's name on drafts against Account Debtors, on schedules and assignments of Accounts, on verifications of Accounts, and on notices to Account Debtors; (g) to notify the post office authorities to change the address for delivery of Debtor's mail to an address designated by Agent, to receive and open all mail addressed to Debtor, and to retain all mail relating to the Collateral and hold all other mail available for pick up by Debtor; (h) to send requests for verification of Accounts; (i) take any other action contemplated by this Security Agreement and -18- Assignment or the Credit Agreement; (j) sign, execute, acknowledge, swear to, verify, deliver, file, record and publish any one or more of the foregoing; and (k) to do all things necessary to carry out this Security Agreement and Assignment. The appointment of Agent as Debtor's attorney and each and every one of Agent's rights and powers, being coupled with an interest, are irrevocable as long as any Secured Obligations are outstanding. Any person dealing with Agent shall be entitled to rely conclusively on any written or oral statement of Agent that this power of attorney is in effect. This Power of Attorney shall survive the dissolution, reorganization or bankruptcy of the Debtor and shall extend to and be binding upon the Debtor's successors, assigns, heirs and legal representatives. To the extent permitted by applicable law, the Debtor hereby ratifies and approves all acts of any such attorney and agrees that neither the Agent nor any such attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law other than their gross negligence, willful misconduct or unlawful misconduct. Agent may also use Debtor's stationary in connection with exercising its rights and remedies and performing the Obligations of Debtor. Section 10.11 Expenses Secured. The Debtor agrees to pay on demand all costs and expenses, if any (including reasonable counsel, consultant and appraiser fees and expenses), in connection with the exercise and enforcement (whether through negotiations, legal proceedings or otherwise) of Agent's rights and remedies provided by this Security Agreement and Assignment, the Credit Agreement or any other Loan Document, or which by law shall be payable by the Debtor, expressly including all such costs and expenses incurred by the Agent in connection with or during the pendency of any bankruptcy or insolvency proceedings involving the Debtor or any Guarantor. All such expenses shall be part of the Secured Obligations, and shall be secured by the Collateral. Section 10.12 Miscellaneous. The Debtor acknowledges and agrees that the rights, powers, privileges, remedies and interests conferred upon the Agent in respect of the Collateral by this Security Agreement and Assignment and applicable law are solely to enable the Agent to protect and preserve the Collateral, as well as to realize upon it in accordance with this Security Agreement and Assignment, all in such manner as the Agent in its discretion may elect, and shall not impose upon the Agent any duty or other obligation to exercise or enforce any such right, power, privilege, remedy or interest. Any exercise or other enforcement of any such right, power, privilege, remedy or interest, if undertaken by the Agent in its discretion, may be delayed, discontinued or otherwise not pursued or exhausted for any reason whatsoever (whether intentionally or otherwise). Without limiting the generality of the foregoing, the Agent shall be under no duty or obligation to protect or preserve any of the Collateral, perform any obligation or duty of the Debtor under any of the Collateral, or take any action to mitigate or otherwise reduce any damage or other loss or to otherwise collect, exercise or enforce any claim, right or other interest arising under or with respect to the Collateral, except as specifically provided in this Security Agreement and Assignment. Section 11 RIGHT OF SET-OFF -19- Section 11.1 Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default, the Agent hereby is authorized at any time and from time to time, without notice to the Debtor (any such notice being hereby expressly waived by the Debtor), to set-off and apply, directly or through any of its affiliates, custodians, participants and designees, any and all deposits (whether general or special, time or demand, provisional or final, or individual or joint) and other assets and properties at any time held in the possession, custody or control of the Agent and any of its affiliates, custodians, participants and designees, and any indebtedness or other amount at any time held in the possession, custody or control of the Agent and any of its affiliates, custodians, participants and designees, and any indebtedness or other amount at any time owing by the Agent or any of its affiliates or participants, to or for the credit, account or benefit of the Debtor against any and all of the Secured Obligations now or hereafter existing, whether or not the Agent shall have declared a default, accelerated the Secured Obligations or made any demand or taken any other action under this Security Agreement and Assignment, and although such Secured Obligations may be unmatured. The Debtor acknowledges that pursuant to Section 2.1(f) hereof it granted to the Agent a senior security interest in and to, among other things, all such deposits, assets, properties and indebtedness in the possession of the Agent's affiliates, custodians, participants and designees, and the Debtor hereby authorizes any such person to so set-off and apply such amounts at such times and in such manner as the Agent may direct pursuant to this Section 11.1. The Agent shall notify the Debtor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. In debiting any such account, the Secured Obligations shall be deemed to have been paid or repaid only to the extent of the funds actually available in the account notwithstanding any internal procedure of the Agent or any of its affiliates, custodians, participants and designees to the contrary. The rights of the Agent under this Section are in addition to and without limitation of any other rights, powers, privileges, remedies and other interests (including, without limitation, other rights of set-off and security interests) that the Agent may have under this Security Agreement and Assignment and applicable law. Section 12 MISCELLANEOUS PROVISIONS Section 12.1 Delay and Waiver. No delay or omission to exercise any right shall impair any such right or be a waiver thereof, but any such right may be exercised from time to time and as often as may be deemed expedient. A waiver on one occasion shall be limited to that particular occasion. Section 12.2 Severability; Headings. If any part of this Security Agreement and Assignment or the application thereof to any person or circumstance is held invalid, the remainder of this Security Agreement and Assignment shall not be affected thereby. The section headings herein are included for convenience only and shall not be deemed to be a part of this Security Agreement and Assignment. -20- Section 12.3 Binding Effect. This Security Agreement and Assignment shall be binding upon and inure to the benefit of the respective legal representatives, successors, and assigns of the parties hereto; however, Debtor may not assign any of its rights or delegate any of its obligations hereunder. Agent (and any subsequent assignee) may transfer and assign this Security Agreement and Assignment and deliver the Collateral to the assignee, who shall thereupon have all of the rights of Agent; and Agent (or such subsequent assignee who in turn assigns as aforesaid) shall then be relieved and discharged of any responsibility or liability with respect to this Security Agreement and Assignment and said Collateral. Section 12.4 Notices. Any notices under or pursuant to this Security Agreement and Assignment shall be deemed duly sent when delivered in hand or when mailed by registered or certified mail, return receipt requested, or when delivered by courier or when transmitted by facsimile, telecopy, or similar electronic medium to the following addresses: To Debtor: EFTC Corporation 9351 Grant Street Horizon Terrace, 6th Floor Denver, Colorado 80229 Attention: Brian O'D. White Treasurer Telecopy: (303) 451-8210 With a copy to: Martha Traudt Collins, Esq. Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, Colorado 80203 Telecopy: (303) 866-0200 To Agent: Bank One, Colorado, N.A. 1125 Seventeenth Street, Third Floor Denver, Colorado 80202 Attention: David L. Ericson Vice President Telecopy: (303) 297-4435 With a copy to: Ted R. Sikora, II, Esq. Davis, Graham & Stubbs LLP 370 Seventeenth Street, Suite 4700 Denver, Colorado 80202 Telecopy: (303) 893-1379 -21- Either party may change such address by sending notice of the change to the other party; such change of address shall be effective only upon actual receipt of the notice by the other party. Section 12.5 Consent to Jurisdiction. Any legal action or other proceeding with respect to this Security Agreement and Assignment or any other Loan Documents may be brought in the courts of the State of Colorado or of the United States located in the City and County of Denver (to the extent that such courts would otherwise have subject matter jurisdiction), and by execution and delivery of this Security Agreement and Assignment, each of the Debtor and the Agent consents, for itself and in respect of its property, to the jurisdiction of those courts. Each of the Debtor and the Agent irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Security Agreement and Assignment or any other Loan Documents. The Debtor and the Agent each waive personal service of any summons, complaint or other process which may be made by any other means permitted by Colorado law. Section 12.6 Waiver of Jury Trial and Certain Damages. Each of the Debtor and the Agent hereby waives, to the extent permitted by applicable law, trial by jury in any litigation in any court with respect to, in connection with, or arising out of this Security Agreement and Assignment or any other Loan Document or the validity, protection, interpretation, collection or enforcement thereof; and the Debtor hereby waives, to the extent permitted by applicable law, the right to interpose any setoff or counterclaim or cross-claim in connection with any such litigation, irrespective of the nature of such setoff, counterclaim or cross-claim except to the extent that the failure so to assert any such setoff, counterclaim or cross-claim would permanently preclude the prosecution of or recovery upon the same. Notwithstanding anything contained in this Security Agreement and Assignment or any other Loan Documents to the contrary, no claim may be made by the Debtor against the Agent for any lost profits or any special, indirect or consequential damages in respect of any breach or wrongful conduct (other than willful misconduct constituting actual fraud) in connection with, arising out of or in any way related to the transactions contemplated hereunder or under any other Loan Documents, or any act, omission or event occurring in connection therewith; and the Debtor hereby waives, releases and agrees not to sue upon any such claim for any such damages. The Debtor agrees that this Section 12.6 is a specific and material aspect of this Security Agreement and Assignment and acknowledges that the Agent would not extend to the Debtor any advances pursuant to the Credit Agreement if this Section 12.6 were not part of this Security Agreement and Assignment. Section 12.7 Governing Law. All acts and transactions hereunder and the rights and obligations of the parties hereto shall be governed, construed, and interpreted in accordance with the domestic laws of Colorado. [Signatures on following page] -22- IN WITNESS WHEREOF, the Debtor and the Agent have executed this Security Agreement and Assignment by their duly authorized officers as of the date first above written. AGENT: DEBTOR: BANK ONE, COLORADO, N.A. EFTC CORPORATION By: /s/ By: /s/ David L. Ericson Stuart W. Fuhlendorf Vice President Vice President and Chief Financial Officer -23- EX-99.4 11 OREGON DEED OF TRUST After Recording, Return To: Davis, Graham & Stubbs LLP 370 Seventeenth Street, Suite 4700 Denver, CO 80202 Attn: Ted R. Sikora II DEED OF TRUST AND SECURITY AGREEMENT DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING Dated as of September 30, 1997 EFTC CORPORATION, Grantor BANK ONE, COLORADO, N.A., as Agent and Beneficiary NORTHWEST TITLE COMPANY, Trustee Maximum principal amount to be advanced pursuant to the Credit Agreement and Promissory Notes secured by this line of credit instrument (which amount may be exceeded by advances to complete construction pursuant to ORS 86.155(2)(c)): $45,000,000. Maturity Date of the Credit Agreement (exclusive of any option to renew or extend): September 30, 2000 (Revolving and Swing Loans ) and September 30, 2002. (Term Loan). THIS INSTRUMENT IS GOVERNED BY THE PROVISIONS OF THE OREGON REVISED STATUTES 86.705 ET SEQ. THIS INSTRUMENT SECURES FUTURE ADVANCES THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS. THE REAL PROPERTY SUBJECT HERETO IS DESCRIBED IN EXHIBIT A. THIS INSTRUMENT IS TO BE RECORDED AS A DEED OF TRUST IN YAMHILL COUNTY OREGON -i- C O N T E N T S
Page ARTICLE 1 PARTIES, PROPERTY AND DEFINITIONS.............................................................1 1.1 Grantor...................................................................1 1.2 Beneficiary...............................................................1 1.3 Trustee...................................................................1 1.4 Notes.....................................................................1 1.5 Property..................................................................2 1.6 Chattels..................................................................3 1.7 Intangible Personalty.....................................................3 1.8 Loan Documents............................................................3 1.9 Environmental Law.........................................................3 1.10 Regulated Substance.......................................................3 1.11 Person....................................................................4 1.12 Secured Obligations.......................................................4 1.13 Default Rate..............................................................4 ARTICLE 2 GRANTING CLAUSE...............................................................................4 2.1 Grant to Trustee..........................................................4 2.2 Security Interest to Beneficiary..........................................4 ARTICLE 3 GRANTOR'S WARRANTIES AND REPRESENTATIONS......................................................4 3.1 Warranty of Title.........................................................4 3.2 Organizational Status.....................................................5 3.3 Due Authorization.........................................................5 3.4 No Regulated Substances...................................................5 3.5 Non-Agricultural Property.................................................6 3.6 No Susceptibility to Forfeiture...........................................6 3.7 Compliance with Laws......................................................6 3.8 No Conflict with Other Agreements.........................................6 3.9 No Material Litigation....................................................6 3.10 Accurate Financial Information............................................6 ARTICLE 4 GRANTOR'S AFFIRMATIVE COVENANTS...............................................................7 4.1 Payment of Notes..........................................................7 4.2 Performance of Other Obligations..........................................7 4.3 Waiver of Homestead and Other Exemptions..................................7 -i- 4.4 Payment of Taxes..........................................................7 4.5 Other Encumbrances........................................................7 4.6 Maintenance of Insurance..................................................7 4.7 Payment of Utilities......................................................8 4.8 Maintenance and Repair of Property........................................8 4.9 Compliance with Laws......................................................9 4.10 Performance of Lease Obligations..........................................9 4.11 Eminent Domain; Private Damage............................................9 4.12 Mechanics' Liens.........................................................10 4.13 Environmental Claims.....................................................10 4.14 Defense of Actions.......................................................10 4.15 Expenses of Enforcement..................................................10 4.16 Book and Records; Financial Reports......................................11 4.17 Priority of Leases. ....................................................11 4.18 Further Assurances; Estoppel Certificates................................11 ARTICLE 5 GRANTOR'S NEGATIVE COVENANTS.................................................................11 5.1 Waste and Alterations....................................................11 5.2 Zoning and Private Covenants.............................................12 5.3 Additional Tax Burden....................................................12 5.4 Interference with Leases.................................................12 5.5 Transfer of Property.....................................................12 5.6 Further Encumbrance of Property..........................................12 5.7 Use of Regulated Substances..............................................13 5.8 Change of Name...........................................................13 5.9 Improper Use of Property.................................................13 ARTICLE 6 EVENTS OF DEFAULT............................................................................13 6.1 Failure to Pay Notes.....................................................13 6.2 Violation of Other Covenants.............................................13 6.3 Misrepresentation or Breach of Warranty..................................14 6.4 Acts Threatening Forfeiture. ...........................................14 6.5 Assertion of Priority....................................................14 6.6 Event of Default Under Credit Agreement. ...............................14 ARTICLE 7 BENEFICIARY'S REMEDIES.......................................................................14 7.1 Performance of Defaulted Obligations.....................................14 7.2 Specific Performance and Injunctive Relief...............................15 -ii- 7.3 Acceleration of Secured Obligations......................................15 7.4 Suit for Monetary Relief.................................................15 7.5 Possession of Property...................................................15 7.6 Enforcement of Security Interests........................................15 7.7 Foreclosure Against Property.............................................15 7.8 Appointment of Receiver..................................................16 ARTICLE 8 MISCELLANEOUS PROVISIONS.....................................................................17 8.1 Replacement of Trustee...................................................17 8.2 Time of the Essence......................................................18 8.3 Joint and Several Obligations............................................18 8.4 Rights and Remedies Cumulative...........................................18 8.5 No Implied Waivers.......................................................18 8.6 Dealings with Successor Owners...........................................18 8.7 No Third Party Rights....................................................18 8.8 Preservation of Liability and Priority...................................19 8.9 Subrogation of Beneficiary...............................................19 8.10 Notices..................................................................19 8.11 Fixture Filing...........................................................19 8.12 Defeasance...............................................................19 8.13 Severability.............................................................19 8.14 Reconveyance by Trustee..................................................20 8.15 Attorney's Fees..........................................................20 8.16 UNDER OREGON LAW.........................................................21 8.17 Acceptance by Trustee....................................................21
-iii- DEED OF TRUST AND SECURITY AGREEMENT THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") is given as of September 30, 1997, by the Grantor named below to the Trustee named below, for the use and benefit of the Beneficiary named below. ARTICLE 1 PARTIES, PROPERTY AND DEFINITIONS The following terms and references shall have the meanings indicated: 1.1 Grantor: EFTC CORPORATION, a Colorado corporation, whose legal address is 9351 Grant Street, Horizon Terrace, Sixth Floor, Denver, Colorado 80229. 1.2 Beneficiary: BANK ONE, COLORADO, N.A., a national banking association, whose legal address is 1125 Seventeenth Street, Third Floor, Denver, Colorado 80202, Attention: David L. Ericson, Vice President, as Agent for the Banks under that certain Credit Agreement (the "Credit Agreement") dated September 30, 1997, by and among Grantor, the Banks listed therein, together with any future holder of a Note. Capitalized terms used and not otherwise defined herein shall have the meanings given to them in the Credit Agreement. 1.3 Trustee: NORTHWEST TITLE COMPANY, with an office located at 601 E. Hancock, Newberg, Oregon 97132. 1.4 Notes: Any promissory notes made by Grantor in favor of Beneficiary, including, without limitation: (i) Grantor's Promissory Note (Revolving Loan) dated September 30, 1997, in the original principal amount of $25,000,000.00; (ii) Grantor's Promissory Note (Term Loan) dated September 30, 1997, in the original principal amount of $20,000,000.00; (iii) Grantor's Promissory Note (Swing Loan) dated September 30, 1997, in the original principal amount of $2,500,000.00; and -1- (iv) Any and all modifications, extensions and renewals of any of the foregoing and any and all future advances or readvances to Grantor whether pursuant to any of the foregoing promissory notes or otherwise. All terms and provisions of the Notes and the Guaranty are incorporated by this reference in this Deed of Trust. 1.5 Property: The land described in Exhibit A attached, together with the following: (a) All buildings, structures and improvements now or hereafter located thereon, as well as all rights of way, easements, trackage rights and other appurtenances to such land; (b) All of Grantor's right, title and interest in any land lying between the boundaries of the land described on Exhibit A and the center line of any adjacent street, road, avenue or alley, whether opened or proposed; (c) All of Grantor's right, title and interest in all water rights and conditional water rights that are appurtenant to or that have been used or are intended for use in connection with such land, including but not limited to (i) ditch, well, pipeline, spring and reservoir rights, whether or not adjudicated or evidenced by any well or other permit, (ii) all rights with respect to nontributary groundwater (and other groundwater) underlying said land, (iii) any permit to construct any water well, water from which is intended to be used in connection with such land, and (iv) all of Grantor's right, title and interest under any decreed or pending plan of augmentation or water exchange plan; (d) All of Grantor's right, title and interest in all minerals, crops, timber, trees, shrubs, flowers and landscaping features now or hereafter located on, under or above such land; (e) With the exception of items that are owned by tenants and that such tenants are entitled, under the terms of applicable lease agreements, to remove from the leased premises , and except for items leased by Grantor from third parties or held by Grantor on consignment, all machinery, apparatus, equipment, fittings, fixtures (whether actually or constructively attached, and including all trade, domestic and ornamental fixtures) now or hereafter located in, on or under such land or improvements and used or usable in connection with any present or future operation thereof, including but not limited to all heating, air-conditioning, freezing, -2- lighting, laundry, incinerating and power equipment; engines; pipes; pumps; tanks; motors; conduits; switchboards; plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, cooking and communications apparatus; boilers, water heaters, ranges, furnaces and burners; appliances; vacuum cleaning systems; elevators; escalators; shades; awnings; screens; storm doors and windows; stoves; refrigerators; attached cabinets; partitions; ducts and compressors; rugs and carpets; draperies; and all additions thereto and replacements therefor; (f) All development rights associated with such land, whether previously or subsequently transferred to such land from other real property or now or hereafter susceptible of transfer from such land to other real property; (g) All awards and payments, including interest thereon, resulting from the exercise of any right of eminent domain or any other public or private taking of, injury to, or decrease in the value of, any of such property; and (h) All other or greater rights and interests of every nature in any of the above-described property and in the possession or use thereof and income therefrom, whether now owned or subsequently acquired by Grantor. 1.6 Chattels: All goods, fixtures, building and other materials, supplies and other tangible personal property of every nature now owned or hereafter acquired by Grantor and used, intended for use, or usable in the operation and any future construction of improvements or development of the Property, together with all accessions thereto, replacements and substitutions therefor and proceeds thereof. 1.7 Intangible Personalty: All accounts and all plans, specifications, licenses, permits and other general intangibles (whether now owned or hereafter acquired, and including proceeds thereof) relating to or arising from Grantor's ownership, use, operation, leasing or sale of all or any part of the Property, specifically including but in no way limited to any right that Grantor may have or acquire to transfer any development rights from the Property to other real property, and any development rights that may be so transferred. 1.8 Loan Documents: The Notes, this Deed of Trust and any financing statements executed in connection herewith, the Assignment of Leases and Rents and Other Income of even date herewith that also secures the Notes, the Credit Agreement and each other document executed or delivered by Grantor as security for the Notes or in connection with the transaction pursuant to which the Notes have been executed and delivered. The term "Loan Documents" also -3- includes all modifications, extensions, renewals and replacements of each document referred to above. 1.9 Environmental Law: Any federal, state or local enactment relating to protection of public health or the environment, including (by way of illustration rather than limitation) the Clean Water Act, 33 U.S.C. ss. 1251, et seq., the Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601, et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq., and the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 135, et seq., as well as applicable state counterparts to such federal legislation and any regulations, guidelines, directives or other interpretations of any such enactment, all as amended from time to time. 1.10 Regulated Substance: Any substance, the manufacture, storage, transport, generation, use, treatment, recycling, disposal or other disposition of which is prohibited or regulated (including, without limitation, being subjected to notice, reporting, record-keeping or clean-up requirements) by any Environmental Law. 1.11 Person: An individual, corporation, association, partnership, trust or other legal entity. 1.12 Secured Obligations: All present and future obligations of Grantor to Beneficiary evidenced by or contained in the Loan Documents, whether stated in the form of promises, covenants, representations, warranties, conditions or prohibitions or in any other form. 1.13 Default Rate: A rate of interest equal to the Prime Rate plus 3% per annum. ARTICLE 2 GRANTING CLAUSE 2.1 Grant to Trustee. As security for the Secured Obligations, Grantor grants, bargains, sells and conveys the Property to Trustee, in trust, with the power of sale, for the use and benefit of Beneficiary and subject to all provisions of this Deed of Trust. 2.2 Security Interest to Beneficiary. As additional security for the Secured Obligations, Grantor hereby grants to Beneficiary a security interest in the Chattels and in the Intangible Personalty. To the extent any of the Chattels or the Intangible Personalty may be or have been acquired with funds advanced by Beneficiary under the Loan Documents, this security -4- interest is a purchase money security interest. The security interest granted in this section shall survive any judicial or nonjudicial foreclosure of this Deed of Trust as against the Property and, notwithstanding any purported cancellation of this Deed of Trust in connection with any such foreclosure, shall continue in force as against the Chattels and the Intangible Personalty until all of the Secured Obligations have been satisfied and discharged in full. Any complete release of this Deed of Trust shall, however, unless otherwise expressly provided in the release document, constitute a release of such security interest as well. Grantor agrees that a carbon, photographic or other reproduction of this Deed of Trust, or of any financing statement signed in connection with this Deed of Trust, may be filed or recorded to perfect the security interests granted in this section. After an event of default has occurred and continues beyond the applicable grace period thereafter, Grantor appoints Beneficiary attorney-in-fact for Grantor, to sign on Grantor's behalf any financing statement or amendment of financing statement that Beneficiary may at any time consider necessary or appropriate after an Event of Default has occurred and continues beyond the applicable grace period therefor. ARTICLE 3 GRANTOR'S WARRANTIES AND REPRESENTATIONS 3.1 Warranty of Title. Grantor represents and warrants to Beneficiary that Grantor has good, marketable and insurable title to the Property, subject only to the lien of general taxes for the current year, payable the following year, and those additional matters, if any, set forth in Exhibit B attached. Grantor further represents and warrants to Beneficiary that Grantor has good title to the Chattels and the Intangible Personalty, free of any liens, encumbrances, security interests and other claims whatever, except insofar as the Chattels may be encumbered by the lien of general taxes for the current year, payable in the following year, or by any encumbrance listed in Exhibit B. The warranties contained in this section shall survive foreclosure of this Deed of Trust, and shall inure to the benefit of and be enforceable by any Person who may acquire title to the Property, the Chattels or the Intangible Personalty pursuant to any such foreclosure. 3.2 Organizational Status. Grantor represents and warrants to Beneficiary that Grantor is a profit corporation properly organized, validly existing and in good standing under the laws of the State of Colorado, with all necessary power and authority to execute, deliver and perform Grantor's obligations under the Loan Documents, and is qualified to transact business in, and is in good standing in, the State of Oregon. 3.3 Due Authorization. If Grantor is other than a natural person, then each individual who executes this document on behalf of Grantor represents and warrants to -5- Beneficiary that such execution has been authorized by all necessary corporate, partnership or other action on the part of Grantor. 3.4 No Regulated Substances. Grantor represents and warrants to Beneficiary that: (a) No Regulated Substance is currently being generated, used, treated, stored or disposed of on, in or under the Property that is in material noncompliance with Environmental Laws; (b) Neither Grantor nor, to the best of Grantor's knowledge after due investigation, any other Person has ever caused or permitted any Regulated Substance to be generated, placed, held, located or disposed of on, under or in the Property that is in material noncompliance with Environmental Laws; (c) Neither Grantor nor, to the best of Grantor's knowledge after due investigation, any other Person has ever used the Property as a dump site, permanent or temporary storage site or transfer station for any Regulated Substance that is in material noncompliance with Environmental Laws; (d) Grantor has received no notice of, and is not aware of, any actual or alleged violation of any Environmental Law materially affecting the Property or any activity conducted on the Property; and (e) No action or proceeding is pending or, to Grantor's knowledge after due investigation, before or appealable from any court, quasi-judicial body or administrative agency relating to the enforcement of any Environmental Law affecting the Property or any activity conducted on the Property. Grantor will indemnify Beneficiary against and hold Beneficiary harmless from any loss, claim, damage or expense, including reasonable attorneys' fees and other out of pocket litigation expenses, incurred by Beneficiary in connection with any claim that any of the matters represented and warranted by Grantor in this section are inaccurate or untrue. The indemnity provided for in the preceding sentence is a part of the Secured Obligations but will survive payment or performance of the other Secured Obligations and the release, foreclosure or other discharge of this Deed of Trust. 3.5 Non-Agricultural Property. Grantor represents and warrants to Beneficiary that the Property is not used principally for agricultural or farming purposes. -6- 3.6 No Susceptibility to Forfeiture. Grantor represents and warrants to Beneficiary that Grantor is not engaged, and has not at any time since Grantor's acquisition of the Property been engaged, in a "pattern of racketeering activity" within the meaning of 18 U.S.C. ss. 1961, as amended, or within the meaning of any similar state or federal law, nor has Grantor committed any other act or engaged in any other pattern of actions, the potential results of which might include forfeiture of Grantor's interest in the Property. 3.7 Compliance with Laws. Grantor represents and warrants to Beneficiary that the Property and Grantor's present and proposed use of the Property are in compliance in all material respects with all applicable laws, ordinances and other governmental requirements. 3.8 No Conflict with Other Agreements. Grantor represents and warrants to Beneficiary that Grantor's execution and delivery of the Loan Documents does not conflict with, violate or constitute a default under any other agreement by which Grantor or any part of the Property, the Chattels or the Intangible Personalty are bound. 3.9 No Material Litigation. Grantor hereby represents and warrants that, except as disclosed in the Credit Agreement, there is no pending, or to the Grantor's knowledge, threatened action or proceeding affecting the Grantor or any of its properties or business activities before any court, governmental agency or arbitrator, in which there is a reasonable possibility of a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Deed of Trust. 3.10 Accurate Financial Information. Grantor hereby represents and warrants that the unaudited pro forma consolidated balance sheets of the Grantor (and others) as at December 31, 1996, and the related consolidated statements of income and retained earnings of the Grantor (and others) for the fiscal year then ended, as disclosed in the proxy statement mailed to the Grantor's shareholders in connection with the Circuit Test Acquisition, and the unaudited balance sheets of the Grantor (and others) as at June 30, 1997, and the related consolidated statements of income and retained earnings of the Grantor (and others) for the fiscal quarter then ended, copies of which have been furnished to the Banks, fairly present the financial condition of the Grantor (and others) as at such date and the results of the operations of the Grantor (and others) for the period ended on such date, all in accordance with Regulation S-X promulgated under the Securities Exchange Act of 1934, and since December 31, 1996, there has been no material adverse change in such condition or operations except as disclosed in the Credit Agreement. -7- ARTICLE 4 GRANTOR'S AFFIRMATIVE COVENANTS 4.1 Payment of Notes. Pursuant to the terms of the Loan Documents, Grantor will cause all principal, interest and other sums payable under the Notes to be paid (on or before the expiration of any applicable grace period) as set forth under the terms of the Loan Documents. 4.2 Performance of Other Obligations. Grantor will promptly and strictly perform and comply with (or cause to be performed and complied with) all other covenants, conditions and prohibitions required by Grantor by the terms of the Loan Documents. 4.3 Waiver of Homestead and Other Exemptions. Grantor hereby waives all rights to any homestead or other exemption to which Grantor would otherwise be entitled under any present or future constitutional, statutory or other provision of Oregon or other state or federal law. 4.4 Payment of Taxes. Grantor hereby covenants to pay its Debt in excess of $1,000,000 and other obligations in accordance with their terms and pay and discharge promptly all Federal and material State and local taxes, and all material governmental assessments and charges or levies imposed upon any such Person or upon such Person's income or profits or in respect of its assets or business, or in any event before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Grantor shall have set aside on its books adequate reserves in accordance with GAAP with respect thereto. 4.5 Other Encumbrances. Grantor will promptly and strictly perform and comply with all covenants, conditions and prohibitions required of Grantor in connection with any other encumbrance affecting the Property, or any part thereof, regardless of whether such other encumbrance is superior or subordinate to the lien hereof. 4.6 Maintenance of Insurance. (a) Grantor shall maintain the third-party insurance required by the Credit Agreement, provided, however, that in no event shall such insurance be for an amount less than the the replacement cost of the assets so insured, including the Property. -8- (b) Renewal Policies. Not less than 30 days prior to the expiration date of each insurance policy required pursuant to paragraph (a) above, Grantor will deliver to Beneficiary an appropriate renewal policy (or a certified copy thereof), together with evidence satisfactory to Beneficiary that the applicable premium has been prepaid. Without limiting the obligations of the Grantor under this Section 4.6, in the event the Grantor fails to maintain the insurance required by the foregoing provisions of this Section 4.6, then the Beneficiary may, but shall have no obligation to, procure insurance covering the interests of the Banks, in such amounts and against such risks as the Beneficiary shall deem appropriate, and the Grantor will reimburse the Beneficiary in respect of any premiums paid by the Beneficiary as provided in the Credit Agreement. (c) Any insurance proceeds received by Beneficiary with respect to an insured casualty may, in accordance with the terms of the Credit Agreement, either (i) be retained and applied by Beneficiary toward payment of the Secured Obligations, or (ii) be paid over, in whole or in part to the Grantor to pay for repairs or replacements necessitated by the casualty; provided, that if all of the Secured Obligations have been performed or are discharged by the application of less than all of such insurance proceeds, then any remaining proceeds will be paid over to Grantor. The Beneficiary will have no obligation to see to the proper application of any insurance proceeds paid over to Grantor nor will any such proceeds received by Beneficiary bear interest or be subject to any other charge for the benefit of Grantor. Beneficiary may, prior to the application of insurance proceeds, commingle them with Beneficiary's own funds and otherwise act with regard to such proceeds as Beneficiary may determine in Beneficiary's sole discretion. (d) Successor's Rights. Any Person who acquires title to the Property through foreclosure of this Deed of Trust will succeed to all of Grantor's rights under all policies of insurance maintained pursuant to this section. (e) WARNING. UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE ELSEWHERE. -9- 4.7 Payment of Utilities. Grantor will pay before delinquency all charges for water, sewer, electricity, natural gas and other utilities serving the Property. 4.8 Maintenance and Repair of Property. Grantor will at all times maintain the Property in good condition and repair, ordinary wear and tear excepted, will diligently prosecute the completion of any building or other improvement that is at any time in the process of construction on the Property, and will promptly repair, restore, replace or rebuild any material part of the Property that may be affected by any casualty or any public or private taking of or injury to the Property. Beneficiary and any Person authorized by Beneficiary may enter and inspect the Property at all reasonable times. 4.9 Compliance with Laws. Grantor will comply in all material respects with all statutes, ordinances and other governmental or quasi-governmental requirements and private covenants relating to the ownership, construction, use or operation of the Property, including but not limited to all material Environmental Laws; provided, that so long as Grantor is not otherwise in default hereunder, Grantor may upon providing Beneficiary with security reasonably satisfactory to Beneficiary ,proceed diligently and in good faith to contest the validity or applicability of any such statute, ordinance, requirement or covenant. Whether or not Grantor elects to contest such validity or applicability, Grantor will notify Beneficiary promptly of any apparent or alleged violation of any material statute, ordinance, requirement or covenant, and will provide Beneficiary promptly with copies of all notices, pleadings and other communications relating to any such violation. 4.10 Performance of Lease Obligations. Grantor will perform promptly all of Grantor's obligations under or in connection with each present and future lease of all or any part of the Property. If Grantor receives at any time any written communication from the tenant under any such lease asserting a default by Grantor under such lease, or purporting to terminate or cancel such lease, Grantor will promptly forward a copy of such communication (and any subsequent communications relating thereto) to Beneficiary. 4.11 Eminent Domain; Private Damage. If all or any part of any property encumbered by this Deed of Trust is taken or damaged by eminent domain or any other public or private action, Grantor will notify Beneficiary promptly of the time and place of all meetings, hearings, trials and other proceedings relating to such action. Beneficiary may participate in all negotiations and appear and participate in all judicial or arbitration proceedings concerning any award or payment that may be due as a result of such taking or damaging, and may, after an event of default has occurred, in Beneficiary's sole discretion, compromise or settle, in the names of both Beneficiary and Grantor, any claim for any such award or payment. Any such award or -10- payment is to be paid to Beneficiary and will be applied first to reimburse Beneficiary for all costs and expenses, including attorneys' fees, incurred by Beneficiary in connection with the ascertainment and collection of such award or payment. The balance, if any, of such award or payment may, in Beneficiary's sole discretion, either (a) be retained by Beneficiary and applied toward the Secured Obligations, but only if any Event of Default has occurred, or (b) be paid over, in whole or in part and subject to such conditions as Beneficiary may impose, to Grantor for the purpose of restoring, repairing or rebuilding any part of the encumbered property affected by the taking or damaging. Beneficiary will have no duty to see to the application of any part of any award or payment released to Grantor. Grantor's duty to pay the Notes in accordance with the terms of the Loan Documents and to perform the other Secured Obligations will not be suspended by the pendency or discharged by the conclusion of any proceedings for the collection of any such award or payment, and any reduction in the Secured Obligations resulting from Beneficiary's application for any such award or payment will take effect only when Beneficiary receives such award or payment. If this Deed of Trust has been foreclosed prior to Beneficiary's receipt of such award or payment, Beneficiary may nonetheless retain such award or payment to the extent required to reimburse Beneficiary for all out of pocket costs and expenses, including reasonable attorneys' fees, incurred in connection therewith, and to discharge any deficiency remaining with respect to the Secured Obligations. 4.12 Mechanics' Liens. Grantor will keep the Property free and clear of all liens and claims of liens by contractors, subcontractors, mechanics, laborers, materialmen and other such Persons, and will cause any recorded statement of any such lien to be released of record within 30 days after the recording thereof. Notwithstanding the preceding sentence, however, Grantor will not be deemed to be in default under this section if and so long as Grantor (a) contests in good faith the validity or amount of any asserted lien and diligently prosecutes or defends an action appropriate to obtain a binding determination of the disputed matter, and (b) provides Beneficiary with such security as Beneficiary may reasonably require to protect Beneficiary against all out-of-pocket loss, damage and expense, including reasonable attorneys' fees, that Beneficiary might incur if the asserted lien is determined to be valid. Grantor will indemnify Beneficiary against and hold Beneficiary harmless from any out-of-pocket loss, damage or expense, including reasonable attorneys' fees and other out-of-pocket litigation expenses, incurred by Beneficiary as a result of any default by Grantor under this section, and Grantor's obligations under this sentence shall survive foreclosure of this Deed of Trust. 4.13 Environmental Claims. Grantor will indemnify Beneficiary against and hold Beneficiary harmless from any out-of-pocket loss, damage or expense, including reasonable attorneys' fees and other expenses, incurred by Beneficiary in connection with the investigation, defense or settlement of any claim, whether or not valid and whether asserted by a governmental -11- agency or a private party, that (a) any part of the Property is contaminated or otherwise affected by the presence of any Regulated Substance, or (b) the Property or any activity conducted at any time on the Property is wholly or partly responsible for the presence elsewhere of any Regulated Substance, or in connection with any cleanup or other remediation actions that may be imposed on or agreed to by Beneficiary in connection with any such claim. The indemnity provided for in this section is a part of the Secured Obligations but will survive payment or performance of the other Secured Obligations and the release, foreclosure or other discharge of this Deed of Trust. 4.14 Defense of Actions. Grantor will defend, at Grantor's expense, any action, proceeding or claim that affects any property encumbered hereby or any interest of Beneficiary in such property or in the Secured Obligations, and will indemnify and hold Beneficiary harmless from all out-of-pocket loss, damage, cost or expense, including reasonable attorneys' fees, that Beneficiary may incur in connection therewith. 4.15 Expenses of Enforcement. Grantor will pay on demand all out-of-pocket costs and expenses, including but not limited to reasonable attorneys' fees, appraisal costs and expenses for title insurance and title searches and certificates, that Beneficiary may incur in connection with any effort or action (whether or not litigation or foreclosure is involved) to enforce or defend Beneficiary's rights and remedies under any of the Loan Documents, or to secure title to or possession of, or to realize on, any security for the Secured Obligations. 4.16 Book and Records; Financial Reports. Grantor shall maintain all financial records in accordance with GAAP and permit, after two weeks notice unless an Event of Default has occurred, any Beneficiary employees or other representatives approved by the Beneficiary (which approval shall not be unreasonably withheld) that is designated by the Beneficiary or the Required Banks to visit and inspect the properties of the Grantor, and to inspect Grantor's financial and business records and make extracts there from and copies thereof, all at reasonable times and in a manner so as not to unreasonably disrupt the operations of the Grantor and as often as reasonably requested, and permit any such employees or representatives to discuss the affairs, finances and condition of the Grantor with the officers and other representatives thereof, including the Grantor's independent accountants if a representative of the Grantor is present and if the Beneficiary has notified the Grantor not less than 24 hours prior to such meeting of the issues that will be discussed. Grantor shall deliver those financial statements required to be delivered by it under the Credit Agreement. 4.17 Priority of Leases. To the extent Grantor has the right, under the terms of any existing lease of all or any part of the Property, to make such lease subordinate to the lien of this -12- Deed of Trust, Grantor will, at Beneficiary's request and expense, take such action as may be required to effect such subordination. Conversely, Grantor will, at Beneficiary"s request and Grantor's expense, take such action as may be necessary to subordinate the lien hereof to any future lease of all or any part of the Property designated by Beneficiary. 4.18 Further Assurances; Estoppel Certificates. Grantor will execute and deliver to Beneficiary on demand, and pay the out-of-pocket costs of preparation and recording thereof, any further documents that Beneficiary may reasonably request to confirm or perfect the liens and security interests created or intended to be created hereby, or to confirm or perfect any evidence of the Secured Obligations. Grantor will also within ten days after any request by Beneficiary, deliver to Beneficiary a signed and acknowledged statement certifying to Beneficiary, or to any proposed transferee of the Secured Obligations, (a) the balance of principal, interest and other sums then outstanding under the Notes, and (b) whether Grantor claims to have any offsets or defenses with respect to the Secured Obligations and, if so, the nature of such offsets or defenses. Grantor's failure to provide such a statement within such ten-day period will result in Grantor being conclusively bound by any representation that Beneficiary may make as to those matters. ARTICLE 5 GRANTOR'S NEGATIVE COVENANTS 5.1 Waste and Alterations. Grantor will not commit or permit any waste with respect to the Property, nor will Grantor cause or permit any material part of the Property, including but not limited to any building, structure, parking lot, driveway, landscape scheme, timber, or other ground improvement, to be removed, demolished or materially altered without the prior written consent of Beneficiary, other than such items which are either (i) obsolete and no longer necessary for the conduct of Grantor's business, or (ii) promptly replaced with a similar item of equal or greater value. 5.2 Zoning and Private Covenants. Grantor will not initiate, join in or consent to any change in any zoning ordinance or classification, any change in the "zone lot" or "zone lots" (or similar zoning unit or units) presently comprising the Property, any transfer of development rights, any change in any private restrictive covenant, or any change in any other public or private restriction limiting or defining the uses that may be made of the Property or any part thereof, without the express written consent of Beneficiary. If under applicable zoning provisions the use of all or any part of the Property is or becomes a nonconforming use, Grantor will not cause or permit such use to be discontinued or abandoned without the express written consent of Beneficiary. -13- 5.3 Additional Tax Burden. Except with the prior written consent of Beneficiary, Grantor will not initiate, join in or consent to any action or proposal to include all or any part of the Property in any special improvement district or other special district or taxing authority that does not include the Property on the date of this Deed of Trust. 5.4 Interference with Leases. Grantor will neither do nor neglect to do anything that may cause or permit the termination of any lease of all or any part of the Property, or cause or permit the withholding or abatement of any rent payable under any such lease. Except with the prior written consent of Beneficiary, Grantor will not (a) collect rent from all or any part of the Property for more than one month in advance, (b) modify any lease of all or any part of the Property, (c) assign the rents from the Property or any part thereof, or (d) consent to the cancellation or surrender of all or any part of any such lease, except that Grantor may in good faith terminate any such lease for nonpayment of rent or other material breach by the tenant. 5.5 Transfer of Property. Grantor will not convey, lease or otherwise transfer, either voluntarily or involuntarily, the Property or any part thereof or interest therein, without the prior written consent of Beneficiary. If Beneficiary consents to any transfer otherwise prohibited by this section, Beneficiary may condition such consent on changes in the terms for payment of the Secured Obligations, including but not limited to an increase in the interest rate borne by the Notes, a reduction in the term of the Notes, or both. 5.6 Further Encumbrance of Property. Except for Permitted Liens, Grantor will neither create nor permit any junior lien or encumbrance against the Property, other than a mortgage or deed of trust in which the mortgagee or beneficiary i. expressly acknowledges the priority of this Deed of Trust, as to all amounts then or at any time thereafter advanced hereunder or secured hereby, over any lien or security interest created by such junior mortgage or deed of trust, and ii. expressly agrees that no foreclosure or other enforcement proceeding under such mortgage or deed of trust will be effective to terminate any lease of all or any part of the Property, regardless of the relative priorities of such junior mortgage or deed of trust and such lease. Any Person who acquires or records any lien or encumbrance against the Property after the recording of this Deed of Trust will be deemed to have agreed to, and will be bound by, the foregoing requirements, whether or not the document or documents relating to such lien or encumbrance reflect that agreement. -14- 5.7 Use of Regulated Substances. Grantor will not cause or permit all or any part of the Property to be used to manufacture, generate, store, transfer, treat, recycle or dispose of any Regulated Substance, except in compliance with any Environmental Law, nor will Grantor cause or permit, as a result of any intentional or unintentional act on the part of Grantor or any tenant, subtenant or other user or occupant of the Property, any release of any Regulated Substance onto the Property or from the Property onto other property. Grantor will indemnify Beneficiary against, and hold Beneficiary harmless from, any out-of-pocket loss, claim, damage or expense, including reasonable attorneys' fees and other litigation expenses, incurred by Beneficiary in connection with any actual or alleged violation of the preceding sentence. Such indemnity is a part of the Secured Obligations but will survive payment or performance of the other Secured Obligations and the release, foreclosure or other discharge of this Deed of Trust. 5.8 Change of Name. Grantor shall not, except upon not less than 30 days prior written notice to the Beneficiary, change the address at which the Grantor maintains its chief executive offices and principal place of business; nor conduct its business activities under any names other than those set forth in the Credit Agreement unless the Grantor notifies the Beneficiary of any such new name not less than 30 days prior to beginning use of such new name, except that no more than seven days notice shall be required in the case of a new name resulting from an acquisition of a business or assets by the Grantor. 5.9 Improper Use of Property. Grantor will not use the Property for any purpose or in any manner that violates any applicable law, ordinance or other governmental requirement, the requirements or conditions of any insurance policy, or any private covenant. ARTICLE 6 EVENTS OF DEFAULT Each of the following events will constitute a default under this Deed of Trust and under each of the other Loan Documents: 6.1 Failure to Pay Notes. Pursuant to the terms of the Loan Documents, the occurrence of any failure to make any payment when due under the terms of the respective Notes pursuant to the terms of the Loan Documents. 6.2 Violation of Other Covenants. The occurrence of any failure to perform or observe any other covenant, condition or prohibition contained in any of the Loan Documents which failure is not cured within fifteen (15) days after Grantor's receipt of written notice thereof from Grantor; -15- 6.3 Misrepresentation or Breach of Warranty. Beneficiary's determination that any statement or warranty contained in any of the Loan Documents is untrue or misleading in any material respect as of the date made; 6.4 Acts Threatening Forfeiture. Beneficiary's reasonable determination that Grantor has committed any act or engaged in any pattern of actions that may lead to a claim for forfeiture of Grantor's interest in the Property, it being agreed that the issuance of any criminal complaint or indictment charging Grantor with any such act or pattern of actions would be a sufficient basis for such a determination by Beneficiary if one of the penalties for such complaint or indictment is forfeiture of property; 6.5 Assertion of Priority. The assertion (except by the owner of an encumbrance expressly excepted from Grantor's warranty of title herein) of any claim of priority over this Deed of Trust by title, lien or otherwise, unless Grantor within 30 days after such assertion either causes the assertion to be withdrawn or provides Beneficiary with such security as Beneficiary may require to protect Beneficiary against all loss, damage or expense, including attorneys, fees, that Beneficiary may incur in the event such assertion is upheld; or 6.6 Event of Default Under Credit Agreement. An "Event of Default" (as such term is defined in the Credit Agreement) has occurred and is continuing. ARTICLE 7 BENEFICIARY'S REMEDIES Immediately upon or at any time after the occurrence of any event of default hereunder, Beneficiary may exercise any remedy available at law or in equity, including but not limited to those listed below and those listed in the other Loan Documents, in such sequence or combination as Beneficiary may determine in Beneficiary's sole discretion: 7.1 Performance of Defaulted Obligations. Beneficiary may make any payment or perform any other obligation under the Loan Documents that Grantor has failed to make or perform, and Grantor hereby irrevocably appoints Beneficiary as the true and lawful attorney-in-fact for Grantor to make any such payment and perform any such obligation in the name of Grantor. All out of pocket payments made and expenses (including reasonable attorneys' fees) incurred by Beneficiary in this connection, together with interest thereon at the Default Rate from the date paid or incurred until repaid, will be part of the Secured Obligations and will be -16- immediately due and payable by Grantor to Beneficiary. In lieu of advancing Beneficiary's own funds for such purposes, Beneficiary may use any funds of Grantor that may be in Beneficiary's possession, including but not limited to insurance or condemnation proceeds and amounts deposited for taxes, insurance premiums or other purposes. 7.2 Specific Performance and Injunctive Relief. Notwithstanding the availability of legal remedies, Beneficiary will be entitled to obtain specific performance, mandatory or prohibitory injunctive relief or other equitable relief requiring Grantor to cure or refrain from repeating any default. 7.3 Acceleration of Secured Obligations. Beneficiary may, upon notice to Grantor, declare all of the Secured Obligations immediately due and payable in full. 7.4 Suit for Monetary Relief. With or without accelerating the maturity of the Secured Obligations, Beneficiary may sue from time to time for any payment due under any of the Loan Documents, or for money damages resulting from Grantor's default under any of the Loan Documents. 7.5 Possession of Property. To the extent permitted by applicable law, Beneficiary may enter and take possession of the Property without seeking or obtaining the appointment of a receiver, may employ a managing agent for the Property and may lease or rent all or any part of the Property, either in Beneficiary's name or in the name of Grantor, and may collect the rents, issues and profits of the Property. Any revenues collected by Beneficiary under this section will be applied first toward payment of all out of pocket expenses (including reasonable attorneys' fees) incurred by Beneficiary, together with interest thereon at the Default Rate from the date incurred until repaid, and the balance, if any, will be applied against the Secured Obligations. 7.6 Enforcement of Security Interests. Beneficiary may exercise all rights of a secured party under the Oregon Uniform Commercial Code with respect to the Chattels and the Intangible Personalty, including but not limited to taking possession of, holding and selling the Chattels and enforcing or otherwise realizing on any accounts and general intangibles. Any requirement for reasonable notice of the time and place of any public sale, or of the time after which any private sale or other disposition is to be made, will be satisfied by Beneficiary's giving of such notice to Grantor at least ten days prior to the time of any public sale or the time after which any private sale or other intended disposition is to be made. To the extent permitted by applicable law, Beneficiary may, at Beneficiary's option, cause Trustee to sell any or all of the Chattels, the Intangible Personalty or other personal property as part of the sale of the Property, without making any distinction between real and personal property. -17- 7.7 Foreclosure Against Property. Upon the occurrence of any event of default, Beneficiary shall have the right to have Trustee sell the Property in accordance with the Oregon Revised Statutes 86.705 et seq. at public auction to the highest bidder. Any person except Trustee may bid at the Trustee's sale. The power of sale is conferred by this Deed of Trust and the law shall not be an exclusive remedy. When such power of sale is not exercised, Beneficiary may foreclose this Deed of Trust as a mortgage. Trustee is not obligated to notify any party hereto of a pending sale under any other deed of trust or of any action or proceeding in which Grantor, Trustee, or Beneficiary shall be a party, unless such action or proceeding is brought by Trustee. Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Notes and such receipts and evidence of expenditures made and secured hereby as Trustee may require. (a) Upon receipt of such notice from Beneficiary, Trustee shall cause to be given such Notice of Default as then required by law. Trustee shall, without demand on Grantor, after lapse of such time as may then be required by law and after Notice of Sale and Notice of Foreclosure having been given as required by law, sell the Property at the time and place of sale fixed by it in such Notice of Sale and Notice of Foreclosure, either as a whole, or in separate lots or parcels or items as Trustee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. (b) After deducting all costs, fees and expenses of Trustee and of this Trust, including costs of evidence of title and reasonable counsel fees in connection with sale, Trustee shall apply the proceeds of sale to payment of all sums expended under the terms hereof, not then repaid, with accrued interest, all other sums then secured hereby and the remainder, if any, shall be paid into court in the manner provided by law. 7.8 Appointment of Receiver. To the extent permitted by applicable law, Beneficiary shall be entitled, as a matter of absolute right and without regard to the value of any security for the Secured Obligations or the solvency of any Person liable therefor, to the appointment of a receiver for the Property as set forth in this Section 7.8. Beneficiary shall be entitled to such appointment on ex parte application to any court of competent jurisdiction. Grantor waives any right to any hearing or notice of hearing prior to the appointment of a receiver. Such receiver and his agents shall be empowered (a) to take possession of the Property -18- and any businesses conducted by Grantor or any other Person thereon and any business assets used in connection therewith, (b) to exclude Grantor and Grantor's agents, servants and employees from the Property, or, at the option of the receiver, in lieu of such exclusion, to collect a fair market rental from any such Persons occupying any part of the Property, (c) to collect the rents, issues, profits and income therefrom, (d) to complete any construction that may be in progress, (e) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (f) to use all stores of materials, supplies and maintenance equipment on the Property and replace such items at the expense of the receivership estate, (g) to pay all taxes and assessments against the Property and the Chattels, all premiums for insurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, (h) to borrow from Beneficiary such funds as may reasonably be necessary to the effective exercise of the receiver's powers, on such terms as may be agreed upon by the receiver and Beneficiary, and (i) generally to do anything that Grantor could legally do if Grantor were in possession of the Property. All out of pocket expenses incurred by the receiver or his agents, including obligations to repay funds borrowed by the receiver, shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including reasonable attorneys' fees incurred by the receiver and by Beneficiary, together with interest thereon at the Default Rate from the date incurred until repaid, and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Beneficiary, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Property has passed after foreclosure sale and all applicable periods of redemption have expired. ARTICLE 8 MISCELLANEOUS PROVISIONS 8.1 Replacement of Trustee. Beneficiary may at any time, with or without cause, elect to replace the Trustee named at the beginning of this Deed of Trust. Beneficiary may exercise such election by notifying Trustee of such replacement, signing and acknowledging an instrument appointing a successor Trustee and recording such instrument in the real property records of the County in which the Property is located. Any such successor Trustee may be replaced by Beneficiary in the same manner. If (and only if) Beneficiary exercises the right to replace the Trustee originally named, the following provisions shall become applicable: (a) Trustee will not be liable for any error in judgment or for any act done in good faith by Trustee, nor will Trustee be otherwise accountable or responsible, except for Trustee's own bad faith or willful misconduct, under any circumstances whatever. Trustee will -19- not be personally liable, in the event Trustee or any other Person acting under the powers granted Trustee under this Deed of Trust enters or takes possession of the Property, for debts contracted or for liability or damages incurred in the management or operation of the Property. Trustee may rely absolutely on any document, instrument or signature purporting to authorize or support any action by Trustee under this Deed of Trust which Trustee believes in good faith to be genuine. Grantor will from time to time pay Trustee all compensation due Trustee under this Deed of Trust, will reimburse Trustee for all expenses, including attorneys' fees, incurred by Trustee in the performance of Trustee's duties under this Deed of Trust, and will indemnify Trustee and hold Trustee harmless against any loss, claim, damage or expense incurred by Trustee in connection with the performance of such duties. (b) Any funds received by Trustee shall, until used or applied as provided in this Deed of Trust, be held in trust for the purposes for which they were received. Except to the extent required by law, such funds need not be segregated from other funds held in trust by Trustee. In no event shall Trustee or Beneficiary be liable to pay interest on any funds held by Trustee. (c) Trustee may resign by giving 30 days' notice of resignation in writing to Beneficiary. (d) Any successor Trustee appointed pursuant to this section will, without further act, deed or conveyance, automatically become vested with all of the rights, powers, interests and trusts which had been held by such successor Trustee's predecessor, with the same effect as though the successor Trustee had originally been named Trustee in this Deed of Trust. Nevertheless, at the request of Beneficiary or of the successor Trustee, the former Trustee shall execute and deliver to the successor Trustee an instrument in recordable form, transferring to the successor Trustee all of the former Trustee's rights, powers, interests and trusts under this Deed of Trust, and shall also transfer and deliver to the successor Trustee any property or funds held by the former Trustee in the former Trustee's capacity as trustee under this Deed of Trust. (e) Trustee may authorize one or more Persons to act on Trustee's behalf in the performance of ministerial acts under this Deed of Trust, including but not limited to the transmittal and posting of notices. 8.2 Time of the Essence. Time is of the essence with respect to all provisions of the Loan Documents. -20- 8.3 Joint and Several Obligations. If Grantor is more than one Person, then all Persons comprising Grantor are jointly and severally liable for all of the Secured Obligations. 8.4 Rights and Remedies Cumulative. Beneficiary's rights and remedies under each of the Loan Documents are cumulative of the rights and remedies available to Beneficiary under each of the other Loan Documents and those otherwise available to Beneficiary at law or in equity. No act of Beneficiary shall be construed as an election to proceed under any particular provision of any Loan Document to the exclusion of any other provision in the same or any other Loan Document, or as an election of remedies to the exclusion of any other remedy that may then or thereafter be available to Beneficiary. 8.5 No Implied Waivers. Beneficiary shall not be deemed to have waived any provision of any Loan Document unless such waiver is in writing and is signed by Beneficiary. Without limiting the generality of the preceding sentence, neither Beneficiary's acceptance of any payment with knowledge of a default by Grantor, nor any failure by Beneficiary to exercise any remedy following a default by Grantor, shall be deemed a waiver of such default, and no waiver by Beneficiary of any particular default on the part of Grantor shall be deemed a waiver of any other default or of any similar default in the future. 8.6 Dealings with Successor Owners. If the Property or any interest in the Property is transferred to any Person other than Grantor, whether voluntarily or involuntarily and whether or not Beneficiary has consented to such transfer, then Beneficiary may deal with such successor owner in all matters relating to the Secured Obligations, and no such dealings, including but not limited to any change in the terms of the Secured Obligations, will be deemed to discharge or impair the obligations of Grantor to Beneficiary under the Loan Documents. 8.7 No Third Party Rights. No Person shall be a third party beneficiary of any provision of any of the Loan Documents. All provisions of the Loan Documents favoring Beneficiary are intended solely for the benefit of Beneficiary, and no third party shall be entitled to assume or expect that Beneficiary will not waive or consent to modification of any such provision in Beneficiary's sole discretion. 8.8 Preservation of Liability and Priority. Without affecting the liability of Grantor or of any other Person (except a Person expressly released in writing) for payment and performance of all of the Secured Obligations, and without affecting the rights of Beneficiary with respect to any security not expressly released in writing, and without impairing in any way the priority of this Deed of Trust over the interests of any Person acquired or first evidenced by recording subsequent to the recording hereof, Beneficiary may, either before or after the maturity -21- of the Note, and without notice or consent: (a) release any Person liable for payment or performance of all or any part of the Secured Obligations; (b) make any agreement altering the terms of payment or performance of all or any of the Secured Obligations; (c) exercise or refrain from exercising, or waive, any right or remedy that Beneficiary may have under any of the Loan Documents; (d) accept additional security of any kind for any of the Secured Obligations; or (e) release or otherwise deal with any real or personal property securing the Secured Obligations. Any Person acquiring or recording evidence of any interest of any nature in the Property, the Chattels or the Intangible Personalty shall be deemed, by acquiring such interest or recording any evidence thereof, to have agreed and consented to any or all such actions by Beneficiary. 8.9 Subrogation of Beneficiary. Beneficiary shall be subrogated to the lien of any previous encumbrance discharged with funds advanced by Beneficiary under the Loan Documents, regardless of whether such previous encumbrance has been released of record. 8.10 Notices. Any notice required or permitted to be given by Grantor or Beneficiary under any of the Loan Documents must be in writing and will be deemed given on personal delivery or on the third business day after the mailing thereof, by registered or certified United States mail, postage prepaid, to the appropriate party at its address shown on the first page of this Deed of Trust. Either party may change such party's address for notices by giving notice to the other party in accordance with this section, but no such change of address will be effective as against any Person without actual knowledge of the change. 8.11 Fixture Filing. This Deed of Trust is intended to serve as a financing statement under the Oregon Uniform Commercial Code with respect to any fixtures that may at any time be part of the Property or the Chattels, and the recording of this Deed of Trust is intended to constitute a "fixture filing" for purposes of such Uniform Commercial Code. 8.12 Defeasance. Upon payment and performance in full of all of the Secured Obligations, Beneficiary will execute and deliver to Grantor such documents as may be required to release this Deed of Trust of record. 8.13 Severability. Wherever possible, each provision of the Loan Documents is to be interpreted so as to be effective and valid under applicable law. If any provision of any Loan Document is, for any reason and to any extent, invalid or unenforceable, then neither the remainder of the Loan Document in which such provision appears, nor any other Loan Document, nor the application of the provision to other Persons or in other circumstances, shall be affected by such invalidity or unenforceability. -22- 8.14 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of the Notes to Trustee for cancellation and retention and upon payment by Grantor of Trustee's fees, Trustee shall reconvey to Grantor, or the person or persons legally entitled thereto, without warranty, any portion of the Property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in any reconveyance may be described as "the person or persons legally entitled thereto." 8.15 Attorney's Fees. Wherever this Deed of Trust provides for payment of attorney fees to the Beneficiary, such provision of attorneys fees shall include, without limitation, the reasonable fees and disbursements of attorneys in connection with proceedings in any trial court, appellate court, as well as in any bankruptcy proceedings. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -23- 8.16 UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER TO BE ENFORCEABLE. 8.17 Acceptance by Trustee. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Signed and delivered as of the date first mentioned above. EFTC CORPORATION an Colorado corporation By /s/ Name: Stuart W. Fuhlendorf Title: Vice President STATE OF COLORADO ) CITY AND) ss. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 30th day of September, 1997, by Stuart W. Fuhlendorf, as Vice President of EFTC CORPORATION, a Colorado corporation.. My commission expires: August 18, 2001 Witness my hand and official seal. /s/ Deborah J. Thomas Notary Public -24- EXHIBIT A to DEED OF TRUST AND SECURITY AGREEMENT (Legal Description) Parcel 2 of Partition Plat 97-52 in the City of Newberg, recorded July 24, 1997 in Film 4, Pages 452-453, in Plat Records of Yamhill County, Oregon. A-1 EXHIBIT B TO DEED OF TRUST AND SECURITY AGREEMENT (Permitted Exceptions) 1. Ten foot public utility easement along the West line as shown on Partition Plat 97- 52. B-1 EX-99.5 12 COLORADO DEED OF TRUST DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT From EFTC CORPORATION To THE PUBLIC TRUSTEE OF WELD COUNTY for BANK ONE, COLORADO, N.A. Dated as of September 30, 1997 THIS INSTRUMENT IS GOVERNED BY THE PROVISIONS OF COLORADO STATUTES ss.ss. 38-37-101 ET SEQ. THIS INSTRUMENT SECURES FUTURE ADVANCES. THE MAXIMUM AMOUNT OF PRINCIPAL SECURED BY THIS INSTRUMENT IS $45,000,000. THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS. THE REAL PROPERTY SUBJECT HERETO IS DESCRIBED IN EXHIBIT A. THIS INSTRUMENT IS TO BE RECORDED AS A DEED OF TRUST IN WELD COUNTY . -i- THIS DOCUMENT WAS Ted R. Sikora II PREPARED BY AND WHEN Davis, Graham & Stubbs LLP RECORDED AND/OR FILED 370 Seventeenth Street SHOULD BE RETURNED Suite 4700 TO: Denver, CO 80202 - ------------------------------- ----------------------------------------- FOR RECORDER'S USE ONLY -ii- TABLE OF CONTENTS
Page ARTICLE 1 PARTIES, PROPERTY AND DEFINITIONS...............................................................1 1.1 Grantor..............................................................................1 1.2 Beneficiary..........................................................................1 1.3 Trustee..............................................................................1 1.4 Notes................................................................................1 1.5 Property.............................................................................2 1.6 Chattels.............................................................................3 1.7 Intangible Personalty................................................................3 1.8 Loan Documents.......................................................................3 1.9 Environmental Law....................................................................3 1.10 Regulated Substance..................................................................4 1.11 Person...............................................................................4 1.12 Secured Obligations..................................................................4 1.13 Default Rate.........................................................................4 ARTICLE 2 GRANTING CLAUSE.................................................................................4 2.1 Grant to Trustee.....................................................................4 2.2 Security Interest to Beneficiary.....................................................4 ARTICLE 3 GRANTOR'S WARRANTIES AND REPRESENTATIONS........................................................5 3.1 Warranty of Title....................................................................5 3.2 Organizational Status................................................................5 3.3 Due Authorization....................................................................5 3.4 No Regulated Substances..............................................................5 3.5 Non-Agricultural Property............................................................6 3.6 No Susceptibility to Forfeiture......................................................6 3.7 Compliance with Laws.................................................................6 3.8 No Conflict with Other Agreements....................................................7 3.9 No Material Litigation...............................................................7 3.10 Accurate Financial Information.......................................................7 ARTICLE 4 GRANTOR'S AFFIRMATIVE COVENANTS.................................................................7 4.1 Payment of Notes.....................................................................7 4.2 Performance of Other Obligations.....................................................7 -i- 4.3 Waiver of Homestead and Other Exemptions.............................................7 4.4 Payment of Taxes.....................................................................8 4.5 Other Encumbrances...................................................................8 4.6 Maintenance of Insurance.............................................................8 4.7 Payment of Utilities.................................................................9 4.8 Maintenance and Repair of Property and Chattels......................................9 4.9 Compliance with Laws.................................................................9 4.10 Performance of Lease Obligations....................................................10 4.11 Eminent Domain; Private Damage......................................................10 4.12 Mechanics' Liens....................................................................10 4.13 Environmental Claims................................................................11 4.14 Defense of Actions..................................................................11 4.15 Expenses of Enforcement.............................................................11 4.16 Book and Records; Financial Reports.................................................11 4.17 Priority of Leases..................................................................12 4.18 Further Assurances; Estoppel Certificates...........................................12 ARTICLE 5 GRANTOR'S NEGATIVE COVENANTS...................................................................12 5.1 Waste and Alterations...............................................................12 5.2 Zoning and Private Covenants........................................................13 5.3 Additional Tax Burden...............................................................13 5.4 Interference with Leases............................................................13 5.5 Transfer of Property................................................................13 5.6 Further Encumbrance of Property.....................................................13 5.7 Use of Regulated Substances.........................................................14 5.8 Change of Name......................................................................14 5.9 Improper Use of Property............................................................14 ARTICLE 6 EVENTS OF DEFAULT..............................................................................15 6.1 Failure to Pay Notes................................................................15 6.2 Violation of Other Covenants........................................................15 6.3 Misrepresentation or Breach of Warranty.............................................15 6.4 Acts Threatening Forfeiture.........................................................15 6.5 Assertion of Priority...............................................................15 6.6 Event of Default Under Credit Agreement.............................................15 ARTICLE 7 BENEFICIARY'S REMEDIES.........................................................................16 7.1 Performance of Defaulted Obligations................................................16 7.2 Specific Performance and Injunctive Relief..........................................16 -ii- 7.3 Acceleration of Secured Obligations.................................................16 7.4 Suit for Monetary Relief............................................................16 7.5 Possession of Property..............................................................16 7.6 Enforcement of Security Interests...................................................17 7.7 Foreclosure Against Property........................................................17 7.8 Appointment of Receiver.............................................................18 ARTICLE 8 MISCELLANEOUS PROVISIONS.......................................................................19 8.1 Time of the Essence.................................................................19 8.2 Joint and Several Obligations.......................................................19 8.3 Rights and Remedies Cumulative......................................................19 8.4 No Implied Waivers..................................................................19 8.5 Dealings with Successor Owners......................................................19 8.6 No Third Party Rights...............................................................19 8.7 Preservation of Liability and Priority..............................................20 8.8 Subrogation of Beneficiary..........................................................20 8.9 Notices.............................................................................20 8.10 Fixture Filing......................................................................20 8.11 Defeasance..........................................................................20 8.12 Reconveyance by Trustee.............................................................20 8.13 Acceptance by Trustee...............................................................21 8.14 Severability........................................................................22
-iii- DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT THIS DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT ("Deed of Trust") is given as of September 30, 1997, by the Grantor named below to the Trustee named below, for the use and benefit of the Beneficiary named below. ARTICLE 1 PARTIES, PROPERTY AND DEFINITIONS The following terms and references shall have the meanings indicated: 1.1 Grantor: EFTC CORPORATION, a Colorado corporation, whose legal address is 9351 Grant Street, Horizon Terrace, Sixth Floor, Denver, Colorado 80229, together with any future owner of the Property or any part thereof or interest therein. 1.2 Beneficiary: BANK ONE, COLORADO, N.A., a national banking association, whose legal address is 1125 Seventeenth Street, Third Floor, Denver, Colorado 80202, Attention: David L. Ericson, Vice President, as Agent for the Banks under that certain Credit Agreement (the "Credit Agreement") dated September 30, 1997, by and among Grantor, the Banks listed therein, and Beneficiary, as Agent for the Banks, together with any future holder of a Note. Capitalized terms used and not otherwise defined herein shall have the meanings given to them in the Credit Agreement. 1.3 Trustee:The Public Trustee of Weld County, Colorado. 1.4 Notes: Grantor's Notes shall mean any promissory notes made by Grantor in favor of Beneficiary, including, without limitation: (i) Grantor's Promissory Note (Revolving Loan) dated September 30, 1997, in the original principal amount of $25,000,000.00; (ii) Grantor's Promissory Note (Term Loan) dated September 30, 1997, in the original principal amount of $20,000,000.00; and (iii) Grantor's Promissory Note (Swing Loan) dated September 30, 1997, in the original principal amount of $2,500,000.00; and -1- (iv) Any and all modifications, extensions and renewals of any of the foregoing and any and all future advances or readvances to Grantor whether pursuant to any of the foregoing promissory notes or otherwise. All terms and provisions of the Notes are incorporated by this reference in this Deed of Trust. 1.5 Property: The land described in Exhibit A attached, commonly referred to as 233 Dundee Avenue, Greeley, Colorado 80634, together with the following: (a) All buildings, structures and improvements now or hereafter located thereon, as well as all rights of way, easements, trackage rights and other appurtenances to such land; (b) All of Grantor's right, title and interest in any land lying between the boundaries of the land described on Exhibit A and the center line of any adjacent street, road, avenue or alley, whether opened or proposed; (c) All of Grantor's right, title and interest in all water rights and conditional water rights that are appurtenant to or that have been used or are intended for use in connection with such land, including but not limited to (i) ditch, well, pipeline, spring and reservoir rights, whether or not adjudicated or evidenced by any well or other permit, (ii) all rights with respect to nontributary groundwater (and other groundwater that is subject to the provisions of Colorado Revised Statutes Section 37-90-137(4) or the corresponding provisions of any successor statute) underlying said land, (iii) any permit to construct any water well, water from which is intended to be used in connection with such land, and (iv) all of Grantor's right, title and interest under any decreed or pending plan of augmentation or water exchange plan; (d) All of Grantor's right, title and interest in all minerals, crops, timber, trees, shrubs, flowers and landscaping features now or hereafter located on, under or above such land; (e) With the exception of items that are owned by tenants and that such tenants are entitled, under the terms of applicable lease agreements, to remove from the leased premises, and except for items leased by Grantor from third parties or held by Grantor on consignment, all machinery, apparatus, equipment, fittings, fixtures (whether actually or constructively attached, and including all trade, domestic and ornamental fixtures) now or hereafter located in, on or under such land or improvements and used or usable in connection with any present or future operation thereof, including but not limited to all heating, air-conditioning, freezing, lighting, laundry, incinerating and power equipment; engines; pipes; pumps; tanks; motors; conduits; switchboards; plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, cooking and communications apparatus; boilers, water heaters, ranges, furnaces and burners; appliances; vacuum cleaning systems; -2- elevators; escalators; shades; awnings; screens; storm doors and windows; stoves; refrigerators; attached cabinets; partitions; ducts and compressors; rugs and carpets; draperies; and all additions thereto and replacements therefor; (f) All development rights associated with such land, whether previously or subsequently transferred to such land from other real property or now or hereafter susceptible of transfer from such land to other real property; (g) All awards and payments, including interest thereon, resulting from the exercise of any right of eminent domain or any other public or private taking of, injury to, or decrease in the value of, any of such property; and (h) All other or greater rights and interests of every nature in any of the above-described property and in the possession or use thereof and income therefrom, whether now owned or subsequently acquired by Grantor. 1.6 Chattels: All goods, fixtures, building and other materials, supplies and other tangible personal property of every nature now owned or hereafter acquired by Grantor and used, intended for use, or usable in the operation and any future construction of improvements or development of the Property, together with all accessions thereto, replacements and substitutions therefor and proceeds thereof. 1.7 Intangible Personalty: All accounts and all plans, specifications, licenses, permits and other general intangibles (whether now owned or hereafter acquired, and including proceeds thereof) relating to or arising from Grantor's ownership, use, operation, leasing or sale of all or any part of the Property, specifically including but in no way limited to any right that Grantor may have or acquire to transfer any development rights from the Property to other real property, and any development rights that may be so transferred. 1.8 Loan Documents: The Notes, this Deed of Trust and any financing statements executed in connection herewith, the Assignment of Leases and Rents and Other Income of even date herewith that also secures the Notes, the Credit Agreement, and each other document executed or delivered by Grantor as security for the Notes or in connection with the transaction pursuant to which the Notes have been executed and delivered. The term "Loan Documents" also includes all modifications, extensions, renewals and replacements of each document referred to above. 1.9 Environmental Law: Any federal, state or local enactment relating to protection of public health or the environment, including (by way of illustration rather than limitation) the Clean Water Act, 33 U.S.C. ss. 1251, et seq., the Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Resource -3- Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601, et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq., and the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 135, et seq., as well as applicable state counterparts to such federal legislation and any regulations, guidelines, directives or other interpretations of any such enactment, all as amended from time to time. 1.10 Regulated Substance: Any substance, the manufacture, storage, transport, generation, use, treatment, recycling, disposal or other disposition of which is prohibited or regulated (including, without limitation, being subjected to notice, reporting, record-keeping or clean-up requirements) by any Environmental Law. 1.11 Person: An individual, corporation, association, partnership, trust or other legal entity. 1.12 Secured Obligations: All present and future obligations of Grantor to Beneficiary evidenced by or contained in the Loan Documents, whether stated in the form of promises, covenants, representations, warranties, conditions or prohibitions or in any other form. 1.13 Default Rate: A rate of interest equal to the Prime Rate plus 3% per annum. ARTICLE 2 GRANTING CLAUSE 2.1 Grant to Trustee. As security for the Secured Obligations, Grantor grants, bargains, sells and conveys the Property to Trustee, in trust, with the power of sale, for the use and benefit of Beneficiary and subject to all provisions of this Deed of Trust. 2.2 Security Interest to Beneficiary. As additional security for the Secured Obligations, Grantor hereby grants to Beneficiary a security interest in the Chattels and in the Intangible Personalty. To the extent any of the Chattels or the Intangible Personalty may be or have been acquired with funds advanced by Beneficiary under the Loan Documents, this security interest is a purchase money security interest. The security interest granted in this section shall survive any judicial or nonjudicial foreclosure of this Deed of Trust as against the Property and, notwithstanding any purported cancellation of this Deed of Trust in connection with any such foreclosure, shall continue in force as against the Chattels and the Intangible Personalty until all of the Secured Obligations have been satisfied and discharged in full. Any complete release of this Deed of Trust shall, however, unless otherwise expressly provided in the release document, constitute a release of -4- such security interest as well. Grantor agrees that a carbon, photographic or other reproduction of this Deed of Trust, or of any financing statement signed in connection with this Deed of Trust, may be filed or recorded to perfect the security interests granted in this section. After an Event of Default has occurred and continues beyond the applicable grace period thereafter, Grantor appoints Beneficiary attorney-in-fact for Grantor, to sign on Grantor's behalf any financing statement or amendment of financing statement that Beneficiary may at any time consider necessary or appropriate after an Event of Default has occurred and continues beyond the applicable grace period therefor. ARTICLE 3 GRANTOR'S WARRANTIES AND REPRESENTATIONS 3.1 Warranty of Title. Grantor represents and warrants to Beneficiary that Grantor has good, marketable and insurable title to the Property, subject only to the lien of general taxes for the current year, payable the following year, and those additional matters, if any, set forth in Exhibit B attached. Grantor further represents and warrants to Beneficiary that Grantor has good title to the Chattels and the Intangible Personalty, free of any liens, encumbrances, security interests and other claims whatever, except insofar as the Chattels may be encumbered by the lien of general taxes for the current year, payable in the following year, or by any encumbrance listed in Exhibit B. The warranties contained in this section shall survive foreclosure of this Deed of Trust, and shall inure to the benefit of and be enforceable by any Person who may acquire title to the Property, the Chattels or the Intangible Personalty pursuant to any such foreclosure. 3.2 Organizational Status. Grantor represents and warrants to Beneficiary that Grantor is a profit corporation properly organized, validly existing and in good standing under the laws of the State of Colorado, with all necessary power and authority to execute, deliver and perform Grantor's obligations under the Loan Documents, and is qualified to transact business in, and is in good standing in, the State of Colorado. 3.3 Due Authorization. If Grantor is other than a natural person, then each individual who executes this document on behalf of Grantor represents and warrants to Beneficiary that such execution has been authorized by all necessary corporate, partnership or other action on the part of Grantor. 3.4 No Regulated Substances. Grantor represents and warrants to Beneficiary that: (a) No Regulated Substance is currently being generated, used, treated, stored or disposed of on, in or under the Property that is in material noncompliance with Environmental Laws; -5- (b) Neither Grantor nor, to the best of Grantor's knowledge after due investigation, any other Person has ever caused or permitted any Regulated Substance to be generated, placed, held, located or disposed of on, under or in the Property that is in material noncompliance with Environmental Laws; (c) Neither Grantor nor, to the best of Grantor's knowledge after due investigation, any other Person has ever used the Property as a dump site, permanent or temporary storage site or transfer station for any Regulated Substance that is in material noncompliance with Environmental Laws; (d) Grantor has received no notice of, and is not aware of, any actual or alleged violation of any Environmental Law materially affecting the Property or any activity conducted on the Property; that is in material noncompliance with Environmental Laws; and (e) No action or proceeding is pending or, to Grantor's knowledge after due investigation, before or appealable from any court, quasi-judicial body or administrative agency relating to the enforcement of any Environmental Law affecting the Property or any activity conducted on the Property. Grantor will indemnify Beneficiary against and hold Beneficiary harmless from any loss, claim, damage or expense, including reasonable attorneys' fees and other out of pocket litigation expenses, incurred by Beneficiary in connection with any claim that any of the matters represented and warranted by Grantor in this section are inaccurate or untrue. The indemnity provided for in the preceding sentence is a part of the Secured Obligations but will survive payment or performance of the other Secured Obligations and the release, foreclosure or other discharge of this Deed of Trust. 3.5 Non-Agricultural Property. Grantor represents and warrants to Beneficiary that the Property is not used principally for agricultural or farming purposes. 3.6 No Susceptibility to Forfeiture. Grantor represents and warrants to Beneficiary that Grantor is not engaged, and has not at any time since Grantor's acquisition of the Property been engaged, in a "pattern of racketeering activity" within the meaning of 18 U.S.C. ss. 1961, as amended, or within the meaning of any similar state or federal law, nor has Grantor committed any other act or engaged in any other pattern of actions, the potential results of which might include forfeiture of Grantor's interest in the Property. 3.7 Compliance with Laws. Grantor represents and warrants to Beneficiary that the Property and Grantor's present and proposed use of the Property are in compliance in all material respects with all applicable laws, ordinances and other governmental requirements. -6- 3.8 No Conflict with Other Agreements. Grantor represents and warrants to Beneficiary that Grantor's execution and delivery of the Loan Documents does not conflict with, violate or constitute a default under any other agreement by which Grantor or any part of the Property, the Chattels or the Intangible Personalty are bound. 3.9 No Material Litigation. Grantor hereby represents and warrants that, except as disclosed in the Credit Agreement, there is no pending, or to the Grantor's knowledge, threatened action or proceeding affecting the Grantor or any of its properties or business activities before any court, governmental agency or arbitrator, in which there is a reasonable possibility of a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Deed of Trust. 3.10 Accurate Financial Information. Grantor hereby represents and warrants that the unaudited pro forma consolidated balance sheets of the Grantor (and others) as at December 31, 1996, and the related consolidated statements of income and retained earnings of the Grantor (and others) for the fiscal year then ended, as disclosed in the proxy statement mailed to the Grantor's shareholders in connection with the Circuit Test Acquisition, and the unaudited balance sheets of the Grantor (and others) as at June 30, 1997, and the related consolidated statements of income and retained earnings of the Grantor (and others) for the fiscal quarter then ended, copies of which have been furnished to the Banks, fairly present the financial condition of the Grantor (and others) as at such date and the results of the operations of the Grantor (and others) for the period ended on such date, all in accordance with Regulation S-X promulgated under the Securities Exchange Act of 1934, and since December 31, 1996, there has been no material adverse change in such condition or operations except as disclosed in the Credit Agreement. ARTICLE 4 GRANTOR'S AFFIRMATIVE COVENANTS 4.1 Payment of Notes. Pursuant to the terms of the Loan Documents, Grantor will cause all principal, interest and other sums payable under the Notes to be paid (on or before the expiration of any applicable grace period) as set forth under the terms of the Loan Documents. 4.2 Performance of Other Obligations. Grantor will promptly and strictly perform and comply with (or cause to be performed and complied with) all other covenants, conditions and prohibitions required by Grantor by the terms of the Loan Documents. -7- 4.3 Waiver of Homestead and Other Exemptions. Grantor hereby waives all rights to any homestead or other exemption to which Grantor would otherwise be entitled under any present or future constitutional, statutory or other provision of Colorado or other state or federal law. 4.4 Payment of Taxes. Grantor hereby covenants to pay its Debt in excess of $1,000,000 and other obligations in accordance with their terms and pay and discharge promptly all Federal and material State and local taxes, and all material governmental assessments and charges or levies imposed upon any such Person or upon such Person's income or profits or in respect of its assets or business, or in any event before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Grantor shall have set aside on its books adequate reserves in accordance with GAAP with respect thereto. 4.5 Other Encumbrances. Grantor will promptly and strictly perform and comply with all covenants, conditions and prohibitions required of Grantor in connection with any other encumbrance affecting the Property, the Chattels or the Intangible Personalty, or any part thereof, regardless of whether such other encumbrance is superior or subordinate to the lien hereof. 4.6 Maintenance of Insurance. (a) Grantor shall maintain the third-party insurance required by the Credit Agreement, provided, however, that in no event shall such insurance be for an amount less than the the replacement cost of the assets so insured, including the Property. (b) Renewal Policies. Not less than 30 days prior to the expiration date of each insurance policy required pursuant to paragraph (a) above, Grantor will deliver to Beneficiary an appropriate renewal policy (or a certified copy thereof), together with evidence satisfactory to Beneficiary that the applicable premium has been prepaid. Without limiting the obligations of the Grantor under this Section 4.6, in the event the Grantor fails to maintain the insurance required by the foregoing provisions of this Section 4.6, then the Beneficiary may, but shall have no obligation to, procure insurance covering the interests of the Banks, in such amounts and against such risks as the Beneficiary shall deem appropriate, and the Grantor will reimburse the Beneficiary in respect of any premiums paid by the Beneficiary as provided in the Credit Agreement. -8- (c) Any insurance proceeds received by Beneficiary with respect to an insured casualty may, in accordance with the terms of the Credit Agreement, either (i) be retained and applied by Beneficiary toward payment of the Secured Obligations, or (ii) be paid over, in whole or in part to the Grantor to pay for repairs or replacements necessitated by the casualty; provided, that if all of the Secured Obligations have been performed or are discharged by the application of less than all of such insurance proceeds, then any remaining proceeds will be paid over to Grantor. The Beneficiary will have no obligation to see to the proper application of any insurance proceeds paid over to Grantor, nor will any such proceeds received by Beneficiary bear interest or be subject to any other charge for the benefit of Grantor. Beneficiary may, prior to the application of insurance proceeds, commingle them with Beneficiary's own funds and otherwise act with regard to such proceeds as Beneficiary may determine in Beneficiary's sole discretion. (d) Successor's Rights. Any Person who acquires title to the Property or the Chattels through foreclosure of this Deed of Trust will succeed to all of Grantor's rights under all policies of insurance maintained pursuant to this section. 4.7 Payment of Utilities. Grantor will pay before delinquency when due all charges for water, sewer, electricity, natural gas and other utilities serving the Property. 4.8 Maintenance and Repair of Property and Chattels. Grantor will at all times maintain the Property and the Chattels in good condition and repair, ordinary wear and tear excepted, will diligently prosecute the completion of any building or other improvement that is at any time in the process of construction on the Property, and will promptly repair, restore, replace or rebuild any material part of the Property or the Chattels that may be affected by any casualty or any public or private taking of or injury to the Property or the Chattels. Beneficiary and any Person authorized by Beneficiary may enter and inspect the Property at all reasonable times, and may inspect the Chattels, wherever located, at all reasonable times. 4.9 Compliance with Laws. Grantor will comply in all material respects with all statutes, ordinances and other governmental or quasi-governmental requirements and private covenants relating to the ownership, construction, use or operation of the Property, including but not limited to all material Environmental Laws; provided, that so long as Grantor is not otherwise in default hereunder, Grantor may, upon providing Beneficiary with security reasonably satisfactory to Beneficiary, proceed diligently and in good faith to contest the validity or applicability of any such statute, ordinance, requirement or covenant. Whether or not Grantor elects to contest such validity or applicability, Grantor will notify Beneficiary promptly of any apparent or alleged violation of any material statute, ordinance, requirement or covenant, and will provide Beneficiary promptly with copies of all notices, pleadings and other communications relating to any such violation. -9- 4.10 Performance of Lease Obligations. Grantor will perform promptly all of Grantor's obligations under or in connection with each present and future lease of all or any part of the Property. If Grantor receives at any time any written communication from the tenant under any such lease asserting a default by Grantor under such lease, or purporting to terminate or cancel such lease, Grantor will promptly forward a copy of such communication (and any subsequent communications relating thereto) to Beneficiary. 4.11 Eminent Domain; Private Damage. If all or any part of any property encumbered by this Deed of Trust is taken or damaged by eminent domain or any other public or private action, Grantor will notify Beneficiary promptly of the time and place of all meetings, hearings, trials and other proceedings relating to such action. Beneficiary may participate in all negotiations and appear and participate in all judicial or arbitration proceedings concerning any award or payment that may be due as a result of such taking or damaging, and may, after an event of default has occurred, in Beneficiary's sole discretion, compromise or settle, in the names of both Beneficiary and Grantor, any claim for any such award or payment. Any such award or payment is to be paid to Beneficiary and will be applied first to reimburse Beneficiary for all costs and expenses, including attorneys' fees, incurred by Beneficiary in connection with the ascertainment and collection of such award or payment. The balance, if any, of such award or payment may, in Beneficiary's sole discretion, either (a) be retained by Beneficiary and applied toward the Secured Obligations, but only if any Event of Default has occurred, or (b) be paid over, in whole or in part and subject to such conditions as Beneficiary may impose, to Grantor for the purpose of restoring, repairing or rebuilding any part of the encumbered property affected by the taking or damaging. Beneficiary will have no duty to see to the application of any part of any award or payment released to Grantor. Grantor's duty to pay the Notes in accordance with the terms of the Loan Documents and to perform the other Secured Obligations will not be suspended by the pendency or discharged by the conclusion of any proceedings for the collection of any such award or payment, and any reduction in the Secured Obligations resulting from Beneficiary's application for any such award or payment will take effect only when Beneficiary receives such award or payment. If this Deed of Trust has been foreclosed prior to Beneficiary's receipt of such award or payment, Beneficiary may nonetheless retain such award or payment to the extent required to reimburse Beneficiary for all out of pocket costs and expenses, including reasonable attorneys' fees, incurred in connection therewith, and to discharge any deficiency remaining with respect to the Secured Obligations. 4.12 Mechanics' Liens. Grantor will keep the Property free and clear of all liens and claims of liens by contractors, subcontractors, mechanics, laborers, materialmen and other such Persons, and will cause any recorded statement of any such lien to be released of record within 30 days after the recording thereof. Notwithstanding the preceding sentence, however, Grantor will not be deemed to be in default under this section if and so long as Grantor (a) contests in good faith the validity or amount of any asserted lien and diligently prosecutes or defends an action appropriate to -10- obtain a binding determination of the disputed matter, and (b) provides Beneficiary with such security as Beneficiary may reasonably require to protect Beneficiary against all out-of-pocket loss, damage and expense, including reasonable attorneys' fees, that Beneficiary might incur if the asserted lien is determined to be valid. Grantor will indemnify Beneficiary against and hold Beneficiary harmless from any out-of-pocket loss, damage or expense, including reasonable attorneys' fees and other out-of-pocket litigation expenses, incurred by Beneficiary as a result of any default by Grantor under this section, and Grantor's obligations under this sentence shall survive foreclosure of this Deed of Trust. 4.13 Environmental Claims. Grantor will indemnify Beneficiary against and hold Beneficiary harmless from any out-of-pocket loss, damage or expense, including reasonable attorneys' fees and other expenses, incurred by Beneficiary in connection with the investigation, defense or settlement of any claim, whether or not valid and whether asserted by a governmental agency or a private party, that (a) any part of the Property is contaminated or otherwise affected by the presence of any Regulated Substance, or (b) the Property or any activity conducted at any time on the Property is wholly or partly responsible for the presence elsewhere of any Regulated Substance, or in connection with any cleanup or other remediation actions that may be imposed on or agreed to by Beneficiary in connection with any such claim. The indemnity provided for in this section is a part of the Secured Obligations but will survive payment or performance of the other Secured Obligations and the release, foreclosure or other discharge of this Deed of Trust. 4.14 Defense of Actions. Grantor will defend, at Grantor's expense, any action, proceeding or claim that affects any property encumbered hereby or any interest of Beneficiary in such property or in the Secured Obligations, and will indemnify and hold Beneficiary harmless from all out-of-pocket loss, damage, cost or expense, including reasonable attorneys' fees, that Beneficiary may incur in connection therewith. 4.15 Expenses of Enforcement. Grantor will pay on demand all out-of-pocket costs and expenses, including but not limited to reasonable attorneys' fees, appraisal costs and expenses for title insurance and title searches and certificates, that Beneficiary may incur in connection with any effort or action (whether or not litigation or foreclosure is involved) to enforce or defend Beneficiary's rights and remedies under any of the Loan Documents, or to secure title to or possession of, or to realize on, any security for the Secured Obligations. 4.16 Book and Records; Financial Reports. Grantor shall maintain all financial records in accordance with GAAP and permit, after two weeks notice unless an Event of Default has occurred, any Beneficiary employees or other representatives approved by the Beneficiary (which approval shall not be unreasonably withheld) that is designated by the Beneficiary or the Required Banks to visit and inspect the properties of the Grantor, and to inspect Grantor's financial and -11- business records and make extracts there from and copies thereof, all at reasonable times and in a manner so as not to unreasonably disrupt the operations of the Grantor and as often as reasonably requested, and permit any such employees or representatives to discuss the affairs, finances and condition of the Grantor with the officers and other representatives thereof, including the Grantor's independent accountants if a representative of the Grantor is present and if the Beneficiary has notified the Grantor not less than 24 hours prior to such meeting of the issues that will be discussed. Grantor shall deliver those financial statements required to be delivered by it under the Credit Agreement. 4.17 Priority of Leases. To the extent Grantor has the right, under the terms of any existing lease of all or any part of the Property, to make such lease subordinate to the lien of this Deed of Trust, Grantor will, at Beneficiary's request and Grantor's expense, take such action as may be required to effect such subordination. Conversely, Grantor will, at Beneficiary's request and Grantor's expense, take such action as may be necessary to subordinate the lien hereof to any future lease of all or any part of the Property designated by Beneficiary. 4.18 Further Assurances; Estoppel Certificates. Grantor will execute and deliver to Beneficiary on demand, and pay the out-of-pocket costs of preparation and recording thereof, any further documents that Beneficiary may reasonably request to confirm or perfect the liens and security interests created or intended to be created hereby, or to confirm or perfect any evidence of the Secured Obligations. Grantor will also, within ten days after any request by Beneficiary, deliver to Beneficiary a signed and acknowledged statement certifying to Beneficiary, or to any proposed transferee of the Secured Obligations, (a) the balance of principal, interest and other sums then outstanding under the Notes, and (b) whether Grantor claims to have any offsets or defenses with respect to the Secured Obligations and, if so, the nature of such offsets or defenses. Grantor's failure to provide such a statement within such ten-day period will result in Grantor being conclusively bound by any representation that Beneficiary may make as to those matters. ARTICLE 5 GRANTOR'S NEGATIVE COVENANTS 5.1 Waste and Alterations. Grantor will not commit or permit any waste with respect to the Property, nor will Grantor cause or permit any material part of the Property, including but not limited to any building, structure, parking lot, driveway, landscape scheme, timber, or other ground improvement, to be removed, demolished or materially altered without the prior written consent of Beneficiary, other than such items which are either (i) obsolete and no longer necessary for the conduct of Grantor's business, or (ii) promptly replaced with a similar item of equal or greater value. -12- 5.2 Zoning and Private Covenants. Grantor will not initiate, join in or consent to any change in any zoning ordinance or classification, any change in the "zone lot" or "zone lots" (or similar zoning unit or units) presently comprising the Property, any transfer of development rights, any change in any private restrictive covenant, or any change in any other public or private restriction limiting or defining the uses that may be made of the Property or any part thereof, without the express written consent of Beneficiary. If under applicable zoning provisions the use of all or any part of the Property is or becomes a nonconforming use, Grantor will not cause or permit such use to be discontinued or abandoned without the express written consent of Beneficiary. 5.3 Additional Tax Burden. Except with the prior written consent of Beneficiary, Grantor will not initiate, join in or consent to any action or proposal to include all or any part of the Property in any special improvement district or other special district or taxing authority that does not include the Property on the date of this Deed of Trust. 5.4 Interference with Leases. Grantor will neither do nor neglect to do anything that may cause or permit the termination of any lease of all or any part of the Property, or cause or permit the withholding or abatement of any rent payable under any such lease. Except with the prior written consent of Beneficiary, Grantor will not (a) collect rent from all or any part of the Property for more than one month in advance, (b) modify any lease of all or any part of the Property, (c) assign the rents from the Property or any part thereof, or (d) consent to the cancellation or surrender of all or any part of any such lease, except that Grantor may in good faith terminate any such lease for nonpayment of rent or other material breach by the tenant. 5.5 Transfer of Property. Grantor will not convey, lease or otherwise transfer, either voluntarily or involuntarily, the Property or any part thereof or interest therein, without the prior written consent of Beneficiary. If Beneficiary consents to any transfer otherwise prohibited by this section, Beneficiary may condition such consent on changes in the terms for payment of the Secured Obligations, including but not limited to an increase in the interest rate borne by the Notes, a reduction in the term of the Notes, or both. 5.6 Further Encumbrance of Property. Except for Permitted Liens, Grantor will neither create nor permit any junior lien or encumbrance against the Property, other than a mortgage or deed of trust in which the mortgagee or beneficiary: i. expressly acknowledges the priority of this Deed of Trust, as to all amounts then or at any time thereafter advanced hereunder or secured hereby, over any lien or security interest created by such junior mortgage or deed of trust, and -13- ii expressly agrees that no foreclosure or other enforcement proceeding under such mortgage or deed of trust will be effective to terminate any lease of all or any part of the Property, regardless of the relative priorities of such junior mortgage or deed of trust and such lease. Any Person who acquires or records any lien or encumbrance against the Property after the recording of this Deed of Trust will be deemed to have agreed to, and will be bound by, the foregoing requirements, whether or not the document or documents relating to such lien or encumbrance reflect that agreement. 5.7 Use of Regulated Substances. Grantor will not cause or permit all or any part of the Property to be used to manufacture, generate, store, transfer, treat, recycle or dispose of any Regulated Substance, except in compliance with any Environmental Law, nor will Grantor cause or permit, as a result of any intentional or unintentional act on the part of Grantor or any tenant, subtenant or other user or occupant of the Property, any release of any Regulated Substance onto the Property or from the Property onto other property. Grantor will indemnify Beneficiary against, and hold Beneficiary harmless from, any out-of-pocket loss, claim, damage or expense, including reasonable attorneys' fees and other litigation expenses, incurred by Beneficiary in connection with any actual or alleged violation of the preceding sentence. Such indemnity is a part of the Secured Obligations but will survive payment or performance of the other Secured Obligations and the release, foreclosure or other discharge of this Deed of Trust. 5.8 Change of Name. Grantor shall not, except upon not less than 30 days prior written notice to the Beneficiary, change the address at which the Grantor maintains its chief executive offices and principal place of business; nor conduct its business activities under any names other than those set forth in the Credit Agreement unless the Grantor notifies the Beneficiary of any such new name not less than 30 days prior to beginning use of such new name, except that no more than seven days notice shall be required in the case of a new name resulting from an acquisition of a business or assets by the Grantor.. 5.9 Improper Use of Property. Grantor will not use the Property for any purpose or in any manner that violates any applicable law, ordinance or other governmental requirement, the requirements or conditions of any insurance policy, or any private covenant. -14- ARTICLE 6 EVENTS OF DEFAULT Each of the following events will constitute a default under this Deed of Trust and under each of the other Loan Documents: 6.1 Failure to Pay Notes. Pursuant to the terms of the Loan Documents, the occurrence of any failure to make any payment when due under the terms of the respective Notes pursuant to the terms of the Loan Documents. 6.2 Violation of Other Covenants. The occurrence of any failure to perform or observe any other covenant, condition or prohibition contained in any of the Loan Documents which failure is not cured within fifteen (15) days after Grantor's receipt of written notice thereof from Grantor; 6.3 Misrepresentation or Breach of Warranty. Beneficiary's determination that any statement or warranty contained in any of the Loan Documents is untrue or misleading in any material respect as of the date made; 6.4 Acts Threatening Forfeiture. Beneficiary's reasonable determination that Grantor has committed any act or engaged in any pattern of actions that may lead to a claim for forfeiture of Grantor's interest in the Property, it being agreed that the issuance of any criminal complaint or indictment charging Grantor with any such act or pattern of actions would be a sufficient basis for such a determination by Beneficiary if one of the penalties for such complaint or indictment is forfeiture of property; 6.5 Assertion of Priority. The assertion (except by the owner of an encumbrance expressly excepted from Grantor's warranty of title herein) of any claim of priority over this Deed of Trust, by title, lien or otherwise, unless Grantor within 30 days after such assertion either causes the assertion to be withdrawn or provides Beneficiary with such security as Beneficiary may require to protect Beneficiary against all loss, damage or expense, including attorneys, fees, that Beneficiary may incur in the event such assertion is upheld; or 6.6 Event of Default Under Credit Agreement. An "Event of Default" (as such term is defined in the Credit Agreement) has occurred and is continuing. -15- ARTICLE 7 BENEFICIARY'S REMEDIES Immediately upon or at any time after the occurrence of any event of default hereunder, Beneficiary may exercise any remedy available at law or in equity, including but not limited to those listed below and those listed in the other Loan Documents, in such sequence or combination as Beneficiary may determine in Beneficiary's sole discretion: 7.1 Performance of Defaulted Obligations. Beneficiary may make any payment or perform any other obligation under the Loan Documents that Grantor has failed to make or perform, and Grantor hereby irrevocably appoints Beneficiary as the true and lawful attorney-in-fact for Grantor to make any such payment and perform any such obligation in the name of Grantor. All out of pocket payments made and expenses (including reasonable attorneys' fees) incurred by Beneficiary in this connection, together with interest thereon at the Default Rate from the date paid or incurred until repaid, will be part of the Secured Obligations and will be immediately due and payable by Grantor to Beneficiary. In lieu of advancing Beneficiary's own funds for such purposes, Beneficiary may use any funds of Grantor that may be in Beneficiary's possession, including but not limited to insurance or condemnation proceeds and amounts deposited for taxes, insurance premiums or other purposes. 7.2 Specific Performance and Injunctive Relief. Notwithstanding the availability of legal remedies, Beneficiary will be entitled to obtain specific performance, mandatory or prohibitory injunctive relief or other equitable relief requiring Grantor to cure or refrain from repeating any default. 7.3 Acceleration of Secured Obligations. Beneficiary may, upon notice to Grantor, declare all of the Secured Obligations immediately due and payable in full. 7.4 Suit for Monetary Relief. With or without accelerating the maturity of the Secured Obligations, Beneficiary may sue from time to time for any payment due under any of the Loan Documents, or for money damages resulting from Grantor's default under any of the Loan Documents. 7.5 Possession of Property. To the extent permitted by applicable law, Beneficiary may enter and take possession of the Property without seeking or obtaining the appointment of a receiver, may employ a managing agent for the Property and may lease or rent all or any part of the Property, either in Beneficiary's name or in the name of Grantor, and may collect the rents, issues and profits of the Property. Any revenues collected by Beneficiary under this section will be applied first toward payment of all out of pocket expenses (including reasonable attorneys' fees) incurred by -16- Beneficiary, together with interest thereon at the Default Rate from the date incurred until repaid, and the balance, if any, will be applied against the Secured Obligations. 7.6 Enforcement of Security Interests. Beneficiary may exercise all rights of a secured party under the Colorado Uniform Commercial Code with respect to the Chattels and the Intangible Personalty, including but not limited to taking possession of, holding and selling the Chattels and enforcing or otherwise realizing on any accounts and general intangibles. Any requirement for reasonable notice of the time and place of any public sale, or of the time after which any private sale or other disposition is to be made, will be satisfied by Beneficiary's giving of such notice to Grantor at least ten days prior to the time of any public sale or the time after which any private sale or other intended disposition is to be made. To the extent permitted by applicable law, Beneficiary may, at Beneficiary's option, cause Trustee to sell any or all of the Chattels, the Intangible Personalty or other personal property as part of the sale of the Property, without making any distinction between real and personal property. 7.7 Foreclosure Against Property. Beneficiary may foreclose this Deed of Trust, insofar as it encumbers the Property, either by judicial action or through Trustee. Foreclosure through Trustee will be initiated by Beneficiary's filing of its notice of election and demand for sale with Trustee. Upon the filing of such notice of election and demand for sale, Trustee shall promptly comply with all notice and other requirements of the laws of Colorado then in force with respect to such sales, and shall give four weeks' public notice of the time and place of such sale by advertisement weekly in some newspaper of general circulation then published in the County or City and County in which the Property is located. Any sale conducted by Trustee pursuant to this section shall be held at the front door of the county courthouse for such County or City and County, or on the Property, or at such other place as similar sales are then customarily held in such County or City and County, provided that the actual place of sale shall be specified in the notice of sale. The proceeds of any sale under this section shall be applied first to the fees and expenses of the officer conducting the sale, and then to the reduction or discharge of the Secured Obligations in such order as Beneficiary may elect; any surplus remaining shall be paid over to Grantor or to such other Person or Persons as may be lawfully entitled to such surplus. At the conclusion of any foreclosure sale, the officer conducting the sale shall execute and deliver to the purchaser at the sale a certificate of purchase, which shall describe the property sold to such purchaser and shall state that upon the expiration of the applicable periods for redemption, the holder of such certificate will be entitled to a deed to the property described in the certificate. After the expiration of all applicable periods of redemption, unless the property sold has been redeemed by Grantor, the officer who conducted such sale shall, upon request, execute and deliver an appropriate deed to the holder of the certificate of purchase or the last certificate of redemption, as the case may be, and such deed shall operate to divest Grantor and all Persons claiming under Grantor of all right, title and interest, whether legal or equitable, in the property described in the deed. Nothing in this section dealing with foreclosure -17- procedures or specifying particular actions to be taken by Beneficiary or by Trustee or any similar officer shall be deemed to contradict or add to the requirements and procedures now or hereafter specified by Colorado law, and any such inconsistency shall be resolved in favor of Colorado law applicable at the time of foreclosure. 7.8 Appointment of Receiver. To the extent permitted by applicable law, Beneficiary shall be entitled, as a matter of absolute right and without regard to the value of any security for the Secured Obligations or the solvency of any Person liable therefor, to the appointment of a receiver for the Property on ex parte application to any court of competent jurisdiction. Grantor waives any right to any hearing or notice of hearing prior to the appointment of a receiver. Such receiver and his agents shall be empowered (a) to take possession of the Property and any businesses conducted by Grantor or any other Person thereon and any business assets used in connection therewith, (b) to exclude Grantor and Grantor's agents, servants and employees from the Property, or, at the option of the receiver, in lieu of such exclusion, to collect a fair market rental from any such Persons occupying any part of the Property, (c) to collect the rents, issues, profits and income therefrom, (d) to complete any construction that may be in progress, (e) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (f) to use all stores of materials, supplies and maintenance equipment on the Property and replace such items at the expense of the receivership estate, (g) to pay all taxes and assessments against the Property and the Chattels, all premiums for insurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, (h) to borrow from Beneficiary such funds as may reasonably be necessary to the effective exercise of the receiver's powers, on such terms as may be agreed upon by the receiver and Beneficiary, and (i) generally to do anything that Grantor could legally do if Grantor were in possession of the Property. All out of pocket expenses incurred by the receiver or his agents, including obligations to repay funds borrowed by the receiver, shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including reasonable attorneys' fees incurred by the receiver and by Beneficiary, together with interest thereon at the Default Rate from the date incurred until repaid, and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Beneficiary, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Property has passed after foreclosure sale and all applicable periods of redemption have expired. -18- ARTICLE 8 MISCELLANEOUS PROVISIONS 8.1 Time of the Essence. Time is of the essence with respect to all provisions of the Loan Documents. 8.2 Joint and Several Obligations. If Grantor is more than one Person, then all Persons comprising Grantor are jointly and severally liable for all of the Secured Obligations. 8.3 Rights and Remedies Cumulative. Beneficiary's rights and remedies under each of the Loan Documents are cumulative of the rights and remedies available to Beneficiary under each of the other Loan Documents and those otherwise available to Beneficiary at law or in equity. No act of Beneficiary shall be construed as an election to proceed under any particular provision of any Loan Document to the exclusion of any other provision in the same or any other Loan Document, or as an election of remedies to the exclusion of any other remedy that may then or thereafter be available to Beneficiary. 8.4 No Implied Waivers. Beneficiary shall not be deemed to have waived any provision of any Loan Document unless such waiver is in writing and is signed by Beneficiary. Without limiting the generality of the preceding sentence, neither Beneficiary's acceptance of any payment with knowledge of a default by Grantor, nor any failure by Beneficiary to exercise any remedy following a default by Grantor, shall be deemed a waiver of such default, and no waiver by Beneficiary of any particular default on the part of Grantor shall be deemed a waiver of any other default or of any similar default in the future. 8.5 Dealings with Successor Owners. If the Property or any interest in the Property is transferred to any Person other than Grantor, whether voluntarily or involuntarily and whether or not Beneficiary has consented to such transfer, then Beneficiary may deal with such successor owner in all matters relating to the Secured Obligations, and no such dealings, including but not limited to any change in the terms of the Secured Obligations, will be deemed to discharge or impair the obligations of Grantor to Beneficiary under the Loan Documents. 8.6 No Third Party Rights. No Person shall be a third party beneficiary of any provision of any of the Loan Documents. All provisions of the Loan Documents favoring Beneficiary are intended solely for the benefit of Beneficiary, and no third party shall be entitled to assume or expect that Beneficiary will not waive or consent to modification of any such provision in Beneficiary's sole discretion. -19- 8.7 Preservation of Liability and Priority. Without affecting the liability of Grantor or of any other Person (except a Person expressly released in writing) for payment and performance of all of the Secured Obligations, and without affecting the rights of Beneficiary with respect to any security not expressly released in writing, and without impairing in any way the priority of this Deed of Trust over the interests of any Person acquired or first evidenced by recording subsequent to the recording hereof, Beneficiary may, either before or after the maturity of the Note, and without notice or consent: (a) release any Person liable for payment or performance of all or any part of the Secured Obligations; (b) make any agreement altering the terms of payment or performance of all or any of the Secured Obligations; (c) exercise or refrain from exercising, or waive, any right or remedy that Beneficiary may have under any of the Loan Documents; (d) accept additional security of any kind for any of the Secured Obligations; or (e) release or otherwise deal with any real or personal property securing the Secured Obligations. Any Person acquiring or recording evidence of any interest of any nature in the Property, the Chattels or the Intangible Personalty shall be deemed, by acquiring such interest or recording any evidence thereof, to have agreed and consented to any or all such actions by Beneficiary. 8.8 Subrogation of Beneficiary. Beneficiary shall be subrogated to the lien of any previous encumbrance discharged with funds advanced by Beneficiary under the Loan Documents, regardless of whether such previous encumbrance has been released of record. 8.9 Notices. Any notice required or permitted to be given by Grantor or Beneficiary under any of the Loan Documents must be in writing and will be deemed given on personal delivery or on the third business day after the mailing thereof, by registered or certified United States mail, postage prepaid, to the appropriate party at its address shown on the first page of this Deed of Trust. Either party may change such party's address for notices by giving notice to the other party in accordance with this section, but no such change of address will be effective as against any Person without actual knowledge of the change. 8.10 Fixture Filing. This Deed of Trust is intended to serve as a financing statement under the Colorado Uniform Commercial Code with respect to any fixtures that may at any time be part of the Property or the Chattels, and the recording of this Deed of Trust is intended to constitute a "fixture filing" for purposes of such Uniform Commercial Code. 8.11 Defeasance. Upon payment and performance in full of all of the Secured Obligations, Beneficiary will execute and deliver to Grantor such documents as may be required to release this Deed of Trust of record. 8.12 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of the Notes to Trustee for cancellation and -20- retention and upon payment by Grantor of Trustee's fees, Trustee shall reconvey to Grantor, or the person or persons legally entitled thereto, without warranty, any portion of the Property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in any reconveyance may be described as "the person or persons legally entitled thereto." 8.13 Acceptance by Trustee. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -21- 8.14 Severability. Wherever possible, each provision of the Loan Documents is to be interpreted so as to be effective and valid under applicable law. If any provision of any Loan Document is, for any reason and to any extent, invalid or unenforceable, then neither the remainder of the Loan Document in which such provision appears, nor any other Loan Document, nor the application of the provision to other Persons or in other circumstances, shall be affected by such invalidity or unenforceability. Signed and delivered as of the date first mentioned above. EFTC CORPORATION a Colorado corporation By: /s/ Name: Stuart Fuhlendorf Vice President and Chief Financial Officer STATE OF COLORADO ) CITY AND) ss. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 30th day of September 1997, by Stuart W. Fuhlendorf as Vice President and Chief Financial Officer, respectively, of EFTC CORPORATION, a Colorado corporation. My commission expires: 11/17/97 Witness my hand and official seal. /s/ Nick Nimmo Notary Public -22- EXHIBIT A to DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT (Legal Description) Weld County, Colorado LOT C, EFTC SUBDIVISION, CITY OF GREELEY, WELD COUNTY, COLORADO A-1 EXHIBIT B to DEED OF TRUST AND SECURITY AGREEMENT AND FINANCING STATEMENT (Exceptions to Warranty of Title) Weld County, Colorado 1. Reservations by the Union Pacific Railroad Company to itself and its assigns in Deed recorded JULY 1, 1895 in Book 121 at Page 531, of all coal that may be underneath the surface of the land described therein and the exclusive right to prospect and mine for the same; also such right-of-way and other grounds as may be necessary for the proper working of any coal mines that may develop upon said premises, and for the transportation of the coal from the same; and any interests therein, assignments or conveyances thereof. 2. Right-of-way for PIPE LINE purposes as granted to JEROME IGO AND WALKER J. MOSIER by instrument recorded DECEMBER 17, 1925 in BOOK 785 at PAGE 178, said right-of-way being about 2900 feet in length leading from a point on the North Boomerang Lateral in the SE 1/4 of Section 5, Township 5 North, Range 66 West of the 6th P.M., which is about 800 feet East of the West line of said SE 1/4, thence leading Northeasterly about 1650 feet, thence Northerly about 1250 feet to its terminus at a point which is in the NE 1/4 of said Section about 450 feet North of the East and West center line of said Section, and which is about 250 feet East of the dwelling on said NE 1/4. 3. Right-of-way for DITCH purposes between HENRY ROTHE AND KATIE ROTHE, GEORGE MOSIER AND ADDIE M. MOSIER, MARY M. IGO, JOSEPH CARL GRATZL AND EILEEN GRATZL by instrument recorded MAY 20, 1953 in BOOK 1357 at PAGE 128, said right-of-way not being specifically defined. 4. Oil and Gas Lease from JOHN R.P. WHEELER, DAVID G. CLARKSON, WILLIAM C. BENSLER, WILLIAM R. FARR, ROBERT G. TOINTON, AND PATRICK T. ROCHE DOING BUSINESS AS GREELEY TECH CENTER, A JOINT VENTURE to THOMAS H. MORGAN, recorded JULY 1, 1982 in BOOK 971 as RECEPTION NO. 1896206, and any interests therein, assignments, or conveyances thereof. Said Lease extended by AFFIDAVIT OF PRODUCTION recorded JUNE 28, 1990 in BOOK 1268 as RECEPTION NO. 2218384. 5. Covenants and restrictions, which do not contain reversionary clauses, recorded JULY 7, 1989 in BOOK 1237 as RECEPTION NO. 2184750. 6. Easements for drainage and utility purposes over subject property as shown on the street and easement dedication plat for Tech Center at Boomerang Run recorded SEPTEMBER 13, 1990 in BOOK 1276 as RECEPTION NO. 2227155. A-2 7. Easement for DRAINAGE AND UTILITY purposes as reserved by JOHN R. P. WHEELER, INDIVIDUALLY AND AS JOINT VENTURER OF GREELEY TECH CENTER, A JOINT VENTURE in instrument recorded JULY 16, 1987 in BOOK 1163 as RECEPTION NO. 2107311, said easement being a 15.00 foot drainage and utility easement adjacent and parallel to the West line of the property described in the above mentioned deed, and a 10.00 foot drainage and utility easement parallel and adjacent to the North line and the East line of said property. An additional 10.00 foot drainage and utility easement North of and adjacent to an existing 15.00 foot drainage and utility easement adjacent to the North right-of-way line of 4th Street, is herein granted along the South side of said property and continuing East to an intersection with the westerly right- of-way line of 71st Avenue as shown on the street and easement dedication plat for the Greeley Tech Center. 8. Easement for DRAINAGE AND UTILITY purposes as reserved by WILLIAM R. FARR, INDIVIDUALLY AND AS A JOINT VENTURER OF GREELEY TECH CENTER, A JOINT VENTURE in instrument recorded JULY 16, 1987 in BOOK 1163, as RECEPTION NO. 2107312 said easement being a 15.00 foot drainage and utility easement adjacent and parallel to the West line of the property described in the above mentioned deed, and a 10.00 foot drainage and utility easement parallel and adjacent to the North line and the East line of said property. An additional 10.00 foot drainage and utility easement North of and adjacent to an existing 15.00 foot drainage and utility easement adjacent to the North right-of-way line of 4th Street, is herein granted along the South side of said property and continuing East to an intersection with the westerly right- of-way line of 71st Avenue as shown on the street and easement dedication plat for the Greeley Tech Center. 9. Easement for DRAINAGE AND UTILITY purposes as reserved by ROBERT G. TOINTON, INDIVIDUALLY AND AS JOINT VENTURER OF GREELEY TECH CENTER in instrument recorded JULY 16, 1987 in BOOK 1163 as RECEPTION NO. 2107313, said easement being a 15.00 foot drainage and utility easement adjacent and parallel to the West line of the property described in the above mentioned deed, and a 10.00 foot drainage and utility easement parallel and adjacent to the North line and the East line of said property. An additional 10.00 foot drainage and utility easement North of and adjacent to an existing 15.00 foot drainage and utility easement adjacent to the North right-of-way line of 4th Street, is herein granted along the South side of said property and continuing East to an intersection with the westerly right-of-way line of 71st Avenue as shown on the street and easement dedication plat for the Greeley Tech Center. 10. Site data and notes as contained on the plat of EFTC PUD recorded May 4, 1994 in Book 1440 as Reception No. 2386700. 11. Easements as shown on the plat of subdivision. A-3 EX-99.6 13 SUBORDINATED NOTE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EFTC CORPORATION $15,000,000 Floating Rate Subordinated Notes due 2002 --------------------- NOTE AGREEMENT --------------------- Dated as of September 5, 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. THE NOTES..............................................................................................-1- 1a. Authorization of Issue of Notes...............................................................-1- 1b. Interest on the Notes.........................................................................-1- 2. SALE AND PURCHASE OF NOTES.............................................................................-3- 3. CLOSING................................................................................................-3- 3a. Closing, Closing Date.........................................................................-3- 4. CONDITIONS.............................................................................................-3- 4a. Opinions of Company Counsel...................................................................-3- 4b. Representations and Warranties; Etc...........................................................-3- 4c. Proceedings...................................................................................-3- 5. PREPAYMENT OF THE NOTES................................................................................-4- 5a. Optional and Mandatory Prepayments............................................................-4- 5b. Notice of Prepayment..........................................................................-4- 5c. Surrender of Notes; Notations Thereon.........................................................-4- 5d. Prohibition on Purchase of the Notes..........................................................-5- 6. AFFIRMATIVE COVENANTS..................................................................................-5- 6a. Financial Statements..........................................................................-5- 6b. Inspection of Property........................................................................-6- 6c. Financial Records.............................................................................-6- 6d. Corporate Existence; Etc......................................................................-6- 6e. Payment of Taxes and Claims...................................................................-7- 6f. Warrant.......................................................................................-7- 7. MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS......................................................-7- 8. SUBORDINATION..........................................................................................-8- 8a. Agreement That Notes Be Subordinate...........................................................-8- 8b. Limitation During Certain Defaults on Senior Indebtedness.....................................-8- 8c. Priority of Senior Indebtedness...............................................................-9- 8d. Payment to Holders of Senior Indebtedness of Certain Amounts Received by Holders of Notes..............................................................................-9- 8e. Notice of Specified Events; Reliance on Certificate of Liquidating Agent ............................................................................................-10- 8f. Subrogation..................................................................................-10- 8g. Obligation to Pay Not Impaired...............................................................-11- 8h. Limitation During Event of Default Hereunder.................................................-11- 8i. Reliance by Senior Indebtedness on Subordination Provisions..................................-11- 8j. Certain Payments and Credits Permitted.......................................................-11- 8k. Subordination Not to Be Prejudiced by Certain Acts...........................................-11- 8l. Limitation on Securing Notes.................................................................-12- 9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................-12- 9a. Organization and Qualification...............................................................-12- 9b. Actions Pending; Compliance with Law.........................................................-12- 9c. Use of Proceeds..............................................................................-13- 9d. Insurance....................................................................................-13- 9e. Governmental Consent, Etc....................................................................-13- 9f. Holding Company Act and Investment Company Act Status........................................-13- 9g. Taxes........................................................................................-13- 9h. No Default; Conflicting Agreement or Charter Provisions......................................-13- 9i. Financial Statements.........................................................................-14- 9j. Offering of Securities.......................................................................-14- 10. REPRESENTATIONS AND COVENANT OF THE PURCHASER.........................................................-15- 10a. Acquisition for Investment...................................................................-15- 10b. ERISA........................................................................................-15- 10c. Restriction on Sale, Other Disposition.......................................................-15- 11. DEFAULT...............................................................................................-15- 11a. Events of Default; Acceleration..............................................................-15- 11b. Other Remedies...............................................................................-17- 12. DEFINITIONS...........................................................................................-18- 13. Miscellaneous.........................................................................................-20- 13a. Home Office Payment..........................................................................-20- 13b. Expenses.....................................................................................-20- 13c. Consent to Amendments........................................................................-21- 13d. Registration, Transfer and Exchange of Notes.................................................-22- 13e. Lost, Etc., Notes............................................................................-22- 13f. Survival of Representations and Warranties; Entire Agreement.................................-22- 13g. Disclosure to Other Persons..................................................................-22- 13h. Successors and Assigns.......................................................................-23- 13i. Notices......................................................................................-23- 13j. Descriptive Headings.........................................................................-23- 13k. Governing Law................................................................................-23- 13l. Counterparts.................................................................................-23- 13m. Satisfaction Requirement.....................................................................-23- 13n. Severability.................................................................................-24-
Exhibit A - Form of Subordinated Note Exhibit B - Form of Opinion of Counsel to the Company Exhibit C - Form of Warrant EFTC Corporation 9351 Grant Street, Suite 600 Denver, CO 80229 As of September 5, 1997 To the Purchaser Accepting This Agreement on the Signature Page Hereof Ladies and Gentlemen: EFTC CORPORATION (the "Company"), a Colorado corporation, hereby agrees with you as follows: 1. THE NOTES. 1a. Authorization of Issue of Notes. The Company has duly authorized an issue of $15,000,000 aggregate principal amount of floating rate subordinated notes (the "Notes"), in the forms of Exhibit A. Each such Note shall bear interest and be payable as provided herein and therein. As used herein, the term "Notes" shall include all notes originally issued pursuant to this Agreement and all notes delivered in substitution or exchange for any of said notes pursuant to this Agreement and, where applicable, shall include the singular number as well as the plural. The term "Note" means one of the Notes. 1b. Interest on the Notes. (i) Each Note shall bear interest at the Applicable Interest Rate (LIBOR, as determined for each Interest Period, plus 2.0% per annum), and on any overdue payment as specified in Exhibit A. Not later than 5:00 p.m. Denver, Colorado local time on the second Business Day next following the Closing Date, you will notify the Company of LIBOR as determined pursuant to (ii)(A), below, and the Company will determine the Applicable Interest Rate for the Notes for the initial Interest Period commencing on the Closing Date and will give notice thereof by facsimile transmission to you. Promptly after the determination of LIBOR for each subsequent Interest Period, the Company will give notice to each holder of a Note setting forth LIBOR as so determined and the Applicable Interest Rate for the Notes for such Interest Period. (ii) For each Interest Period, the Company will calculate LIBOR for such Interest Period as provided herein and each such calculation shall be binding upon the holders of the Notes absent manifest error. As used herein, "LIBOR" shall mean the interest rate determined in accordance with the following provisions: (A) Principal Method of Determination. If, for any Interest Period, LIBOR is determined under the Montera Loan Documents, LIBOR for the purposes hereof shall be equal to the "Index" rate determined for the same Interest Period in accordance with the Montera Loan Documents. As used herein, the term "Montera Loan Documents" means, together, the Business Loan Agreement, dated February -1- 5, 1997, between Montera Cattle Company LLP and Bank One, Colorado, N.A. and the related Promissory Note, dated February 5, 1997, issued by Montera Cattle Company LLP to Bank One Colorado, N.A. (B) Alternative Method of Determination. If, for any Interest Period, LIBOR is not determined under the Montera Loan Documents, LIBOR shall be determined as follows: (I) On the Publication Day that is the first day of each Interest Period, or if such first day is not a Publication Day, the Publication day next preceding such first day (a "LIBOR Interest Determination Date"), the Company will determine LIBOR on the basis of the rates for deposits of not less than U.S.$1,000,000 having a term comparable to such Interest Period, commencing on the London Market Day that is or, if such date is not a London Market Day, the London Market Day that most nearly precedes, such LIBOR Interest Determination Date, that are published in The Wall Street Journal on such LIBOR Interest Determination Date; provided that if such rate is not so published, LIBOR for such LIBOR Interest Determination Date will be determined as described in clause (II) below. (II) If on any LIBOR Interest Determination Date no LIBOR rate is so published having a term comparable to the applicable Interest Period, LIBOR will be determined by the banking institution with which the Company then has its principal banking relationship on the basis of the rates on such LIBOR Interest Determination Date at which deposits in U.S. dollars having a term comparable to such Interest Period are offered to prime banks in the London Interbank Market commencing on the London Market Day that is or, if such date is not a London Market Day, the London Market Day that most nearly precedes, such LIBOR Interest Determination Date, and in a principal amount equal to an amount of not less than U.S. $1,000,000 that in such bank's judgment is representative for a single transaction in such market at such time. The Company will request such bank to provide a written quotation of such rate. If such bank does not timely provide a proper quotation, LIBOR for such LIBOR Interest Determination Date will be equal to LIBOR for the immediately preceding Interest Period. For the purposes of this clause (ii), "Publication Day" means any day on which The Wall Street Journal (or any alternate publication agreed upon by the Company and the Required Holder(s) or any successor publication) is published for general circulation and "London Market Day" means any day on which deposits in U.S. dollars are transacted in the London interbank market. All percentages resulting from any calculation of LIBOR pursuant to this clause (B) will be rounded, if necessary, to the nearest one-hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards). -2- 2. SALE AND PURCHASE OF NOTES. Upon the terms and subject to the conditions herein set forth, the Company will issue and sell to you and you will purchase from the Company Notes in the aggregate principal amount of $15,000,000, at a purchase price of 100% of such principal amount. 3. CLOSING. 3a. Closing, Closing Date. The closing of the sale of Notes to you shall take place at the offices of Holme Roberts & Owen LLC, 1700 Lincoln Street, suite 4100, Denver, CO 80203 on September 7, 1997 or such later date as shall be mutually agreeable to you and the Company. The date of the closing is hereinafter referred to as the "Closing Date." At the closing, the Company will deliver to you one or more Notes to be purchased by you, registered in your name or in the name of your nominee, in any denominations (multiples of $1,000,000) and in the aggregate principal amount to be purchased by you, all as you may specify by timely notice to the Company (or in the absence of such notice, one Note registered in your name), duly executed and dated the Closing Date, against payment of the purchase price therefor with funds immediately available to the Company at its account no. 126000106 at Bank One, Colorado, N.A., Denver, CO, ABA No. 102001017, for further credit to the Company's account at Bank One, Colorado, N.A., Greeley, CO, Branch #504. If at the closing the Company shall fail to tender to you any of the Notes to be purchased by you as provided above in this Section, or any of the conditions specified in Section 4 shall not have been satisfied or waived by you by the fifth Business Day after the date intended for the closing to occur, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any other rights you may have by reason of such failure or such non-fulfillment. 4. CONDITIONS. Your obligations to purchase and pay for the Notes at the closing hereunder are subject to the fulfillment to your satisfaction, on or before the Closing Date, of the following conditions: 4a. Opinions of Company Counsel. You shall have received from Holme Roberts & Owen LLC, an opinion substantially in the form of Exhibit B, dated the Closing Date. 4b. Representations and Warranties; Etc. The representations and warranties in Section 9 shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on the Closing Date, except to the extent of changes caused by the transactions contemplated hereby; the Company shall have performed all agreements on its part required to be performed under this Agreement on or prior to the Closing Date; no Default or Event of Default shall exist; and you shall have received an Officer's Certificate, dated the Closing Date, to the effect specified in this Section 4b. 4c. Proceedings. All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in substance and form to you and your counsel, and you and your counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. -3- 5. PREPAYMENT OF THE NOTES. The Notes may not be paid or prepaid prior to their final maturity except as hereinafter provided. 5a. Optional and Mandatory Prepayments. (i) Upon notice given as provided in Section 5b, the Company, at its option, may prepay the Notes as a whole (or from time to time in part in integral multiples of $50,000), in each case at the principal amount so to be prepaid, without premium, together with interest accrued thereon to the date fixed for such prepayment. It is understood that the Company intends to use a portion of the net proceeds of any issuance and sale of equity securities to repay all or a portion of the Notes. It is further understood that the Company's ability to make any such prepayment may be limited or prohibited at any particular time by the terms of the Company's then outstanding Senior Indebtedness. (ii) On the first Interest Payment Date after the anniversary of the Closing Date in 1998, 1999, 2000 and 2001, the Company shall prepay $50,000 in principal amount of the Notes then outstanding, or the entire outstanding principal amount of the Notes if less than $50,000 in principal amount of Notes remains outstanding. (iii) If, on or prior to October 15, 1997, the Company has not executed and delivered to you the Warrant referred to in Section 6f, then on or before October 20, 1997, the Company shall prepay the entire principal amount of the Notes then outstanding. (iv) Upon written request of the holders of 100% of the Notes at the time outstanding, given not less than thirty (30) days prior to the dates specified in such notice as the prepayment date, the Company shall prepay the entire principal amount of the notes then outstanding; provided that such notice shall be void and the Company shall have no such obligation to so prepay the Notes unless (a) the Company has legally available funds to make such a prepayment in accordance with Section 5b, and (b) the Company is permitted to make such payment pursuant to the terms of all Senior Indebtedness at the time outstanding. (v) In the event the principal amount of any such prepayment is less than the outstanding principal amount all of the Notes at the time outstanding, the Company will allocate the principal amount so to be prepaid among all outstanding Notes in proportion to the respective unpaid principal amounts thereof. 5b. Notice of Prepayment. The Company shall give written notice of each prepayment of Notes pursuant to Section 5a to each holder of such Notes, which notice shall be given not less than 20 days (or, in the case ot a prepayment pursuant to Section 5a(iii), not less than 2 days) or more than 60 days prior to the date fixed for such prepayment, shall specify the amount so to be prepaid and the date fixed for such prepayment. Without the consent of each holder of a Note so to be prepaid, no such prepayment date specified with respect to any optional prepayment of Notes shall be other than an Interest Payment Date. Notice of prepayment having been so given, the aggregate principal amount of the Notes so to be prepaid as specified in such notice, together with interest accrued thereon to such date fixed for prepayment, shall become due and payable on the specified prepayment date. -4- 5c. Surrender of Notes; Notations Thereon. Subject to the provisions of Section 13a, as a condition of prepayment of all or any part of the principal of and interest on any Note, the Company may require the holder to present such Note for notation of such payment and, if such Note is paid in full, require the surrender thereof. 5d. Prohibition on Purchase of the Notes. The Company will not, and will not permit any Affiliate of the Company to, acquire directly or indirectly by purchase or prepayment or otherwise any of the outstanding Notes except (a) by way of payment or prepayment in accordance with the provisions of the Notes and of this Agreement or (b) pursuant to an offer to purchase made by the Company or any Affiliate of the Company to the holders of all Notes, which offer shall require the Company or such Affiliate to purchase on the same terms and conditions, pro rata among all Notes tendered, and shall remain open for a period of at least 20 Business Days after notice has been mailed to the holders of all Notes; provided that at the time of such offer and purchase no Default or Event of Default shall exist and no waiver in respect of any previous Default or Event of Default shall then be in effect. Any Notes purchased by the Company or any Affiliate in accordance with the preceding sentence shall thereupon be canceled and no Notes shall be issued in substitution therefor. 6. AFFIRMATIVE COVENANTS. The Company covenants and agrees that so long as any Note shall be outstanding: 6a. Financial Statements. The Company will deliver to each Significant Holder in duplicate: (i) as soon as practicable and in any event within 50 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, consolidated statements of operations, cash flows and changes in consolidated common stockholders' equity position of the Company and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarterly period, which in each case shall set forth in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by an authorized financial officer of the Company to present fairly and in accordance with GAAP, the information contained therein (subject to changes resulting from year-end adjustments); provided that, for so long as the Company is subject to the periodic reporting requirements of the Exchange Act, the timely delivery of the Company's Quarterly Report on Form 10-Q shall be deemed to satisfy the Company's obligations under this Clause (i); (ii) as soon as practicable and in any event within 100 days after the end of each fiscal year, consolidated statements of operations, cash flows and changes in consolidated common stockholders' equity position of the Company and its Subsidiaries for such year, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, which in each case shall set forth in comparative form corresponding consolidated figures from the preceding annual audit, all in reasonable detail, in accordance with GAAP (except as permitted by Section 6c), and accompanied by a report thereon of independent public accountants of recognized national standing selected by the Company; provided that, for so long as the Company is subject to the periodic reporting requirements of the Exchange Act, the timely delivery of the Company's Annual Report to Shareholders, if any, for such fiscal year, the Company's Proxy Statement with respect to the -5- Company's Annual Meeting next following such fiscal year and the Company's Annual Report on Form 10-K for such fiscal year shall be deemed to satisfy the Company's obligations under this Clause (ii); (iii) concurrently with the financial statements for each quarterly accounting period and for each fiscal year of the Company, furnished pursuant to clauses (i) and (ii) above, a certificate signed by the Chief Executive Officer, the Chief Financial Officer or the Treasurer of the Company stating that, based upon such examination or investigation and review of this Agreement as in the opinion of the signer is necessary to enable the signer to express an informed opinion with respect thereto, no Default or Event of Default has occurred during such period, or, if any Default or Event of Default shall have occurred, specifying all such Defaults and Events of Default, the nature and period of existence thereof and what action the Company has taken, is taking or proposes to take with respect thereto; (iv) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as the Company or any Subsidiary shall send to any holders of its securities that are registered under the Exchange Act and copies of all registration statements (without exhibits), other than on Form S-8 or any similar successor form, and all reports relating to securities of the Company that the Company or any Subsidiary files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission); and (v) promptly after the Company becomes aware of the existence of a Default or Event of Default, an Officer's Certificate specifying the nature and period of existence of such Default or Event of Default and what action the Company has taken, is taking or proposes to take with respect thereto. 6b. Inspection of Property. The Company will, upon reasonable notice and subject to applicable law, permit any Person designated in writing by any Significant Holder (without limitation of any other rights which such Significant Holder may have as a creditor of the Company) to visit and inspect at such Significant Holder's expense such of the offices and properties (and, during the existence of an Event of Default, to examine all corporate books and financial records) of the Company and its Subsidiaries as such Significant Holder may reasonably request and to discuss the affairs, finances and accounts of any thereof with the principal officers of the Company (and, during the existence of an Event of Default, its independent public accountants), all at such reasonable times and as often as such, Significant Holder may reasonably request. 6c. Financial Records. The Company will, and will cause each of its consolidated Subsidiaries to, maintain financial records (including, but not limited to, journals and ledgers) so as to reflect accurately its financial condition in all material respects in accordance with GAAP or, in the case of any Subsidiary that is not organized under the laws of the United States of America, any State thereof or the District of Columbia, in accordance with any prescribed system of accounts applicable from time to time to such Person. 6d. Corporate Existence; Etc. Subject to Section 7, the Company will do or cause to be done all things necessary to preserve and maintain its existence, rights and privileges; provided, -6- however, that the Company shall not be required to preserve any such right or privilege if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the holders of the Notes. 6e. Payment of Taxes and Claims. The Company will pay or discharge, or cause to be paid or discharged before the same shall become delinquent, (i) all taxes, assessments and governmental charges imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (ii) all lawful material claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. 6f. Warrant. Not later than October 15, 1997, the Company shall have execute and deliver to you a Warrant to purchase 500,000 shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), substantially in the form of Exhibit C. The Company shall use its best efforts to execute and deliver such Warrant as promptly as practicable, which efforts shall include, if necessary, submitting the issuance of such Warrant to the special meeting of the Company's share holders next following the Date hereof. As used herein, the term "Warrants" shall include the warrant originally issued pursuant to this Agreement and all warrants delivered in substitution or exchange for any of said warrants pursuant to this Agreement and, where applicable, shall include the singular number as well as the plural. The term "Warrant" means one of the Warrants. 7. MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS. The Company covenants and agrees that so long as any Note shall be outstanding, the Company will not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (i) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall either (a) expressly assume in writing, by documentation satisfactory to the Required Holder(s), the due and punctual payment of the principal of and interest on all the Notes and the performance or observance of every covenant and obligation in this Agreement and the Notes on the part of the Company to be performed or observed or (b) cause a wholly owned Subsidiary of such Person to assume in writing, and such Person shall unconditionally guarantee such Subsidiary's obligations in respect of, in each case by documentation satisfactory to the Required Holder(s), the due and punctual payment of the principal of and interest on all the Notes and the performance or observance of every covenant and obligation in this Agreement and the Notes on the part of the Company to be performed or observed; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall exist; -7- (iii) such Person shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia; (iv) the Company has delivered to each holder of a Note an Officer's Certificate and an opinion of legal counsel, each stating that such consolidation, merger, conveyance, transfer or lease complies with this Section 7 and that all conditions precedent herein provided for relating to such transaction have been complied with; and (v) such merger or consolidation will not otherwise materially adversely affect the ability of the Company (or any other obligator with respect to the Notes and the Warrants) to perform its or their obligations under this Agreement, the Notes or the Warrants. The Company will give each holder of Notes written notice of any proposed transaction permitted by this Section 7 not less than 30 days prior to the date of consummation thereof. Upon any consolidation or merger of the Company into any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with the provisions of this Section 7, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made (or such wholly owned Subsidiary that assumes the Company's obligations pursuant to this Section 7) shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement and the Notes with the same effect as if such successor Person or Subsidiary, as the case may be, had been named as the Company herein, and thereafter, except in the case of a lease to another Person, the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the Notes. 8. SUBORDINATION. 8a. Agreement That Notes Be Subordinate. The Company covenants and agrees, and you, and each other holder of Notes issued hereunder by the acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Section 8; and each Person holding any Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. All Notes shall, for all purposes and in all respects without limitation, including those hereinafter in this Section 8 set forth, be subordinated and subject in right of payment to the prior payment in full in cash or money's worth of the principal of and interest on all Senior Indebtedness; provided, however, that payments on account of principal of and interest on the Notes may be made from time to time, subject to the specific limitations set forth in this Section 8. 8b. Limitation During Certain Defaults on Senior Indebtedness. If there shall have occurred a default in the payment of the principal of or any premium or interest on any Senior Indebtedness, or if there shall have occurred an event of default with respect to any Senior Indebtedness permitting the holders thereof to accelerate the maturity thereof, or if such payment would itself constitute such an event of default, then, unless and until such default or event of default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Company on account of principal of or any premium or interest on the Notes or on account of the purchase or other acquisition of Notes. -8- 8c. Priority of Senior Indebtedness. Upon any distribution of all or substantially all of the assets of the Company, or upon any dissolution, winding up or liquidation of the Company, whether voluntary or involuntary, or upon any reorganization, readjustment, arrangement or similar proceeding relating to the Company or its property, whether or not the Company is a party thereto, and whether in bankruptcy, insolvency or receivership proceedings or otherwise, or upon any assignment by the Company for the benefit of creditors, or upon any other marshaling of the assets and liabilities of the Company: (i) the principal of and any premium and interest on all the Senior Indebtedness and any and all other amount dues thereunder shall first be paid in full in cash or money's worth, or provisions made for such payment, before any payment is made on account of the principal of or interest on the Notes; and (ii) any distribution of assets of the Company or payment by or on behalf of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Notes would be entitled except for the provisions of this Section 8, shall be paid or delivered by the liquidating trustee or agent or other Person making such distribution or payment, whether a trustee in bankruptcy, receiver, assignee for benefit of creditors, liquidating trustee, or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash or money's worth of the principal of and any premium and interest on all Senior Indebtedness remaining unpaid, after giving effect to any concurrent distribution or payment, or provision therefor, to the holders of such Senior Indebtedness. 8d. Payment to Holders of Senior Indebtedness of Certain Amounts Received by Holders of Notes. In the event that, notwithstanding the provisions of Sections 8b and 8c, any distribution of assets of the Company or payment by or on behalf of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Notes would be entitled but for the provisions of this Section 8, shall be received by the holders of the Notes before the principal of and any premium and interest on all Senior Indebtedness is paid in full in cash or money's worth, or provision made for its payment, such distribution or payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably as aforesaid, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay the principal of and any premium and interest on all such Senior Indebtedness in full in cash or money's worth, after giving effect to any concurrent distribution or payment, or provision therefor, to the holders of such Senior Indebtedness. 8e. Notice of Specified Events; Reliance on Certificate of Liquidating Agent. (i) The Company shall give prompt written notice to the holders of the Notes of any dissolution, winding up, liquidation, reorganization, readjustment, arrangement or similar proceeding, assignment for the -9- benefit of creditors, or any marshaling of assets and liabilities, in respect of the Company, within the meaning of Section 8c, and shall also give prompt written notice to the holders of the Notes of any event which pursuant to Section 8b would prevent payment by the Company on account of the principal of or interest on the Notes or on account of the purchase of the Notes. The holders of the Notes shall be entitled to assume that no such event has occurred unless the Company has given such notice. (ii) Upon any distribution of assets of the Company or payment by or on behalf of the Company referred to in this Section 8, the holders of the Notes shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 8c are pending, and the holders of such Notes shall be entitled to rely upon a certificate of the liquidating trustee or agent or other Person making any distribution to the holders of such Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 8. In the event that any holder of Notes determines, in good faith, that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Section 8, such holder of Notes may request such Person to furnish evidence to the reasonable satisfaction of such holder of Notes as to the amount of Senior Indebtedness held by such Person, as to the extent to which such Person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such Person under this Section 8, and if such evidence is not furnished, such holder of Notes may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 8f. Subrogation. Subject to the payment in full of the principal of and any premium and interest on all Senior Indebtedness and of any and all other amounts due thereunder, the holders of the Notes (together with the holders of any other indebtedness of the Company which is subordinate in right of payment to the payment of other indebtedness of the Company, but is not subordinate in right of payment to the Notes and by its terms grants such right of subrogation to the holders thereof) shall be subrogated to the rights of the holders of Senior Indebtedness to receive distributions of assets of the Company or payments by or on behalf of the Company, made on the Senior Indebtedness, until the principal of and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no distributions or payments to the holders of Senior Indebtedness of any cash, property or securities to which the holders of the Notes would be entitled except for the provisions of this Section 8, and no payment over pursuant to the provisions of this Section 8 to the holders of Senior Indebtedness by the holders of the Notes, shall, as between the Company, its creditors other than the holders of Senior Indebtedness and the holders of Notes, be deemed to be a payment by the Company to or on account of Senior Indebtedness, it being understood that the provisions of this Section 8 are, and are intended, solely for the purpose of defining the relative rights of the holders of the Notes, on the one hand, and the holders of Senior Indebtedness, on the other hand. 8g. Obligation to Pay Not Impaired. Nothing contained in this Section 8 or elsewhere in this Agreement, or in the Notes, is intended to or shall alter or impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Notes, the -10- obligation of the Company, which is absolute and unconditional, to pay to the holders of the Notes the principal of and interest on the Notes at the time and place and at the rate prescribed, or to affect the relative rights of the holders of the Notes and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the holder of any Notes from exercising all remedies otherwise permitted by applicable law upon any Default or Event of Default under this Agreement, subject to the rights, if any, under this Section 8 of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. 8h. Limitation During Event of Default Hereunder. Subject to Section 8b, if there shall have occurred any Event of Default specified in Section 11a, other than of the nature referred to in Section 8c, then and unless and until either such Event of Default shall have been cured or waived or shall have ceased to exist or the principal of and interest on all Senior Indebtedness shall have been paid in full in cash or money's worth, no payment shall be made by the Company on account of the principal of or interest on, the Notes, or on account of the purchase or other acquisition of Notes, except (i) payments at the maturity of Notes (subject to Section 8c), (ii) current interest payments, and (iii) payments for the purpose of curing any such Event of Default. 8i. Reliance by Senior Indebtedness on Subordination Provisions. Each holder of any Note by the acceptance thereof acknowledges and agrees that the subordination provisions set forth in this Section 8 are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold such Senior Indebtedness. 8j. Certain Payments and Credits Permitted. Nothing contained in this Section 8 or elsewhere in this Agreement, or in any of the Notes, shall prevent (i) the Company from making payment of the principal of or interest on the Notes, at any time except under the conditions described in Sections 8b, 8c and 8h or (ii) the application by the holder of any Notes of any moneys under this Agreement to the payment of or on account of the principal of or interest on the Notes at any time except under the conditions described in Section 8d. 8k. Subordination Not to Be Prejudiced by Certain Acts. No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided, shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Agreement, regardless of any knowledge thereof any such holder may have or be otherwise charged with. 8l. Limitation on Securing Notes. The Company will not give, and the holders of the Notes will not take or receive, any security interest for the payment of the principal of or interest on the Notes, other than cash required or permitted to be paid to such holders hereunder. 9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants as hereinafter set forth. -11- 9a. Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado, each of the Company's Subsidiaries is duly organized and existing in good standing under the laws of the jurisdiction in which it is incorporated, and the Company and each such Subsidiary has the corporate power to own its respective property and to carry on its respective business as now being conducted, and the Company and each Subsidiary is duly qualified as a foreign corporation to do business and in good standing in every jurisdiction in which the nature of the respective business conducted or property owned by it makes such qualification necessary and where the failure so to qualify would have a material adverse effect on the business or financial position of the Company or the Company and its Subsidiaries taken as a whole. The Company and its Subsidiaries possess all rights, licenses and permits reasonably required for the maintenance and operation of their respective properties and the conduct of their respective businesses as now being maintained and operated and conducted. The issuance and sale of the Notes and, when executed and delivered by the Company in accordance with the terms hereof, the Warrants by the Company and the execution and delivery of this Agreement and the Warrants by the Company and compliance by the Company with all of the provisions of this Agreement, the Warrants (when executed and delivered by the Company in accordance with the terms hereof) and the Notes (i) are within the corporate powers and authority of the Company, (ii) do not (and in the case of the Warrants, will not) require the approval or consent of any stockholders of the Company and (iii) have (and in the case of the Warrants, will have) been authorized by all requisite corporate proceedings on the part of the Company. 9b. Actions Pending; Compliance with Law. There is no action, suit, investigation or proceeding pending, or to the knowledge of the Company threatened, against the Company or any of its Subsidiaries or any of their respective properties or assets by or before any court, arbitrator or governmental body, department, commission, board, bureau, agency or instrumentality, which questions the validity of this Agreement, the Warrants or the Notes or any action taken or to be taken pursuant hereto or thereto, or which, in the opinion of senior management of the Company after consultation with counsel, are reasonably likely to result in any material adverse change in the business or financial condition of the Company and its Subsidiaries taken as a whole. Neither the Company nor any of its Subsidiaries is in default in any material respect with respect to any judgment, order, writ, injunction, decree, or award, and, the business of the Company and its Subsidiaries is presently being conducted so as to comply in all material respects with applicable federal, state and local governmental laws and regulations, including without limitation laws and regulations relating to environmental requirements (such as requirements in respect of air, water and noise pollution) and to employment practices (such as practices in respect of discrimination, health and safety), all to the extent necessary to avoid any material adverse effect on the business, properties or condition (financial or other) of the Company or the Company and its Subsidiaries taken as a whole. 9c. Use of Proceeds. The Company will use the proceeds of the sale of the Notes for general corporate purposes. 9d. Insurance. The Company and its Subsidiaries maintain insurance in such amounts, including self-insurance, retainage and deductible arrangements, and of such a character as is usually maintained by or required for companies engaged in the same or similar business. -12- 9e. Governmental Consent, Etc. The Company is not required to obtain any consent, approval or authorization of, or to make any declaration or filing with, any governmental authority as a condition to or in connection with the execution, delivery or performance of this Agreement, the Notes or, when issued in accordance with the terms hereof, the Warrants or the valid offer, issue, sale or delivery of the Notes or, when issued in accordance with the terms hereof, the Warrants, or the performance by the Company of its obligations in respect thereof. 9f. Holding Company Act and Investment Company Act Status. The Company is not a "holding company" or a "public utility company" as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. The Company is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 9g. Taxes. The Company and its Subsidiaries have filed or caused to be filed all federal and state income tax returns which are required to be filed and have paid or caused to be paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes have become due, except taxes (i) the validity or amount of which is being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside and (ii) which, in the aggregate, are in an amount that is not material to the Company and its Subsidiaries taken as a whole. The Company and its Subsidiaries have paid or caused to be paid, or have established reserves adequate in all material respects, for all federal income tax liabilities and state income tax liabilities applicable to the Company and its Subsidiaries for all fiscal years which have not been examined and reported on by the taxing authorities (or closed by applicable statutes). 9h. No Default; Conflicting Agreement or Charter Provisions. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects the business, property or assets or financial condition of the Company and its Subsidiaries taken as a whole. Neither the issuance and sale of the Notes and, when issued in accordance with the terms hereof, the Warrants nor fulfillment of nor compliance with the terms and provisions hereof or of the Notes and, when issued in accordance with the terms hereof, the Warrants, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, the Certificate of Incorporation or by-laws of the Company or any material mortgage, agreement, instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or its property is subject. The Company has reserved for issuance, upon exercise of the Warrants, 500,000 shares of the Common Stock. The Company is not in default under any outstanding indenture or other debt instrument or with respect to the payment of principal of or interest on any outstanding obligations for borrowed money, and there exists no default by the Company under any material contracts or agreements, or under any instrument by which the Company is bound, which would materially and adversely affect the Company's ability to perform its obligations hereunder or under the Notes or the Warrants or which would materially and adversely affect its business, operations or financial condition. 9i. Financial Statements. The Company has provided you copies of consolidated balance sheets of the Company and its consolidated Subsidiaries as of December 31, 1996 and December 31, 1995 and the related consolidated statements of operations, cash flows and changes -13- in consolidated common stockholders' equity position of the Company and such Subsidiaries for the fiscal years ended on said dates, all with reports thereon of KPMG Peat Marwick, independent public accountants. The Company has also provided to you copies of a consolidated balance sheet of the Company and its consolidated Subsidiaries as of June 30, 1997 and the related consolidated statements of operations, cash flows and changes in consolidated common stockholders' equity position of the Company and such Subsidiaries for the fiscal quarter then ended. All of such financial statements (including the related schedules and notes) fairly present the consolidated financial position of the Company and such Subsidiaries as of the respective dates of said balance sheets and the consolidated results of their operations for the fiscal periods ended on said dates, and have been prepared in accordance with GAAP consistently maintained by the Company and such Subsidiaries throughout such periods, except as set forth in the notes thereto. There are no material liabilities, contingent or otherwise, of the Company or any such Subsidiary as of December 31, 1996 that are not reflected in said consolidated balance sheet (or the notes thereto as required by GAAP) as of said date. Since December 31, 1996, there has been no change in the business, financial condition, properties or prospects of the Company and its Subsidiaries taken as a whole that could materially and adversely affect the Company's ability to perform its obligations hereunder or under the Notes or the Warrants. 9j. Offering of Securities. Neither the Company nor any agent acting on its behalf has offered the Notes or the Warrants or any similar securities of the Company for sale to, or solicited any offers to buy the Notes or the Warrants or any similar securities of the Company from, or otherwise approached or negotiated with respect thereof with, any Person other than you, and the Company has offered the Notes and the Warrants to you for purposes of investment and not for distribution. Neither the Company nor any agent acting on its behalf has offered or will offer the Notes or any part thereof or any similar securities for issue or sale to, or solicit any offer to acquire any of the same from, anyone so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act. 9k. Disclosure. None of this Agreement, the Warrants or any certificate or written disclosure statement furnished to you on or prior to the Closing Date by or on behalf of the Company in connection with the transactions contemplated hereby and by the Warrants, when taken together as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances in which they were made, not misleading. 10. REPRESENTATIONS AND COVENANT OF THE PURCHASER. 10a. Acquisition for Investment. You represent, and in making this sale to you it is specifically understood and agreed, that you are not acquiring the Notes or the Warrants (and upon exercise thereof, the shares of Common Stock underlying the Warrants) to be purchased by you hereunder with a view to, or for sale in connection with, any distribution of any part thereof within the meaning of the Securities Act, and that you have no present intention or plan to effect any distribution of any of the Notes, the Warrants or such shares of Common Stock. 10b. ERISA. You represent that your purchase of Notes hereunder is not being made for or on behalf of any pension or welfare plan, as defined in Section 3 of ERISA. -14- 10c. Restriction on Sale, Other Disposition. You agree that, without the prior consent of the Company, you will not, directly or indirectly, sell, transfer, pledge, encumber or otherwise dispose of (a "Transfer") any Notes or the Warrants or any interest therein. Without limiting the foregoing, any Permitted Transferee shall, by a written agreement reasonably satisfactory to the Company, expressly assume your obligations, duties and covenants under this Agreement as to the Notes so Transferred and under the Warrants and make a representation to the Company to the same or similar effect as is contained in Section 10b or provide other information reasonably satisfactory to the Company to enable the Company to determine that the Transfer of such Note to such Transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA. 11. DEFAULT. 11a. Events of Default; Acceleration. (i) "Event of Default", wherever used herein with respect to Notes, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Section 8 or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (A) default in the due and punctual payment of all or any part of the principal on any Note (whether at the stated maturity or by declaration of acceleration, by notice of prepayment at the option of the Company or otherwise); or (B) default in the due and punctual payment of any interest on any Note and such default shall have continued for a period of 10 days; or (C) default in the performance or observance of any other covenant of the Company in this Agreement or the Warrants and such default shall have continued for a period of 30 days after the Company first becomes aware thereof; or (D) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Subsidiary or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or a Subsidiary, whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay an aggregate principal amount of such indebtedness exceeding $1,000,000 when due and payable after the expiration of any applicable grace period with respect thereto or shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable in an aggregate principal amount exceeding $1,000,000, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 10 days after the occurrence thereof; or (E) any representation or warranty of the Company in this Agreement, in the Warrants or in any certificate or other instrument delivered hereunder or pursuant -15- hereto shall prove to be false or incorrect in any material respect on the date as of which it was made; or (F) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company or a Subsidiary in an involuntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law of any applicable jurisdiction or (2) a decree or order adjudging the Company or a Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable United States federal or state law or the applicable law of any other jurisdiction or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or a Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (G) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law of any applicable jurisdiction or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law of any applicable jurisdiction or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable United States Federal or state law or the applicable law of any other jurisdiction, or the consent of the Company or a Subsidiary to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or a Principal Subsidiary in furtherance of any such action; then (x) upon the occurrence of any Event of Default described in the foregoing clause (F) or (G) with respect to the Company or a Subsidiary the unpaid principal amount of all Notes, together with the interest accrued thereon, shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Company, or (y) upon the occurrence of any other Event of Default, the holder or holders of at least 25% of the outstanding principal amount of the Notes may, by written notice to the Company, declare the unpaid principal amount of all Notes to be, and the same shall forthwith become, due and payable, together with the interest accrued thereon, all without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived; provided that, during the existence of an Event of Default described in the foregoing clause (A) or -16- clause (B) with respect to any Note, the holder of such Note may, by written notice to the Company declare such Note to be, and the same shall forthwith become, due and payable, together with the interest accrued thereon, all without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived. If any holder of any Note shall exercise the option specified in the proviso to the-preceding sentence, the Company will forthwith give written notice thereof to the holders of all other outstanding Notes and each such holder may (whether or not such notice is given or received), by written notice to the Company, declare the principal of all Notes held by it to be, and the same shall forthwith become, due and payable, together with the interest accrued thereon. (ii) The provisions of this Section 11a are subject, however, to the condition that if, at any time after any Note shall have so become due and payable, the Company shall pay all arrears of interest on the Notes and all payments on account of the principal of the Notes which shall have become due otherwise than by acceleration (with interest on such principal and, to the extent permitted by law, on overdue payments of interest, at the rate specified in the Notes) and all Events of Default (other than nonpayment of principal of and accrued interest on Notes due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 13c, then, and in every such case, the holder or holders of at least a majority of the outstanding principal amount of the Notes, by written notice to the Company, may rescind and annul any such acceleration and its consequences, but no such action shall affect any subsequent Default or Event of Default or impair any right consequent thereon. 11b. Other Remedies. (i) If any Event of Default shall exist, subject to the provisions of Section 8, the holder of any Note may proceed to protect and enforce its rights, either by suit in equity or by action at law, or both, whether for the specific performance of any covenant or obligation contained in this Agreement or in the Notes or in aid of the exercise of any power granted in this Agreement, or the holder of any Note may proceed to enforce the payment of all sums due upon such Note or to enforce any other legal or equitable right of the holder of such Note. (ii) The Company covenants that, if it shall default in the making of any payment due under any Note or in the performance or observance of any covenant or obligation contained in this Agreement or in the Notes, it will pay to the holder thereof such further amounts, to the extent lawful, as shall be sufficient to pay the costs and expenses of collection or of otherwise enforcing such holder's rights, including reasonable legal or other professional fees. (iii) No remedy herein conferred upon you or the holder of any Note is intended to be exclusive of any other remedy each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. (iv) No course of dealing between the Company and you or any other holder of a Note, and no delay or failure in exercising any rights hereunder or under any Note, shall operate as a waiver of any rights you or any such holder of a Note may have. 12. DEFINITIONS. For the purpose of this Agreement the following terms shall have the meanings specified with respect thereto below: -17- "Affiliate" means, with respect to a specified Person, any other Person that controls, is controlled by, or is under common control with such specified Person. For the purposes of this definition, the term "control" (including, with correlative meanings, the terms "controlling," "controlled by" or "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Applicable Interest Rate" means the rate of interest borne by the Floating Rate Notes from time to time, which rate is equal to LIBOR (as computed for each Interest Period) in effect from time to time plus 2.0% per annum. "Bank One" means Bank One, Colorado, N.A. "Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Colorado are authorized or obligated by law or executive order to close. "Closing Date" shall have the meaning specified in Section 3a. "Code" means the Internal Revenue Code of 1986, as amended. "Company" shall have the meaning specified in the introduction to this Agreement. "Default" means any event which, with notice or the lapse of time or both, would constitute an Event of Default. "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles as in effect in the United States at the time of application to the provisions thereof. "Interest Payment Date" means, with respect to any Interest Period, the first day of the month next following the month in which such Interest Period commenced. "Interest Period" means the period commencing on the later of the date of such Note and the most recent Interest Payment Date, if any, with respect to such Note (or any Note in exchange or substitution for which such Note was issued) to which interest on such Note has been paid and ending on, but excluding, the next succeeding Interest Payment Date. "LIBOR" shall have the meaning provided in Section 1b. "Montera Loan Documents" shall have the meaning provided in Section 1b. "Notes" shall have the meaning specified in Section 1a. -18- "Officer's Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, if any, the Chief Executive Officer, the Chief Financial Officer, the President or a Vice President of the Company or any officers of the Company performing the same duties from time to time. "Permitted Transferee" means a Person to whom Notes are permitted to be Transferred pursuant to Section 10c. "Person" means and include an individual, a partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "Required Holder(s)" means the holder or holders of at least 51% of the outstanding principal amount of the Notes at the time. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means (i) the Business Loan Agreement between the Company (then named Electronic Fab Technology Corporation) and Bank One, dated as of February 24, 1997 and the related promissory notes delivered by the Company to Bank One, Colorado, N.A., and any extensions or renewals, and any substitute, refinancing or replacements thereof, (ii) the senior secured credit facility that is anticipated to be entered into between the Company and Bank One, as agent, and related promissory notes issued thereunder, (iii) all other indebtedness of the Company for borrowed money that is duly created in accordance with the terms of a contemporaneous writing expressly providing for such indebtedness to be senior in right of payment to the Notes, and (iv) all debts, liabilities, obligations, covenants and duties of the Company arising under either of the foregoing. "Significant Holder" means (i) you, so long as you shall hold (or be committed under this Agreement to purchase) any Notes, (ii) any Affiliate of yours, or (iii) any other holder of at least 25% of the outstanding principal amount of the Notes from time to time. "Subsidiary" means (i) any Person of which or in which the Company and/or its other Subsidiaries own directly or indirectly more than 50% of (a) all classes of Voting Stock of such Person, if it is a corporation, (b) the capital interest or profits interest of such Person, if it is a partnership, limited liability company, joint venture of similar entity or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization; provided that, in the case of each Person specified in the foregoing clauses (a) through (c), such Person is accounted for as a consolidated Subsidiary on the balance sheet of the Company in accordance with GAAP, and (ii) any other Person that is accounted for as a consolidated subsidiary of the Company in accordance with GAAP. Except as otherwise expressly indicated herein, references to Subsidiaries shall refer to Subsidiaries of the Company. "Transfer" shall have the meaning specified in Section 10c. -19- "Voting Stock" means, with respect to a corporation, all classes of capital stock of such corporation that have voting power under ordinary circumstances to elect the directors of such corporation, whether at all times or only so long as no senior class of capital stock of such corporation has such voting power as the result of the occurrence of any contingency; and without limiting the foregoing, any such class of capital stock which is redeemable or which has a preference upon redemption or upon payment of dividends over any other class of capital stock of such corporation shall not, irrespective of voting power, be deemed to be Voting Stock. "Warrant" and "Warrants" shall have the meanings specified in Section 10c. 13. Miscellaneous. 13a. Home Office Payment. The Company agrees that, as long as you shall hold any Notes, all payments to be made on, or in connection with the payment or prepayment of, such Notes will be made at such place and in such manner you may designate in writing, without any requirement for the presentation or surrender of such Notes. You agree that (i) prior to any delivery upon the sale or other disposition of any Note held by you, you will promptly make or cause to be made a notation on such Note of any such payment on account thereof, (ii) if such Note shall be paid in full you will promptly surrender such Note to the Company for cancellation, and (iii) prior to any delivery upon the sale or other disposition of any Note held by you, you will surrender such Note to the Company in exchange for a new Note or Notes in the same aggregate principal amount being sold or disposed of and the aggregate unpaid principal amount of Notes to be held by you after such sale or disposition. The Company agrees to afford the benefits of this Section 13a to any Permitted Transferee which shall have made the same agreement as you have made in this Section 13a. 13b. Expenses. You and the Company agree to be responsible for and to pay your and the Company's respective costs, fees and expenses incurred in connection with the negotiation, execution and delivery of this Agreement, the Notes and the Warrants and the funding of the purchase price of the Notes and the funding of the exercise price of the Warrants. 13c. Consent to Amendments. (i) This Agreement may be amended with the consent of the Company and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the consent to such amendment or waiver with respect to such action or omission to act, by one or more substantially concurrent written instruments signed by the Required Holder(s); provided, however, that (A) no such amendment or waiver shall (1) change the rate or extend the time of payment of interest on any of the Notes, without the consent of the holder of each Note so affected, or (2) modify any of the provisions of this Agreement or of the Notes with respect to the payment or prepayment thereof, or reduce the percentage of the principal amount of the Notes the holders of which are required to approve any such amendment or effectuate any -20- such waiver, without the consent of the holders of all the Notes then outstanding, and (B) no such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. (ii) Any amendment or waiver pursuant to clause (i) above shall apply equally to all the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, in each case whether or not a notation thereof shall have been placed on any Note. (iii) the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of a Note (regardless of the principal amount of Notes then held by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of a Note as consideration for or as an inducement to the entering into by such holder of any such amendment or waiver unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all of the Notes then outstanding. The Company shall promptly send copies of any amendment, waiver (and any request for any such amendment, consent or waiver) relating to this Agreement to you and, to the extent practicable, shall consult with you in connection with each such amendment, consent and waiver. (iv) For the purpose of determining whether the holders of the requisite outstanding principal amount of Notes have taken any action or given any consent or approval under this Agreement, any Notes held by the Company or any of its Affiliates shall not be deemed outstanding. 13d. Registration, Transfer and Exchange of Notes. The Company will keep at its principal executive office a note register in which, subject to such reasonable regulations as it may prescribe, but at its expense (other than transfer taxes, if any), it will provide for the registration and transfer of Notes. The holder of any Note may, at such holder's option, surrender the same for transfer or exchange at said office, or at the place of payment named in such Note, accompanied in the case of a transfer by a written instrument of transfer duly executed by the holder thereof or by such holder's attorney duly authorized in writing. In case any holder shall so request transfer or exchange of any Note, the Company at its expense (other than transfer taxes, if any, or similar governmental charges) will deliver in exchange therefor one or more new Notes (in minimum denominations of $1,000,000, except to evidence the entire unpaid principal amount of the Note so surrendered), as requested by such holder, in the same aggregate principal amount as the Note so surrendered, each dated the later of the date of, or the date to which interest has been paid on, the Note so surrendered. The Company and any agent of the Company may treat the Person in whose name any Note is registered as the owner of such Note for the purpose of receiving payment of the principal of and interest on, such Note and for all other purposes whatsoever, whether or not such Note be overdue, -21- and prior to due presentment for registration of transfer, the Company shall not be affected by notice to the contrary. If any Note shall have been transferred to another holder pursuant to this Section and such holder shall have designated in writing the address to which communications with respect to such Note shall be mailed, all notices, certificates, requests, statements and other documents required or permitted to be delivered to any holder of a Note by any provision hereof shall be delivered to such holder. 13e. Lost, Etc., Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Note, and (in case of loss, theft or destruction) of indemnity satisfactory to it, or (in the case of mutilation) upon surrender and cancellation of such Note, the Company will make and deliver in lieu of such Note a new Note of like tenor and for the same unpaid principal amount, dated the later of the date of, or the date to which interest has been paid on, the Note in lieu of which such new Note is made and delivered. 13f. Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein or made in writing by the Company in connection herewith shall survive the execution and delivery of this Agreement, the sale and purchase of the Notes and the Warrants. Subject to the preceding sentence, this Agreement embodies the entire agreement and understanding between you and the Company and supersedes all prior agreements and understandings relating to the subject matter hereof. 13g. Disclosure to Other Persons. The Company acknowledges that the holder of any Notes may deliver copies of any financial statements and other documents delivered to such holder, and disclose any other information disclosed to such holder, by or on behalf of the Company or any Subsidiary of the Company in connection with or pursuant to this Agreement to (i) such holder's directors, officers, employees, agents and professional consultants (who shall be made aware of the requirements of this Section 13g and the need to comply herewith), (ii) any federal or state regulatory authority having jurisdiction over such holder, (iii) any Person expressly identified in a prior written consent of the Company or (iv) any other Person to whom such delivery or disclosure may be necessary or appropriate (a) in compliance with any law, rule, regulation or order applicable to such holder or (b) in response to any subpoena or other legal process; provided that you agree not to disclose to any Person specified in clause (iii) above any information delivered to you pursuant to Section 6a or any other provisions of this Agreement that the Company has conspicuously identified as non-public, confidential or proprietary in nature and subject to the provisions hereof unless such Person shall have executed and delivered to the Company an agreement substantially in the form of Exhibit D hereto. 13h. Successors and Assigns. All covenants and agreements in this Agreement contained by or on behalf of either of the parties hereto shall bind and inure to the benefit of the Company's successors and assigns and your successors and assigns, including any Permitted Transferees. 13i. Notices. All communications provided for hereunder shall be sent by facsimile transmission, with written confirmation of receipt, or a nationwide overnight delivery service, with receipt of delivery requested, and (i) if to you, addressed to you at the address set forth by you for such communications on the signature page hereof, or to such other address as you may have designated to the Company in writing, (ii) if to any other holder of the Notes, addressed to such -22- holder at the address of such holder in the note register of the Company, and (iii) if to the Company, addressed to it at, EFTC Corporation 9351 Grant Street, Suite 600, Denver, CO 80229, Attention: Chief Financial Officer (Tel: (303) 451-8200; Fax: (303) 451-8210), with a copy to the attention of Francis R. Wheeler, Esq. at Holme Roberts & Owen LLC, Suite 4100, 1700 Lincoln Street, Denver, CO 80203 (tel: (303) 861-7000; Fax: (303) 866-0200), or to such other address or addresses as the Company may have designated in writing to you and each other holder of any of the Notes at the time outstanding. 13j. Descriptive Headings. The descriptive headings of the several Sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 13k. Governing Law. This Agreement, the Notes and the Warrants shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Colorado (without regard to conflicts of laws provisions thereof). 13l. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 13m. Satisfaction Requirement. If any agreement, certificate or other writing, or any action taken or to be taken, or any other thing, is by the terms of this Agreement required to be satisfactory to you or to the Required Holder(s), the determination of such satisfaction shall be made by you or the Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or Persons making such determination. 13n. Severability. In case any one or more of the provisions contained in this Agreement or in any instrument contemplated hereby, or any application thereof, shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein, and any other application thereof, shall not in any way be affected or impaired thereby. -23- If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this letter and return the same to the undersigned, whereupon this letter shall become a binding agreement between you and the undersigned. Very truly yours, EFTC CORPORATION By /s/ Title: The foregoing Agreement is hereby accepted and agreed as of the date first above written: /s/ Richard L. Monfort Address: 3519 Holman Court, Greeley, CO 80631 Telephone: (970) 351-6442 Fax Number: (970) 351-6441 -24- EXHIBIT A [FORM OF NOTE] EFTC CORPORATION Floating Rate Subordinated Note due 2002 No. R-_______ Denver, Colorado $__________ ____________, 1997 EFTC CORPORATION, a Colorado corporation (the "Company"), for value received, hereby promises to pay to or registered assigns, the principal sum of DOLLARS (or so much thereof as shall have not been prepaid) on December 31, 2002 and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal hereof from the date hereof at the Applicable Interest Rate (as such term and other terms used in this Section are below defined) for each Interest Period, payable in arrears on each Interest Payment Date for the immediately preceding Interest Period (unless any such Interest Payment Date is a Saturday, a Sunday or a day on which banking institutions in Denver, Colorado, or New York, New York are authorized or obligated by law or executive order to close (an "Excluded Day"), in which case the interest payment due on such Interest Payment Date will be made the next day thereafter that is not an Excluded Day), until such principal sum shall have become due and payable (whether at maturity, upon acceleration, upon notice of prepayment or otherwise) and to pay on demand interest (so computed) on any overdue principal and, to the extent permitted by applicable law, on any overdue interest, from the due date thereof at a rate per annum equal to the greater of (i) 1% over the Applicable Interest Rate for this Note from time to time in effect pursuant to the Note Agreement and (ii) 1% above the prime commercial lending rate of interest announced from time to time by Bank One, Colorado, N.A. at its principal office in Denver, Colorado (or, if said bank shall no longer be in existence, by the domestic commercial bank which at the time has the largest capital and surplus of all domestic commercial banks), until the obligation of the Company with respect to the payment thereof shall be discharged. Payments of principal and interest shall be made in lawful money of the United States of America upon the presentation hereof (subject to the provisions of Section 13a of the Note Agreement with respect to payments to certain holders) at said principal office of the Company. This Note is one of the Floating Rate Subordinated Notes due 2002 of the Company issued pursuant to the Note Agreement dated as of September 5, 1997 (as at any time amended, the "Note Agreement") entered into by the Company with the initial purchaser, and the duly registered holder of this Note is entitled to the benefits thereof. Capitalized terms used herein without definition have the meanings ascribed thereto in the Note Agreement. As used herein: the term "Applicable Interest Rate" means a rate of interest for each Interest Period equal to LIBOR, as computed pursuant to the Note Agreement, plus 2.0% per annum; the term "LIBOR" means the rate of interest determined pursuant to the terms of the Note Agreement A-1 for each Interest Period on the applicable LIBOR Interest Determination Date; the term "Interest Payment Date" means, with respect to any Interest Period, the first day of the month next following the month in which such Interest Period commenced; and the term "Interest Period" means the period commencing on the later of the date hereof or the most recent Interest Payment Date, if any, with respect to this Note (or any Note issued in exchange or substitution for which this Note was issued) to which interest has been paid and ending on, but excluding, the next succeeding Interest Payment Date. The Company may at its election prepay this Note, in whole or in part, and the maturity hereof may be accelerated following an Event of Default, all as provided in the Note Agreement, to which reference is made for the terms and conditions of such provisions as to prepayment and acceleration. The Notes outstanding under the Note Agreement, including this Note, are subject to mandatory prepayments on the anniversary of the Closing Date in 1998, 1999, 2000 and 2001, each in the amount of $50,000. If any such prepayment is less than the then outstanding principal amount of the Notes, the amount so prepaid shall be allocated to the outstanding Notes pro rata. Upon surrender of this Note for registration of transfer or exchange, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note of the same series and for a like principal amount will be issued to, and, at the option of the holder, registered in the name of, the transferee. The Company and any agent of the Company may deem and treat the Person in-whose name this Note is registered as the owner hereof for the purpose of receiving payments of the principal hereof and interest hereon and for all other purposes whatsoever whether or not this Note is overdue, and the Company shall not be affected by any notice to the contrary. Payments of principal and interest in respect of this Note are subordinate, to the extent and upon the terms set forth in the Note Agreement, to all payments on or in respect of "Senior Indebtedness". The holder of this Note, by acceptance hereof, is deemed to accept the terms and conditions of said Note Agreement providing for such subordination. As provided in the Note Agreement, this Note shall be governed by and construed in accordance with the laws of the State of Colorado. EFTC CORPORATION By Title: A-2 EXHIBIT B [FORM OF OPINION OF HRO] [TO COME.] B-1 EXHIBIT C [FORM OF WARRANT] C-1 EXHIBIT D [FORM OF CONFIDENTIALITY AGREEMENT] [Date] EFTC Corporation 9351 Grant Street, Suite 600 Denver, CO 80229 Ladies and Gentlemen: In connection with the Note Agreement, dated as of September 5, 1997 (the "Agreement"), between EFTC Corporation (the "Company") and the initial purchaser of the notes specified therein, the Company may furnish us with certain information that is non-public, confidential or proprietary in nature. As used herein, "Confidential Information" means information about the Company furnished to us by the Company (or by a holder of Notes issued under the Agreement who received such information as provided in the Agreement) pursuant to Section 6a thereof (or any other information delivered to us pursuant to the Agreement) if the Company or such holder has conspicuously identified such information as non-public, confidential or proprietary in nature and subject to the provisions of the Agreements or this letter, but does not include information (i) which was publicly known, or otherwise known to me, at the time of disclosure, (ii) which subsequently becomes publicly known through no act or omission by me or (iii) which otherwise becomes known to me, other than through disclosure by the Company. I agree that I will (1) hold in confidence the Confidential Information and (2) not disclose or permit disclosure of the Confidential Information, except as permitted in Section 13g of the Agreement, a copy of which is attached hereto as Annex I. Notwithstanding the foregoing, I will be free, after notice to the Company, to correct any false or misleading information which may become public concerning our relationship to the Company. Please confirm your agreement with the foregoing by signing and returning to me the enclosed copy of this letter. Very truly yours, Print Name: Accepted and agreed to: EFTC CORPORATION By Title: D-1 ANNEX I To Confidentiality Agreement 13g. Disclosure to Other Persons. The Company acknowledges that the holder of any Notes may deliver copies of any financial statements and other documents delivered to such holder, and disclose any other information disclosed to such holder, by or on behalf of the Company or any Subsidiary of the Company in connection with or pursuant to this Agreement to (i) such holder's directors, officers, employees, agents and professional consultants (who shall be made aware of the requirements of this Section 13g and the need to comply herewith), (ii) any federal or state regulatory authority having jurisdiction over such holder, (iii) any Person expressly identified in a prior written consent of the Company or (iv) any other Person to whom such delivery or disclosure may be necessary or appropriate (a) in compliance with any law, rule, regulation or order applicable to such holder or (b) in response to any subpoena or other legal process; provided that you agree not to disclose to any Person specified in clause (iii) above any information delivered to you pursuant to Section 6a or any other provisions of this Agreement that the Company has conspicuously identified as non-public, confidential or proprietary in nature and subject to the provisions hereof unless such Person shall have executed and delivered to the Company an agreement substantially in the form of Exhibit D hereto. D-2 EX-99.7 14 MONFORT WARRANT NUMBER OF SHARES: 500,000 WARRANT No. 1 WARRANT TO PURCHASE COMMON STOCK OF EFTC CORPORATION EFTC CORPORATION, a Colorado corporation (the "Company"), HEREBY CERTIFIES THAT, for value received, Richard L. Montfort, or registered assigns, is entitled to purchase 500,000 Common Shares, par value $.01 per share, of the Company (adjusted as below provided) at any time from the Closing Date (as defined below) until 5:00 p.m., Denver, Colorado time, on the Termination Date (as defined below) or the next succeeding Business Day if such Warrant Expiration Date is not a Business Day (as defined below). As used herein, the term "Common Stock" means the Company's Common Shares, par value $.01 per share, as constituted on the date of original issue of this Warrant, and any shares of capital stock into which such Common Shares may thereafter be changed or that may be issued in respect of, in exchange for, or in substitution of such Common Shares by reason of any transaction described in Section 8. As used herein, the term "Warrants" means the warrant to purchase 500,000 shares of Common Stock originally issued pursuant to the Agreement (as defined below) and all warrants delivered in substitution or exchange for such warrant. The term "Warrant" means one of the Warrants. This Warrant to Purchase Common Stock of the Company is issued pursuant to the Note Agreement dated as of September 5, 1997 (the "Agreement"), entered into by the Company with Richard L. Monfort (the "Purchaser"). This Warrant is being issued on October 6, 1997 (the "Closing Date"). The holder of this Warrant is entitled to certain benefits of the Agreement. In addition to payment of the Warrant Price (as defined herein) the Company has granted this Warrant and agreed to issue the shares of Common Stock issuable upon exercise hereof as consideration and in exchange for the agreement of the Purchaser to enter into the Agreement and to purchase the Company's Floating Rate Subordinated Note due 2002 to be issued in an aggregate principal amount of $15,000,000 pursuant to the Agreement. Section 1. Term of Warrants; Exercise of Warrants. Subject to the terms hereof, the holder of this Warrant shall have the right, at any time during the period commencing on the Closing Date and ending at 5:00 p.m., Denver, Colorado time, on the fifth Business Day following the Closing Date (the "Termination Date"), to purchase from the Company up to the number of shares of Common Stock which such holder may at the time be entitled to purchase pursuant to this Warrant, upon at least five Business Days' prior written notice to the Company of such holder's election to exercise this warrant and upon surrender to the Company, at its address for receipt of notices pursuant to the Agreement, of this Warrant, together with the purchase form at the end hereof duly completed and signed, accompanied by payment to the Company of the Warrant Price (as defined in and determined in accordance with the provisions of Sections 7 and 8) for the number of shares with respect to which this Warrant is then exercisable. Payment of the aggregate Warrant Price shall be made by certified or cashier's check or wire transfer. As used herein, the term "Business Day" means any day other than a Saturday or Sunday or a day on which commercial 1 banks are required or authorized by law to be closed in either New York, New York or Denver, Colorado. Upon such surrender of this Warrant and payment of such Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder of this Warrant and in such name or names as such holder may designate, a certificate or certificates for the number of full shares of Common Stock so purchased, together with cash, as provided in Section 9, with respect to any fractional shares of Common Stock otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of such shares of Common Stock as of the close of business on the date of the surrender of this Warrant and payment of the Warrant Price as aforesaid, notwithstanding that the certificates representing such shares shall not actually have been delivered or that the stock transfer books of the Company shall then be closed. This Warrant shall be exercisable, at the election of the holder of this Warrant, either in full or from time to time in part. In the event that this warrant is exercised with respect to less than the aggregate number of shares of Common Stock this Warrant then entitles such holder to purchase, the Company shall deliver to or upon the order of such holder hereof a new Warrant evidencing the rights of such holder to purchase the unpurchased shares of Common Stock then called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. In the alternative, at the request of the holder upon any partial exercise of this Warrant, appropriate notation may be made on this Warrant and the same shall be returned to such holder. Section 2. Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of the shares of Common Stock upon exercise of this Warrant, provided that the Company shall not be required to pay any tax or taxes which may be payable with respect to any secondary transfer of a Warrant or the shares of Common Stock issued upon exercise of any Warrant, and in such case the Company shall not be required to issue or deliver any certificates for shares of Common Stock, until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's reasonable satisfaction that such tax has been paid or that no such tax is due. Section 3. Transferability. Section 3.1 Registration. The Warrants shall be numbered and shall be registered on the books of the Company maintained for such purpose (the "Warrant Register"). Section 3.2 Transfer. Subject to compliance with Sections 3.3 and 3.4, this Warrant, the warrant Shares (as defined below) and all rights hereunder are transferable upon delivery hereof together with the assignment form at the end hereof duly completed and signed by the holder hereof or such holder's duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer, provided that any transferee of this Warrant or such 2 Warrant Shares shall expressly agree to be bound by the terms and conditions hereof. Upon any registration of transfer of this Warrant, the Company shall execute and deliver a new Warrant or Warrants as may be requested by such holder for the same aggregate number of shares of Common Stock as this Warrant. As used herein, the term "Warrant Shares" shall mean, collectively, the shares of Common Stock acquired pursuant to the exercise of this Warrant and any securities issued as a dividend on or other distribution with respect to or in exchange or replacement for or upon any subdivision of any of said shares of Common Stock. Section 3.3 Limitations on Transfer of the Warrants and the Warrant Shares. (a) If, at the time of any transfer of this Warrant or any Warrant Shares, this Warrant or such Warrant Shares, as the case may be, are not registered under the United States Securities Act of 1933, as amended (the "Securities Act"), the Company may require as a condition precedent to allowing such transfer that the holder or transferee of this Warrant or such Warrant Shares furnish to the Company such information as, in the reasonable opinion of counsel to the Company, is necessary in order to establish that such transfer or exchange may be made without registration under the Securities Act, including a written statement that such holder or transferee will not sell or otherwise dispose of this Warrant or such Warrant Shares purchased or acquired by him in any transaction which would violate the Securities Act or any other securities laws. (b) Prior to the Termination Date, (i) the holder of this Warrant or any Warrant Shares will not sell, transfer or otherwise dispose of this Warrant or any Warrant Shares without the prior written consent of the Company or in accordance with Section 3.4, and (ii) the holder of this Warrant or any Warrant Shares will not sell, transfer or otherwise dispose of this Warrant or any Warrant Shares except in connection with a transfer of this Warrant and all such Warrant Shares as an entirety, provided that such holder may, without complying with the requirements of this Section 3.3(b) or Section 3.4, transfer any portion of this Warrant or any Warrant Shares (A) to the extent necessary, in the opinion of the Purchaser's counsel, in order to comply with any applicable law, statute, rule or regulation of any governmental body or with any order of any court, arbitrator or governmental body and (B) to any parent, child, sister, brother, sister-in-law or brother-in-law of such holder following the written agreement, reasonably satisfactory to the Company and its counsel, of such transferee to be bound by the terms hereof. Section 3.4 Right of First Offer. (a) Subject to Section 3.3(b), if the holder of this Warrant or any Warrant Shares (a "Selling Holder") desires at any time prior to the Termination Date to sell this warrant or any Warrant Shares, such holder shall first give notice to the Company (the "First Offer Notice") that such holder desires to sell this Warrant or the Warrant Shares (the "Offered Securities"). (b) Upon receipt of the First Offer Notice, the Company shall have the option to offer to purchase the Offered Securities by written notice to the Selling Holder given within 30 days from 3 receipt of the First Offer Notice and setting forth the aggregate cash price the Company proposes to pay for the Offered Securities (the "Offered Price"). Upon receipt of such written offer, or if the Company shall have failed to make a written offer, the Selling Holder shall have the right for a period of 180 days (i) to sell the Offered Securities as an entirety to any third party, provided that any such sale shall be for a price no less favorable to the Selling Holder than the Offered Price or (ii) to accept the Offered Price (in case the Company made such written offer) to sell the Offered Securities as an entirety to the Company pursuant to Subsection (c) below. Any Offered Securities not sold by such Selling Holder within such 180 day period may not be sold by such Selling Holder prior to the Termination Date unless such Offered Securities are again offered to the Company in accordance with this Section 3.4. (c) The Selling Holder may elect to accept the Offered Price by written notice to the Company and such Selling Holder shall sell, and the Company shall purchase, the Offered Securities at such time and place reasonably acceptable to the Company as shall be designated by the Selling Holder in said notice. Upon consummation of such sale and purchase, the Selling Holder shall deliver the Offered Securities with an appropriate instrument of transfer (without any representation or warranty other than as to ownership of such Offered Securities free and clear of all adverse claims of any kind created by or resulting from any actions or omissions of the Selling Holder) against payment of the Offered Price by certified or cashier's check or wire transfer to the account of the Selling Holder. Section 3.5 Legend on Warrant Shares. Each certificate for shares of Common Stock initially issued upon exercise of this Warrant, unless at the time of exercise such shares are registered under the Securities Act, shall bear the following legend: "The securities represented by this Certificate have not been registered or qualified under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be sold, exchanged, hypothecated or transferred in any manner except in compliance with said Act and other applicable laws. The rights of the holder of this Certificate to transfer this Certificate or the securities represented hereby, and certain other rights and obligations of the holder hereof, are subject to the terms of a Warrant Agreement, dated as of September 5, 1997, between the Company and the initial holder of this Certificate. A copy of such agreement, as amended, will be provided without charge to the registered holder of this Certificate upon written request to the Secretary of the Company" Any certificate issued at any time in exchange or substitution for any certificate bearing such legend (except a new certificate issued upon completion of a public distribution in the United States pursuant to a registration statement under the Securities Act of the securities represented thereby) shall also bear the above legend unless counsel for the Company renders a written legal opinion to the Company that the securities represented thereby need no longer be subject to such restriction. Section 4. Exchange of Warrant Certificate. Any Warrant certificate may be exchanged for another certificate or certificates entitling the holder thereof to purchase a like aggregate number of shares of Common Stock as this certificate then entitles such holder to purchase. Any holder of 4 a Warrant desiring to exchange such Warrant certificate shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver one or more new Warrant certificates as so requested. Section 5. Mutilated or Missing Warrant. In case any Warrant certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the holder thereof, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and indemnity, if requested, satisfactory to the Company. In the case of the initial Purchaser, the initial Purchaser's unsecured agreement of indemnity shall be deemed satisfactory to the Company. Section 6. Requirement of Availability of Shares of Common Stock. There are authorized and available for issuance, and so long as any Warrant remains outstanding the Company shall at all times keep authorized and available for issuance, such number of shares of the Company's authorized but unissued Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants so as to ensure that the authorized capital of the Company comprises sufficient unissued shares of Common Stock for issuance upon the exercise in full of all outstanding Warrants and that such Common Stock may be issued by the Board of Directors of the Company without any further authorization by the shareholders of the Company. Every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants shall be irrevocably authorized and directed at all times to keep available such number of authorized shares and other securities as will be sufficient for such purpose. The Company shall supply any such transfer agent with duly executed stock and other certificates for such purpose and shall provide or otherwise make available any cash which may be payable as provided in Section 9. Section 7. Warrant Price. The price per share of Common Stock (the "Warrant Price") at which shares of Common Stock shall be purchasable upon the exercise of the Warrants shall be U.S.$8.00, subject to adjustment pursuant to Section 8. Section 8. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: Section 8.1 Adjustments. The number of shares purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment as follows: (a) In case the Company shall (i) pay a dividend in Common Stock or make a distribution in Common Stock, (ii) pay a liquidating cash dividend as so denominated in accordance with generally accepted accounting principles, (iii) subdivide its outstanding Common Stock, (iv) combine its outstanding Common Stock into a smaller number of shares of Common Stock, or (v) issue by reclassification of its Common Stock, spin-off, split-up, recapitalization, merger, 5 consolidation or any similar corporate event or arrangement other securities of the Company, the number of shares of Common Stock purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of shares or other securities of the Company which it would have owned or would have been entitled to receive after the happening of any of the events described above had this Warrant been exercised immediately prior to the happening of such event and any record date with respect thereto. Any adjustment made pursuant to this subsection (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Except in respect of transactions described in subsection (a) above, in case the Company shall sell or issue Common Stock or rights, options, warrants, convertible securities or options or other rights to purchase convertible securities or any similar instrument containing the right to subscribe for, purchase or otherwise acquire shares of Common Stock (collectively, "Derivative Securities") at a price per share which is lower at the date of such sale or issuance of such Common Stock or lower at the record date for determination of shareholders entitled to receive (or purchase) such Derivative Securities than the then current Warrant Price immediately prior to such sale or issue, then the number of shares of Common Stock purchasable upon exercise of this Warrant shall be the number determined by multiplying the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to the first public announcement (or consummation of such transaction if the Common Stock is not then publicly traded) of such transaction (or the record date for determination of shareholders entitled to receive (or purchase) such Derivative Securities in the case of a distribution or issuance thereof in respect of the Common Stock) by a fraction (not to be less than one) with (A) a numerator equal to the product of (1) the number of shares of Common Stock outstanding after giving effect to such sale or issuance (and assuming in the case of Derivative Securities that such Derivative Securities had been fully exercised or converted, as the case may be) and (2) the Warrant Price in effect immediately before such public announcement date, consummation date or record date, as the case may be, and (B) a denominator equal to the sum of (i) the product of (x) the number of shares of Common Stock outstanding immediately before such public announcement date, consummation date or record date, as the case may be, and (y) the Warrant Price in effect immediately before such public announcement date, consummation date or record date, as the case may be, and (ii) the aggregate consideration received by the Company for the shares of Common Stock to be so issued or sold or to be purchased or subscribed for upon exercise of such Derivative Securities. For the purposes of such adjustments, the Common Stock which the holders of any such Derivative Securities shall be entitled to subscribe for or purchase shall be deemed to be issued and outstanding as of the date of such public announcement date, consummation date or record date, as the case may be, and the consideration received by the Company therefor shall be deemed to be the consideration received by the Company for such Derivative Securities, plus any underwriting discounts or selling commissions paid by the Company, plus the consideration or premiums stated in such Derivative Securities to be paid for the Common Stock covered thereby. In case the Company shall sell or issue Common Stock or Derivative Securities containing the right to subscribe for or purchase Common Stock for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the "consideration received by the Company" for purposes of this subsection (b), the fair market value of said property shall be determined in good 6 faith by the Board of Directors of the Company acting upon the advice of any Independent Financial Expert acceptable to the Majority Warrantholders. As used herein, the term "Majority Warrantholders" means the holder or holders of then unexercised Warrants to purchase at least a majority of the shares of Common Stock covered by all outstanding Warrants. For purposes of determining whether the holders of outstanding Warrants at any time have taken any action authorized by this Section or otherwise by this Warrant, any Warrants owned by the Company, any Subsidiary or any Affiliate (as such terms are defined in the Agreement) of the Company shall not be deemed outstanding. As used herein, the term "Independent Financial Expert" means a qualified appraisal or investment banking firm that (i) has experience in the valuation of companies similar to the Company, (ii) does not (and whose directors, officers, employees and affiliates do not) have a direct or indirect financial interest in the Company or any of its affiliates or the holder of this Warrant or any of its affiliates, (ii) has not been, and, at the time it is called upon to give independent financial advice, is not (and none of whose directors, officers, employees or affiliates is) a promoter, director or officer of the Company or any of its affiliates or such holder or any of its affiliates, and (iii) does not provide any advice or opinions to, and is not otherwise compensated by, the Company or any of its affiliates or such holder or any of its affiliates, except as an Independent Financial Expert. (c) If the Company shall distribute in any calendar year to all or substantially all holders of its Common Stock evidences of its indebtedness (including Derivative Securities) or assets (including cash or other dividends or distributions out of earnings) and the aggregate fair market value of all assets or evidences of indebtedness so distributed in such calendar year exceeds the greater of $1,000,000 and 10% of the Consolidated Net Income (as defined below) for the preceding calendar year (the "Dividend Threshold"), then, and in each case, the Company shall pay to the holder of this Warrant an amount equal to such holder's pro rata share (assuming for such purpose the exercise of this Warrant in full) of the amount by which such distributions exceeded the Dividend Threshold in such year. The "fair market value of the portion of the assets (other than cash) or evidences of indebtedness so distributed" shall be determined in good faith by the Board of Directors of the Company acting upon the advice of any Independent Financial Expert acceptable to the Majority Warrantholders. As used herein, the term "Consolidated Net Income" shall mean, for any period, the aggregate net income of the Company and its Subsidiaries as determined on a consolidated basis in accordance with GAAP, provided that Consolidated Net income shall be deemed to be zero in any period for which the Company and its Subsidiaries have a net loss for such period determined on a consolidated basis in accordance with GAAP. (d) No adjustment in the number of shares of Common Stock purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent in the number of shares of Common Stock then purchasable upon the exercise of this Warrant, provided that any adjustments which by reason of this subsection (d) are not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. (e) Whenever the number of shares of Common Stock purchasable upon the exercise of this Warrant is increased or decreased as provided in this Section 8, the Warrant Price payable upon 7 exercise of this Warrant shall be adjusted by multiplying the Warrant Price in effect immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon exercise of this Warrant immediately prior to such adjustment, and the denominator of which shall be the number of shares so purchasable immediately after such adjustment. (f) Whenever the number of shares of Common Stock purchasable upon the exercise of this Warrant or the Warrant Price is adjusted as herein provided, the Company shall cause to be promptly mailed to the holder by first-class mail, postage prepaid, notice of such adjustment or adjustments and a certificate of an executive officer of the Company setting forth the number of shares of Common Stock purchasable upon the exercise of this Warrant and the Warrant Price after such adjustment, a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. (g) If, as a result of an adjustment made pursuant to this Section 8, the holder of this Warrant shall become entitled to purchase any shares of the Company other than Common Stock, thereafter the number of such other shares so purchasable upon exercise of this Warrant and the Warrant Price of such shares shall be subject to adjustment. from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of this Section 8 with respect to the shares of Common Stock. Section 8.2 No Adjustment in Certain Cases. No adjustments to the number of shares of Common Stock issuable upon the exercise of this Warrant or the Exercise Price shall be made in connection with the issuance of (a) Common Stock upon exercise of any of the Warrants or (b) stock options granted to employees and directors of the Company for the purchase of a number of shares of Common Stock as may from time to time be duly authorized by the Board of Directors. Section 8.3 Preservation of Purchase Rights Upon Reorganization, Consolidation, Merger, etc. In case of any reorganization, consolidation or merger of the Company with or into another entity as a result of which the holders of the Company's Common Stock become holders of other shares or securities of the Company or of another entity or person, or such holders receive cash or other assets, or in case of any sale or conveyance to another person of the property, assets or business of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing entity or person, as the case may be, shall execute with the holder of this Warrant an agreement that such holder shall have the right thereafter upon payment of the aggregate Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and other securities and property which such holder would have owned or have been entitled to receive after the happening of such reorganization, consolidation, merger, sale or conveyance had this Warrant been exercised immediately prior to such action and the record date, if any, with respect to such action. The agreements referred to in this Section 8.3 shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 8. The provisions of this Section 8.3 shall similarly apply to successive reorganizations, consolidations, mergers, sales or conveyances. 8 Section 8.4 Statement on Warrants. This Warrant shall entitle the holder hereof to purchase such number of shares of Common Stock at such Warrant Price as may be determined in accordance with the terms hereof after giving effect to any adjustments in the number or kind of shares purchasable upon the exercise hereof or the Warrant Price, as the case may be, notwithstanding that this Warrant certificate may continue to express the same price and number and kind of shares as are initially stated herein. Section 8.5 Adjustment by Board of Directors. If any event occurs as to which, in the reasonable good faith opinion of the Board of Directors of the Company, the provisions of this Section 8 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holder of this Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of increasing the Warrant Price as otherwise determined pursuant to any of the provisions of this Section 8, except in the case of a combination of shares of a type contemplated in Section 8.1(a) and then in no event to an amount larger than the Warrant Price as adjusted pursuant to Sections 8.1(a) and 8.1(e). Section 8.6 No Dilution or Impairment. The Company will not, through any reorganization, transfer of assets, consolidation, merger, dissolution or otherwise, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in carrying out all of the provisions of this Section 8. Section 9. Fractional Interests. The Company shall not be required to issue fractional shares of Common Stock on the exercise of any Warrant. If any fraction of a Share would, except for the provisions of this Section 9, be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall pay an amount in cash equal to the then current market price of a share of Common Stock (as determined in good faith by the Board of Directors of the Company) multiplied by such fraction. Section 10. No Rights as Shareholder; Notices. Nothing contained in this Warrant shall be construed as conferring upon the holder or its transferees any rights as a shareholder of the Company, including the right to vote, receive dividends, consent or receive notices as a shareholder with respect to any meeting of shareholders for the election of directors of the Company or any other matter. If, however, at any time prior to the Termination Date and prior to the exercise of this Warrant, any of the following events shall occur: (a) any action which would require an adjustment pursuant to Section 8.1 or 8.5; or (b) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger or sale of its property, assets and business as an entirety) shall be proposed; 9 then in any one or more of said events, the Company shall give notice in writing of such event to each holder of Warrants as provided in Section 12 at least 20 days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to any relevant dividend, distribution, subscription rights or other rights or for the determination of shareholders entitled to vote on such proposed dissolution, liquidation or winding up but failure to mail or receive such notice or any defect therein or in the mailing thereof shall not affect the validity of any such action taken. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Section 11 Registration Rights. Section 11.1 Demand Registration Rights. (a) Right to Make Demand. At any time beginning one year after the date hereof, the holders of a majority of the then outstanding Registrable Securities, may request registration under the Securities Act of all or part of their Registrable Securities (the "Initial Demand"). In addition, at any time eighteen (18) months after the effectiveness of the Registration Statement filed with respect to the Initial Demand, the holders of a majority of the then outstanding Registrable Securities, may request an additional registration under the Securities Act of all or part of their Registrable Securities not registered pursuant to the Initial Demand (the "Secondary Demand"). In either instance, such holders may exercise their right under this Section 11.1(a) by giving a written request to the Company signed by them specifying the number of shares of Registrable Securities requested to be included and the intended method of disposition thereof. Within ten days after receipt of the request, the Company will give written notice of the request to all other holders of Registrable Securities and will include in such registration all Registrable Securities for which the Company has received written requests for inclusion within fifteen (15) days after Parent's notice is given to the holders pursuant to this Section 11.1(a), so long as the aggregate amount of Registrable Securities that the holders request be included in each such registration equals at least 40% of all Registrable Securities and have a fair market value at the time of the request equal to $2,500,000 (a "Demand Registration"). (b) Underwritten Offerings; Priority on Demand Registrations. If the holders of a majority of the Registrable Securities requested to be included so elect, the Demand Registration may be in the form of an underwritten offering. If the Demand Registration is an underwritten offering, the Company shall select the managing underwriters for the offering and the Company may elect to include other securities in such registration on the same terms and conditions as the Registrable Securities to be included in such registration; provided, that, if the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and other securities to be included in the registration exceeds the number that can be sold in such offering at a price satisfactory to the holders of a majority of the Registrable Securities requested to be included in such registration, the Company will give priority for inclusion in such registration: (i) first, to the Registrable Securities requested to be included in such registration (or to such lesser number of Registrable Securities that is equal to the number that, in the opinion of the managing underwriters, can be sold, pro rata among the holders thereof based on the number of Registrable Securities owned), (ii) second, to the securities, if any, requested to be included in such 10 registration pursuant to warrants or options issued to the representatives of the underwriters with respect thereto; (iii) third, to the securities the Company proposes to include in such registration; (iv) fourth, to the securities that the Company is otherwise obligated to include in such registration; and (v) fifth, to other securities that the Company may desire to include in such registration. (c) Restrictions on Demand Registration. Notwithstanding anything in this Section 11.1 to the contrary, if the Company shall furnish to the holders of Registrable Securities requesting registration a certificate signed by the Chief Executive Officer or President of the Company stating that, in the good faith reasonable judgment of the Board of Directors of Parent, such registration of Registrable Securities would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly-owned subsidiaries or would otherwise have a material adverse effect on the Company or the selling holders if undertaken at the time requested, the Company shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the holders of Registrable Securities; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period. (d) Expenses. Except as otherwise provided in this Section 11.1, the Company will pay all Registration Expenses in connection with a Demand Registration. In a Demand Registration that is an underwritten offering, all underwriting discounts, commissions spreads or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the Registrable Securities being offered thereby will be paid by the holders thereof pro rata based on the number of Registrable Securities that each such holder has requested be registered. (e) As used herein, the term "Registrable Securities" means, collectively, the Warrants, or any portion thereof, and all Warrant Shares (including all such Warrant Shares issued upon exercise of any other Warrant), or any portion thereof. Registrable Securities will cease to be such when (i) a registration statement covering such Registrable Securities has become or been declared or ordered effective and they have been disposed of pursuant to such effective Registration Statement, (ii) they are sold, transferred or distributed pursuant to and in compliance with Rule 144 (or any similar provision then in force, but not including Rule 144A) under the Securities Act, or (iii) they have been otherwise transferred and the Company has delivered new certificates or other evidences of ownership for them not subject to any stop transfer order or other restriction on transfer and not bearing a legend restricting transfer in the absence of an effective registration or an exemption from the registration requirements of the Securities Act. (f) As used herein, the term "Registration Expenses" means all expenses incident to the Company's performance of or compliance with this Agreement, including, all registration and filing fees, fees and expenses of compliance with federal and state securities laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding underwriting discounts, commissions spreads or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals), and other representatives or advisors retained by the Company for the purpose of fulfilling its obligations under this Agreement. 11 Section 11.2 Piggyback Registration. (a) Right to Piggyback. Whenever the Company proposes to register any of its securities under the Securities Act (other than as (i) a Demand Registration; (ii) a registration of securities in connection with a merger, an acquisition, an exchange offer, other business combination or an employee benefit plan maintained by the Company or its subsidiaries; or (iii) a registration of securities on Form S-4 or S-8 or any successor or similar form) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company will give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and will include in such registration, subject to Section 11.2(c), all Registrable Securities with respect to which the Company has received written requests for Piggyback Registration within fifteen (15) days after Parent's notice is given to the holders of Registrable Securities. (b) Piggyback Expenses. The Company will pay all Registration Expenses in connection with a Piggyback Registration. In a Piggyback Registration that is an underwritten offering, all underwriting discounts or commissions spreads of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the Registrable Securities being offered thereby will be paid by the holders thereof pro rata based on the number of Registrable Securities that each such holder has requested be registered. (c) Restrictions on Piggyback Registrations. Notwithstanding anything to the contrary in this Section 11.2: (i) if, at any time after receiving such requests and prior to the effective date of the Registration Statement filed in connection with the Piggyback Registration, the Company for any reason decides not to register securities of Parent, the Company will give written notice of its decision to the holders of Registrable Securities and thereupon be relieved of its obligation to register any Registrable Securities in connection with such registration; and (ii) if the Company determines for any reason to delay a Piggyback Registration, the Company may do so by giving written notice of its decision to the holders of Registrable Securities. (d) Priority on Underwritten Primary Registrations. If a Piggyback Registration is an underwritten offering initiated on behalf of the Company and the managing underwriters advise the Company in writing that in their opinion the number of securities to be included in such registration exceeds the number that can be sold in such offering at a price satisfactory to Parent, the Company will give priority for inclusion in such registration: (i) first, to the securities the Company proposes to include in such registration; (ii) second, to the securities, if any, requested to be included in such registration pursuant to warrants or options issued to the representatives of the underwriters with respect thereto; (iii) third, securities that the Company has become, prior to the date hereof, otherwise obligated to include in such registration; (iv) fourth, to the Registrable Securities requested to be included in such registration (or to such lesser number of Registrable Securities, which is equal to the number that, in the opinion of the managing underwriters, can be sold, pro rata among the holders thereof based on the number of Registrable Securities owned); and (v) fifth, to other securities that the Company may desire to include in such registration. 12 (e) Priority on Underwritten Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of Parent's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in the registration exceeds the number that can be sold in the offering, the Company will give priority for inclusion in such registration: (i) first, to the securities requested to be included by the holders requesting such registration; (ii) second, to the securities sought to be included in such registration pursuant to the warrants or options issued to the representatives of the underwriters with respect thereto; (iii) third, to the Registrable Securities requested to be included in such registration (or to such lesser number of Registrable Securities, which is equal to the number that, in the opinion of the managing underwriters, can be sold, pro rata among the holders thereof based on the number of Registrable Securities owned), and (iv) fourth, to other securities that the Company may desire to include in such registration. Section 11.3 Transferability. The registration rights granted in this Section 11 shall not be assignable in any manner to any transferee of any of the Warrants or Registrable Securities except in connection with the sale by the holder of this Warrant or the Registrable Securities issued upon exercise hereof of all of this Warrant or such securities, as the case may be, in a transaction not involving a public offering for the purposes of the Securities Act. Section 11.4 Right to Review the Registration Statement. (a) In connection with the preparation and filing of each registration statement under the Securities Act pursuant to Sections 11.1 and 11.2, the Company will give the holders of Registrable Securities registered under such registration statement, the underwriters, and their respective counsel and accountants, the opportunity to review and comment upon such registration statement, each prospectus included therein or filed with the Commission and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. (b) Each such holder of Registrable Securities shall have the right to review and comment upon such Registration Statement and to request the insertion therein of material furnished to the Company in writing which in the judgment of such holder (a "Requesting Holder") of Registrable Securities should be included; provided, however, such information shall not be required to be included if in the reasonable opinion of counsel of the Company, the inclusion of such material furnished by such holder would be misleading or otherwise in violation of the rules and regulations of the Securities Act. Furthermore, a Requesting Holder has the right to require the deletion of any reference to such Requesting Holder by name or otherwise if such reference is not required by the Securities Act or the rules promulgated thereunder. Section 11.5 Registration Procedures. (a) Procedures the Company Will Follow. Whenever the holders of the Registrable Securities duly request that any Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration of the Registrable Securities on a form 13 available under the Securities Act for which the Company then qualifies and that counsel for the Company deems appropriate and which form is available for the sale of the Registrable Securities in accordance with the intended method of disposition, and pursuant thereto the Company will do the following as expeditiously as possible: (i) Registration Statement. The Company will prepare and file with the SEC, and use its best efforts to cause to become effective, a Registration Statement with respect to the Registrable Securities the Company has been so requested to register on a form available under the Securities Act for which the Company then qualifies and that counsel for the Company deems appropriate and which form is available for the sale of the Registrable Securities in accordance with the intended method of disposition. (ii) Maintenance of Effectiveness. The Company will prepare and file with the SEC such amendments and supplements to the Registration Statement and prospectus used for the sale of the Registrable Securities as may be necessary to keep the Registration Statement effective until the earlier of: (A) the date on which the sale of the Registrable Securities is completed and (B) the date 90 days after the Registration Statement with respect to the Registrable Securities becomes effective, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement during its effectiveness in accordance with the intended methods of disposition of such securities. (iii) Copies of Prospectuses. The Company will furnish to the holders the number of copies of the Registration Statement, each amendment and supplement thereto, the prospectus included in the Registration Statement (including each preliminary prospectus) and such other documents that the holders may reasonably request to facilitate the disposition of the Registrable Securities the Company has been so requested to register. At any time when a prospectus with respect to the Registrable Securities is required to be delivered under the Securities Act, the Company will notify the holders of the occurrence of any material change in the information contained in the prospectus included in the Registration Statement. Whenever in Parent's judgment it is necessary, the Company will prepare a supplement or amendment to the prospectus so that, as thereafter delivered to the proposed purchasers of the Registrable Securities, the prospectus will not contain, to Parent's knowledge, any untrue statement of material fact or omit to state any fact necessary to make the statements in it not misleading, and the holders will discontinue disposition of the Registrable Securities until the holders are advised in writing by the Company that the use of the prospectus may be resumed and are furnished with a supplement or amendment to the prospectus. If the Company shall give any notice to suspend the disposition of Registrable Securities pursuant to a prospectus, the Company shall extend the period of time during which the Company is required to maintain the Registration Statement effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice through and including the date the holders are advised by 14 the Company that the use of the prospectus may be resumed or receive the copies of the supplement or amendment to the prospectus. (iv) Blue Sky Compliance. The Company will use its best efforts to register or qualify the Registrable Securities the Company has been so requested to register under the securities or blue sky laws of such jurisdictions within the United States of America as any holder of Registrable Securities selling Registrable Securities in connection with the registration reasonably requests, and do any and all other acts and things reasonably necessary or advisable to enable the holder to dispose of the holder's Registrable Securities in such jurisdictions; except the Company will not be required to: (A) qualify generally to do business in any jurisdiction where it is not then so qualified or (B) consent to, or take any action that would subject it to, general service of process or taxation in any jurisdiction where it is not then so subject. (v) Listing; Transfer Agent. The Company will use its best efforts to cause all such Registrable Securities to be listed on all securities exchanges or quoted on all automated quotation systems on which securities of the same class issued by the Company are then listed or quoted and will provide a transfer agent and registrar for all such Registrable Securities no later than the effective date of the Registration Statement. (vi) Customary Agreements. In the case of an underwritten offering, the Company will enter into customary agreements, including an underwriting agreement in customary form, as the holders of a majority of the Registrable Securities being registered or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of the Registrable Securities being so registered. (vii) Certain Information. The Company will make available for inspection upon reasonable request by any holder of Registrable Securities being registered, any underwriter participating in any disposition pursuant to the Registration Statement, and any attorney, accountant or other agent retained by the holder or underwriter, all financial and other records, pertinent corporate documents and properties of Parent, and cause Parent's officers, directors and employees to supply all information reasonably requested by the holder, underwriter, attorney, accountant or agent in connection with the Registration Statement, upon receipt by the Company of confidentiality agreements satisfactory to Parent. (viii) Compliance with Law. The Company will comply with all rules and regulations of the SEC and applicable state securities laws governing the manner of sale of securities in connection with the disposition of any Registrable Securities pursuant to any Registration Statement. (ix) Stop-Orders. The Company will promptly notify all holders of Registrable Securities being registered of its receipt of: (A) any stop-order, 15 injunction or order suspending the effectiveness of any Registration Statement covering any Registrable Securities or, to Parent's knowledge, the initiation of any proceeding for that purpose, or (B) any notification with respect to the limitation, restriction or suspension of the offer or sale of any Registrable Securities in any jurisdiction in which the Registrable Securities were qualified to be sold or, to Parent's knowledge any proceeding for that purpose. If the Company notifies the holders of any such event, the holders will immediately discontinue all sales or other dispositions of the Registrable Securities pursuant to the Registration Statement until the Company notifies the holders that such stop-order, injunction, order, limitation, restriction or suspension has been lifted, except, unless the Company notifies the holders otherwise, if a stop-order, injunction, order, limitation, restriction or suspension issued by a state securities or blue sky administrator applies only to offers and sales in such state, the holders will immediately discontinue all sales and other disposition of the Registrable Securities in such state. Parent, with cooperation of the holders, will use its reasonable efforts to contest any such proceeding and to obtain the withdrawal of any such stop-order, injunction, order, limitation, restriction or suspension. (b) Procedures Holders of Registrable Securities Will Follow. Whenever the holders of the Registrable Securities duly request that any Registrable Securities be registered pursuant to this Agreement, the holders will do the following as expeditiously as possible: (i) Certain Information. The holders will provide the Company with such information and affidavits about the holders and the intended manner of disposition of the Registrable Securities and otherwise use their best efforts to cooperate with the Company and the underwriters, if any, the Company may require to satisfy any obligation of the Company under this Agreement to register the Registrable Securities under federal and state securities laws and otherwise take actions related thereto. If the holders fail to provide the information required under this Section 11.5(b)(i), the Company may delay the registration until the information is provided and the holders agree to pay the Company its out-of-pocket expenses that arise from the failure to provide such information. The holders will notify the Company of the occurrence of any material change in the information provided by them that is contained in the prospectus included in the Registration Statement, as then in effect. Whenever in Parent's judgment it is necessary, the Company will prepare a supplement or amendment to the prospectus so that, as thereafter delivered to the proposed purchasers of the Registrable Securities, the prospectus will not contain, to Parent's knowledge, any untrue statement of material fact or omit to state any fact necessary to make the statements in it not misleading, and the holders will discontinue disposition of the Registrable Securities until the holders are advised in writing by the Company that the use of the prospectus may be resumed and are furnished with a supplement or amendment to the prospectus. If the Company shall give any notice to suspend the disposition of Registrable Securities pursuant to a prospectus, the Company shall extend the period of time during which the Company is required to maintain the Registration Statement effective pursuant to this 16 Agreement by the number of days during the period from and including the date of the giving of such notice through and including the date the holders are advised by the Company that the use of the prospectus may be resumed or receive the copies of the supplement or amendment to the prospectus. (ii) Compliance with Law. The holders will comply with all rules and regulations of the SEC and applicable state securities laws governing the manner of sale of securities in connection with the disposition of any Registrable Securities pursuant to any Registration Statement. (iii) Participation in Underwritten Offerings. No holder of Registrable Securities may participate in any underwritten offering hereunder unless such holder: (A) agrees to sell such holder's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority (by number of shares) of Registrable Securities to be included in such underwritten offering and (B) completes and executes all questionnaires, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. (c) Restrictions on Public Sale by Holders. Whenever the Company proposes to register any of its securities under the Securities Act in an underwritten offering (other than as (i) a Demand Registration; (ii) a registration of securities in connection with a merger, an acquisition, an exchange offer, other business combination or an employee benefit plan maintained by the Company or its subsidiaries; or (iii) a registration of securities on Form S-4 or S-8 or any successor or similar form) and if requested by the managing underwriters, each holder of Registrable Securities will not effect any public sale or disposition of securities of the Company the same as or similar to those being registered, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, except as part of such registration, during the 14-day period prior to, and during the 90-day period (or, with respect to a Piggyback Registration, such longer period of up to 120 days as may reasonably be requested by such managing underwriters) beginning on the effective date of the related Registration Statement, to the extent timely notified in writing by the Company or the managing underwriters. (d) Restrictions on Public Sale by the Company and Others. In connection with any Demand Registration that is an underwritten offering and if requested by the managing underwriters, the Company will not effect any public sale or disposition of any securities the same as or similar to those being registered by Parent, except as part of such registration, during the 14-day period prior to, and during the 90-day period beginning on the effective date of the related Registration Statement to the extent timely notified in writing by the managing underwriters. Notwithstanding anything to the contrary in the foregoing, the restrictions under this Section 11.5(c) shall not limit the issuance of securities of Parent, or options or warrants to purchase such securities, that the Company is required to issue pursuant to: (i) any employee stock option plan or non-employee director stock option plan in effect at the time the Company receives a request for Demand Registration; (ii) the exercise of any outstanding options or warrants with respect to securities of Parent; or (iii) the exercise of any conversion or exchange right in accordance with the terms of any other security 17 convertible into or exchangeable for securities the same as or similar to those being registered by Parent. (e) Third-Party Registration Rights. This Agreement is in all cases subject to the contractual registration rights granted pursuant to: (i) the Registration Rights Agreement between the Company and certain of its shareholders, entered into by the Company and such shareholders in connection with the Company's initial public offering of common stock, (ii) the Registration Rights Agreement between the Company and certain former shareholders of Current Electronics, Inc. dated February 24, 1997, and (iii) the Registration Rights Agreement between the Company and certain former shareholders of Circuit Test, Inc., entered into pursuant to the Agreement and Plan of Reorganization between the Company, Circuit Test, Inc., and CTI Acquisition Corp., dated as of July 9, 1997. Section 11.6 Indemnification. (a) Indemnification by Parent. The Company will indemnify and hold harmless, to the extent permitted by law, each each holder of Registrable Securities and, if applicable, the officers and directors of the holder, and each Person who controls the holder (within the meaning of the Securities Act or the Exchange Act) from and against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, injunction, judgment, order, decree, ruling, damage, dues, penalty, fines, costs, amounts paid in settlement, liabilities, obligations, losses, expenses and fees, including court costs and attorneys' fees and expenses (collectively, "Losses") that the holder and, if applicable, the officers and directors of the holder, and each Person who controls the holder may suffer through and after the date of the claim for indemnification caused by or arising out of any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus, preliminary prospectus, or other related filing with the SEC or any other federal or state governmental agency, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by any holder of Registrable Securities expressly for use therein or by any holder's failure to comply with any legal requirement applicable to such holder and not contractually assumed by the Company to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto after the Company has furnished the holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify the underwriters, their officers and directors, and each Person who controls the underwriters (within the meaning of the Securities Act or the Exchange Act) to the extent customary. (b) Indemnification by Holders. In connection with any registration in which a holder of Registrable Securities is participating, each such Holder will indemnify and hold harmless, to the extent permitted by law, Parent, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) from and against the holder's Pro Rata Share (as defined in this Section 11.6(b)) of all Losses that Parent, its directors and officers and each Person who controls the Company may suffer through and after the date of the claim for indemnification caused by or arising out of any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus, preliminary prospectus, or other related filing 18 with the SEC or any other federal or state governmental agency, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that the same are caused by or contained in any information furnished in writing to the Company by any holder of Registrable Securities expressly for use therein or by any holder's failure to comply with any legal requirement applicable to such holder and not contractually assumed by the Company to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto after the Company has furnished the holder with a sufficient number of copies of the same. For purposes of the foregoing, a holder's "Pro Rata Share" means that fraction equal to the amount of the proceeds received or to be received by the holder in connection with the registration over the total proceeds received or to be received by all holders in connection with the registration. (c) Indemnification Procedure. If any Person has a claim for Losses hereunder (an "Indemnified Party"), the Indemnified Party will: (i) notify the party or parties hereto from which it is entitled to make such claim (individually, an "Indemnifying Party" and, together, the "Indemnifying Parties") of such claim, specifying the nature of the Losses and the amount or estimated amount thereof if feasible, and (ii) unless in the Indemnified Party's reasonable judgment (based on written advice of counsel) a conflict of interest between the Indemnified Party and the Indemnifying Parties may exist with respect to the matter giving rise to such claim, permit the Indemnifying Party to assume and thereafter conduct the defense of the matter with counsel of the Indemnifying Party's choice reasonably satisfactory to the Indemnified Party. If the defense is so assumed, the Indemnifying Party will not be subject to any liability for any settlement made with respect to such claim by the Indemnified Party without its consent, which will not be unreasonably withheld. An Indemnifying Party who is not entitled to or elects not to assume the defense of a claim, will not be obligated to pay the fees and expenses of more than one counsel for all parties it indemnifies with respect to such claim, unless in the reasonable judgment of any Indemnified Party (based on written advice of counsel) a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim. Section 12. Notices. Any notice by the Company, the holder of this Warrant or the holders of Warrant Shares or Registrable Securities shall be in writing and shall be deemed to have been duly given if hand delivered on the date of such delivery, or on the fifth day after being mailed by certified mail, return receipt requested, or on the business day after timely delivery to a recognized overnight courier that guarantees overnight delivery, (a) if to the Company, at 9351 Grant Street, Suite 600, Denver, Colorado 80229, Attention: Chief Financial Officer, or at such other address as the Company may designate by notice to each holder of Warrants, Warrant Shares or Registerable Securities at the time outstanding, with a copy to Francis R. Wheeler, Esq., Holme Roberts & Owen, Suite 4100, 1700 Lincoln Street, Denver, Colorado 80203, (b) if to any Purchaser that holds Warrants, Warrant Shares or Registerable Securities, at such Purchaser's address set forth in the Agreement or at such other address as such Purchaser may designate by written notice to the Company and (c) if to any other holder of Warrants, Warrant Shares or Registerable Securities, at the address of such holder as it appears on the Warrant Register. 19 Section 13. Successors. Except as expressly provided in Section 11.3, this Warrant shall bind and inure to the benefit of the Company and its permitted successors and assigns hereunder, the Purchasers and their respective successors and assigns hereunder and, in addition, shall inure to the benefit of and be enforceable by all holders from time to time of the Warrants, the Warrant Shares and the Registerable Securities. No such assignee may claim rights under Section 11 hereof without at the time of such claim agreeing to be bound by the provisions thereof. Section 14. Applicable Law. This Warrant shall be enforced in accordance with, and the rights of the Company, the holder of this Warrant and the holders of Registerable Securities issued upon the exercise hereof shall be governed by, the laws of the State of Colorado (without regard to conflicts of laws principles thereof). Section 15. Benefits of this Agreement. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company, the holder of this Warrant and the holders of the Warrant Shares or Registrable Securities any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company, the holder hereof and the holders of the Warrant Shares and the Registrable Securities. Section 16. Survival. All covenants and agreements of the Company that relate to the Warrant Shares or the Registerable Securities and all rights and duties if the holders from time to time of the Warrant Shares or the Registerable Securities in this Warrant shall be deemed to survive any surrender hereof to the Company upon exercise hereof as contemplated by Section 1. References herein to the Agreement and terms defined therein shall be deemed to survive the termination of the Agreements. EFTC CORPORATION By /s/ Title: 20 EFTC CORPORATION ELECTION TO PURCHASE EFTC Corporation 9351 Grant Street, Suite 600 Denver, Colorado 80229 Att: Chief Financial Officer The undersigned hereby irrevocably elects to exercise the right of purchase represented by the Warrant to which this Election to Purchase is attached for, and to purchase thereunder, _____________ shares of Common Stock (or other securities) of the Company provided for therein, and requests that certificates for said shares (or other securities) be issued in the name of: (Please Print Name and Address) and, if said number of shares shall not be all the shares of Common Stock purchasable hereunder, that a new Warrant certificate for the balance of said shares purchasable under the said Warrant be registered in the name of the undersigned holder or its nominee as below indicated and delivered to the address stated below: Dated: , Name of holder or Nominee (Please Print): Address: Signature: Signature Guaranteed: 21 (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (Name and Address of Assignee must be Printed or Typewritten) the within Warrant, hereby irrevocably constituting and appointing Attorney to transfer said Warrant on the books of EFTC Corporation with full power of substitution in the premises. Dated: , Signature of Registered Holder Signature Guaranteed: 22 -----END PRIVACY-ENHANCED MESSAGE-----