INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated
February 24 , 1997 is among the undersigned shareholders of
Current Electronics, Inc., a Oregon corporation ("Target")
(individually, a "Target Shareholder" and, collectively, "Target
Shareholders"), the undersigned shareholders of Current
Electronics Washington, Inc. a Washington corporation (the
"Company") (individually, a "Company Shareholder" and,
collectively, the "Company Shareholders") and Electronic Fab
Technology Corp. ("Parent"), a Colorado corporation. Target
Shareholders and Company Shareholders are sometimes referred to
herein, individually, as a "Shareholder" and, collectively, as the
"Shareholders."
RECITALS
A. In accordance with the Agreement and Plan of Merger,
dated as of January 15, 1997 (the "Merger Agreement") among
Parent, Merger Sub and Target, Target Shareholders received shares
of Common Stock, $.01 par value, of Parent ("Parent Common Stock")
in exchange for their shares of Common Stock, $.01 par value, of
Target ("Target Common Stock"). In connection with the Merger
Agreement, Parent granted Target Shareholders demand and piggyback
registration rights pursuant to the Registration Rights Agreement
of even date herewith (the "Registration Rights Agreement").
B. Company Shareholders received cash in exchange for
shares of Common Stock, $.01 par value, of the Company (the
"Company Common Stock"), in accordance with the Stock Purchase
Agreement, dated as of January 15, 1997 (the "Stock Purchase
Agreement"), among Parent and the Company Shareholders.
C. In consideration of Parent entering the Merger
Agreement, the Registration Rights Agreement and the Stock
Purchase Agreement and to induce Parent to consummate the
transactions contemplated thereby, the Shareholders are making
certain representations and warranties set forth herein and
indemnifying Parent with respect to certain matters under the
Merger Agreement and the Stock Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of
the representations, covenants and agreements contained herein,
the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Due Authorization; Enforceability; No Conflict. Each
of the Shareholders represents and warrants to Parent with respect
to such Shareholder that the Shareholder has the full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder and has taken all actions necessary to
secure all approvals required in connection therewith. The
Shareholder is a competent adult. This Agreement has been duly
executed and delivered by the Shareholder and constitutes the
valid and binding obligation of the Shareholder enforceable
against the Shareholder in accordance with its terms. The
execution and delivery of this Agreement do not, and the
performance will not, (a) violate or conflict with any permit,
order, license, decree, judgment, statute, law, ordinance, rule or
regulation applicable to the Shareholder or (b) result in any
breach or violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of, or result in the
creation of any mortgage, pledge, lien, encumbrance, charge, or
other security interest (a "Lien") on any of the properties or
assets of the Shareholder pursuant to, or require the consent of
any party to any mortgage, indenture, lease, contract or other
agreement or instrument, bond, note, concession or franchise
applicable to the Shareholder or any of its properties or assets,
except, in the case of this clause (c) only, where such conflict,
violation, default, termination, cancellation or acceleration
would not have and could not reasonably be expected to prevent the
consummation of the transactions contemplated hereby. No consent,
approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to the Shareholder in
connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
1.2 Other Representations and Warranties of Target
Shareholders. Each of the Target Shareholders represents and
warrants to Parent with respect to such Target Shareholder that
the representations and warranties in Sections 1(c) and 1(d) of
the Voting Agreement, dated as of January 15, 1997, among the
Target Shareholders and Parent are true and correct in all
respects. The Target Shareholder has not incurred, or will not
incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees
or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
ARTICLE II
SURVIVAL; INDEMNIFICATION
2.1 Indemnities by Shareholders.
(a) If Target breaches any covenant in the Merger
Agreement, the Company Shareholders breach any covenant in the
Stock Purchase Agreement (other than the covenant under Section
1.1 (Purchase and Sale of Stock) of the Stock Purchase Agreement),
any representation or warranty of Target in the Merger Agreement
is inaccurate (and if there is an applicable survival period
pursuant to Section 11.1 (Survival of Representations and
Warranties) of the Merger Agreement, provided Parent makes a
written claim for indemnification against any Shareholder within
the applicable survival period) or any representation or warranty
of the Company Shareholders in Article III (Representations and
Warranties Concerning the Company and its Subsidiaries) of the
Stock Purchase Agreement is inaccurate (and if there is an
applicable survival period pursuant to Section 10.1 (Survival of
Representations and Warranties) of the Stock Purchase Agreement,
provided Parent makes a written claim for indemnification against
any Company Shareholder within the applicable survival period),
then each Shareholder shall indemnify and hold Parent harmless
from and against the Shareholder's Pro Rata Share (as defined in
Section 2.1(b)) of any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, injunction,
judgment, order, decree, ruling, damage, dues, penalty, fines,
costs, amounts paid in settlement, liabilities, obligations, Taxes
(as defined in Section 2.1(b)), Liens, losses, expenses and fees,
including court costs and attorneys' fees and expenses
(collectively, "Losses") that Parent or any of its subsidiaries
may suffer through and after the date of the claim for
indemnification (including any Losses Parent or its subsidiaries
suffer after the end of any applicable survival period) caused by
or arising out of any such breach or inaccuracy; except that the
Shareholders will not have any obligation to indemnify Parent from
and against any Losses caused by or arising out of any such breach
or inaccuracy (i) until Parent or its subsidiaries have suffered
Losses by reason thereof in excess of a $100,000 aggregate
threshold (at which point the Shareholders will indemnify Parent
relating back to the first such Losses and any further such
Losses) or thereafter and (ii) to the extent the Losses Parent has
suffered by reason of all such breaches and inaccuracies exceeds a
$750,000 aggregate ceiling (after which the Shareholders will have
no obligation to indemnify Parent from and against any further
such Losses, unless such Losses are caused by or arise out of any
inaccuracy of which the Shareholder (or his or her spouse on the
date hereof) had actual knowledge at the time the representation
was made or deemed made, in which case an aggregate ceiling shall
apply to such Shareholder and spouse in an amount equal to the
Consideration (as defined below) received by such Shareholder and
spouse plus their Pro Rata Share of the amount of cash received
pursuant to the Merger Agreement by other shareholders of Target
who are not parties to this Agreement. Such $100,000 aggregate
threshold shall be increased and the amount of Losses to be paid
by the Shareholders hereunder shall be reduced by the amount of
any net recovery by Target above the book value at the Effective
Time (as defined in the Merger Agreement) for Target's account
receivable from Tapistron International, Inc. If any Shareholder
breaches any of such Shareholder's covenants herein, any
representation or warranty of the Shareholder herein is
inaccurate, any Company Shareholder breaches the covenants in
Section 1.1 of the Stock Purchase Agreement or any representation
or warranty of the Company Shareholder in Article II
(Representations and Warranties Concerning the Shareholders) of
the Stock Purchase Agreement is inaccurate, then each Shareholder
shall indemnify Parent from and against the Shareholder's Pro Rata
Share of the entirety of any Losses Parent or its subsidiaries may
suffer through and after the date of the claim for indemnification
caused by or arising out of any such breach or inaccuracy.
(b) The "Shareholder's Pro Rata Share" means that
fraction equal to the amount of Consideration received by the
Shareholder over the Total Consideration, where "Consideration"
with respect to any Company Shareholder means the amount of cash
received by the Company Shareholder pursuant to the Stock Purchase
Agreement and, with respect to any Target Shareholder means the
number of shares of Parent Common Stock received by the Target
Shareholder times the last sale price of Parent Common Stock on
the Nasdaq National Market on the date hereof, plus the amount of
cash, if any, received by the Target Shareholder pursuant to the
Merger Agreement and, "Total Consideration" means the sum of the
Consideration received by all Shareholders.
(c) If Parent has a claim for Losses pursuant to
this Article II that does not involve a Third Party Claim (as
defined in Section 2.2(a)), Parent shall notify the Representative
(as defined in Section 2.3(a)) of such claim, specifying the
nature of the Losses and the amount or estimated amount thereof if
feasible. If the Representative does not notify Parent within 30
days from the date it receives such notice that the Representative
disputes such claim, the amount of such claim shall be
conclusively deemed a liability of the Shareholders under this
Agreement. Nothing herein shall be deemed to prevent Parent from
making a claim for potential or contingent Losses.
2.2 Third Party Claims.
(a) If any third party shall notify Parent with
respect to any matter (a "Third Party Claim") that may give rise
to a claim for indemnification against any Shareholder under this
Article II, then Parent shall promptly notify the Representative
thereof in writing (a "Claim Notice"). The Representative will
have the right to assume and thereafter conduct the defense of the
Third Party Claim with counsel of the Representative's choice
reasonably satisfactory to Parent so long as (i) the
Representative notifies Parent in writing within 10 days after
Parent has given notice of the Third Party Claim that the
Shareholders will indemnify the Parent from and against the
entirety of any Losses Parent may suffer caused by or arising from
the Third Party Claim, (ii) the Representative provides Parent
with evidence reasonably acceptable to Parent that the
Shareholders will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of Parent, likely
to establish a precedential custom or practice materially adverse
to the continuing business, operations, assets, prospects or
interests of Parent or its subsidiaries and (v) the Representative
conducts the defense of the Third Party Claim actively and
diligently. In the event of a Third Party Claim that seeks an
injunction or other equitable relief, the Representative will be
entitled to participate with Parent in the defense of such Third
Party Claim.
(b) While the Representative is conducting the
defense of the Third Party Claim in accordance herewith, (i)
Parent may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii)
Parent will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the
prior written consent of the Representative and (iii) the
Representative will not consent to the entry of any judgment or
enter any settlement with respect to the Third Party Claim without
the prior written consent of Parent.
(c) If any condition under Section 2.2(a) is or
becomes unsatisfied, (i) Parent may defend against the Third Party
Claim in any manner it reasonably may deem appropriate, (ii)
Parent may consent to entry of any judgment or enter into any
settlement that is consented to by the Representative or to which
the Shareholders could not reasonably object, (iii) each
Shareholder will reimburse Parent the Shareholder's Pro Rata Share
promptly and upon request of Parent for the costs of defending
against the Third Party Claim, including reasonable attorneys'
fees and expenses, and (iv) the Shareholders will remain
responsible for any Losses Parent may suffer caused by or arising
from the Third Party Claim to the fullest extent provided by this
Article II. The Shareholders and the Representative agree to
consent to any entry of judgment or the entering into of any
settlement under clause (ii) reasonably appropriate in the
circumstances.
2.3 Representative.
(a) To the fullest extent permitted by law, each
Shareholder hereby irrevocably constitutes and appoints Xxxxxxx X.
Xxxxxxxx as its attorney-in-fact and legal and judicial
representative (the "Representative"), with full power of
substitution, for the purposes of (i) receiving all notices and
communications directed to any Shareholder under this Agreement
and taking any action (or determining to take no action) with
respect thereto as the Representative may deem appropriate,
including the settlement or compromise on behalf of any
Shareholder of any Third Party Claim or Losses, and (ii) executing
and delivering on behalf of any Shareholder all instruments and
documents of every kind the Representative may deem necessary or
advisable to accomplish the foregoing. Each Shareholder hereby
ratifies and confirms, as the Shareholder's own act, all that the
Representative shall do or cause to be done pursuant to this
Agreement.
(b) If the Representative resigns, the resigning
Representative shall appoint as successor either another
Shareholder or a third party reasonably acceptable to Parent (a
"Successor Representative"). The resigning Representative's
resignation shall not be effective until a Successor
Representative shall have agreed in writing to accept such
appointment. If the Representative should die or become
incapacitated, a Successor Representative shall be appointed
within 30 days of the Representative's death or incapacity by the
Shareholders that received a majority of Total Consideration.
Upon acceptance by a Successor Representative of the Successor
Representative's appointment, the appointment shall be final and
binding on the Shareholders.
(c) Each Shareholder irrevocably agrees that with
respect to any Third Party Claim or any claim for indemnification
hereunder any service of process, writ, judgment or other notice
of legal process shall be deemed and held in every respect to be
effectively served upon the Shareholder if delivered by
registered, certified or first class mail, postage prepaid to the
Representative at such person's address set forth in Section 4.1,
whom each Shareholder irrevocably appoints as its authorized agent
for service of process.
(d) The death or incapacity of any Shareholder shall
not terminate the authority and agency of the Representative.
(e) Each Shareholder hereby agrees to indemnify the
Representative and to hold the Representative harmless against any
loss, liability or expense incurred without negligent conduct or
bad faith on the part of the Representative and arising out of or
in connection with his duties as Representative, including court
costs and attorneys' fees and expenses incurred by the
Representative in defending against any Third Party Claim or
Losses in connection with this Agreement.
2.4 Payment Terms. If all or part of any indemnification
obligation under this Agreement is not paid when due, the
Shareholders shall pay Parent interest thereon for each day from
the date the amount became due until the date of payment in full,
payable on demand, at a rate of 10% per annum.
2.5 Other Indemnification Matters. Parent's claims
pursuant to the foregoing indemnification provisions shall not be
limited by any examination made by or on behalf of Parent or its
subsidiaries, the knowledge of Parent or it subsidiaries or any of
their respective officers, directors, stockholders, employees or
agents, or the acceptance by Parent of any certificate or opinion.
ARTICLE III
DISPUTE RESOLUTION
3.1 Remedies. Parent may proceed to enforce the
obligations of the Shareholders hereunder in any court or other
tribunal by an action at law, suit in equity or other appropriate
proceedings, whether for damages, for the specific performance of
any term hereof, or otherwise, or in aid of the exercise of any
power granted hereby or by law. In the event of any such
proceeding, the prevailing party in such proceeding shall be
entitled to receive from the losing party all reasonable costs and
expenses, including the reasonable fees of attorneys, accountants,
and other experts, incurred by the prevailing party in
investigating and prosecuting (or defending) such action at trial
or upon any appeal. Any amount awarded hereunder shall not be
subject to the limitations on liability contained in Section 2.1.
3.2 Jurisdiction and Consent to Suit. Any action, suit or
proceeding by Parent to enforce this Agreement may be brought in
the District Court in and for the City and County of Denver, State
of Colorado, in the United States District Court for the District
of Colorado or in any other court in which venue and jurisdiction
are proper. Each Shareholder and the Representative consent and
submit to the non-exclusive jurisdiction in personam of any such
court in respect of any such action, suit or proceeding.
ARTICLE IV
GENERAL PROVISIONS
4.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or mailed
by registered or certified mail, return receipt requested, or sent
via facsimile, with confirmation of receipt, to the parties at the
following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Parent, to:
Electronic Fab Technology Corp.
0000 Xxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000 0000
(b) if to the Shareholders, to the Representative:
Xxxxxxx X. Xxxxxxxx
0000 X.X. Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Hershner, Hunter, Xxxxxxx,
Xxxxx & Xxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
4.2 Interpretation. When a reference is made in this
Agreement to Articles or Sections, such reference shall be to an
Article or Section to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation." The table of contents and Article and Section
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. In this Agreement, any reference to any event,
change, condition or effect being "material" with respect to any
entity or group of entities means any material event, change,
condition or effect related to the condition (financial or
otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such
entity or group of entities. In this Agreement, any reference to
a party's "knowledge" means such party's actual knowledge after
due and diligent inquiry of officers, directors and other
employees of such party reasonably believed to have knowledge of
such matters. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms, and with respect to
the parties shall include where the context does not prohibit, their
respective permitted successors and assigns.
4.3 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when one or more
counterparts have been signed by each of the parties hereto and
delivered to the other parties hereto, it being understood that
all parties hereto need not sign the same counterpart.
4.4 Entire Agreement; Nonassignability; Parties in
Interest. This Agreement and the documents and instruments and
other agreements specifically referred to herein or delivered
pursuant hereto (a) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written
and oral, among the parties hereto with respect to the subject
matter hereof; (b) are not intended to confer upon any other
person any rights or remedies hereunder; and (c) shall not be
assigned by operation of law or otherwise except as otherwise
specifically provided. This Agreement will bind and inure to the
benefit of the respective successors and assigns of the parties
hereto, whether so expressed.
4.5 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a
court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The
parties hereto further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business
and other purposes of such void or unenforceable provision.
4.6 Remedies Cumulative; No Waiver. Except as otherwise
provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of
any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. No failure or delay on
the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty
or agreement herein, nor shall any single or partial exercise of
any such right preclude other or further exercise thereof or of
any other right.
4.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado
(without regard to the principles of conflicts of law thereof).
4.8 Rules of Construction. The parties hereto agree that
they have been represented by counsel during the negotiation,
preparation and execution of this Agreement and, therefore, waive
the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such
agreement or document.
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be executed and delivered as of the
date first written above.
Parent:
ELECTRONIC FAB TECHNOLOGY CORP.
By:
Shareholders:
_____Charles X. Xxxxxxxx
_____________
Xxxxxxx X. Xxxxxxxx
______Matthew J.
Hewitson______________
Xxxxxxx X. Xxxxxxxx
______Greg
Hewitson__________________
Xxxx Xxxxxxxx
______Christie
Hewitson________________
Xxxxxxxx Xxxxxxxx
______Marsha
Hewitson_________________
Xxxxxx Xxxxxxxx
______Linda
Hewitson___________________
Xxxxx Xxxxxxxx
Representative:
______Charles E.
Hewitson_______________
Xxxxxxx X. Xxxxxxxx
