FINAL SETTLEMENT AGREEMENT
RE CANCELLATION OF CHESAPEAKE SCIENCES CORPORATION
PURCHASE ORDERS 98B-1819, 98B-1914, 98B-1915, & 98B-2056
Exhibit 10.1
This Agreement made effective as of the seventeenth day of August, 1999,
regardless of the date of last signature hereto, is by and between Chesapeake
Sciences Corporation, 0000X Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx, Xxxxxxxx 00000
("CSC"), and Hytek Microsystems, Inc., 000 Xxx Xxxxxxx Xxxx, Xxxxxx Xxxx, XX
00000 ("HYTEK").
WITNESSTH
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WHEREAS CSC issued Purchase Orders 98B-1819, 98B-1914, 98B-1915, & 98B-2056
("the CSC Purchase Orders") to HYTEK for delivery of specific quantities of
specific hybrid assemblies, and
WHEREAS HYTEK accepted the CSC Purchase Orders and began production of the
specific quantities of specific hybrid assemblies, and
WHEREAS CSC wishes to cancel all remaining undelivered items on the CSC Purchase
Orders.
NOW, THEREFORE, upon conclusion of negotiations between the parties and in
consideration of the premises and covenants contained herein, and with the
intent to be legally bound, CSC and HYTEK agree:
1. Upon execution of this Agreement by authorized representatives of the
parties, the CSC Purchase Orders shall be cancelled and null and void with
respect to the rights and obligations of the parties relevant to all
remaining undelivered items on the CSC Purchase Orders.
2. Appendix A, attached hereto and made a part hereof, is a detailed listing
with values of the current inventory of Finished Goods ("FGI"),
Work-in-Process ("WIP"), and Components & Other ("RAW") materials related
to all remaining undelivered items on the CSC Purchase Orders grouped by
hybrid assembly type by inventory category (FGI, WIP, and RAW) with values
and notation of the physical location of the material and warranted by
HYTEK as being complete, true, and accurate. The total value of the current
inventory of FGI, WIP, and RAW materials related to all remaining
undelivered items on the CSC Purchase Orders is $2,304,306.00.
3. Appendix B, attached hereto and made a part hereof, is a detailed best
efforts estimate by HYTEK of the probable yield quantities of the specific
hybrid assemblies into FGI if the WIP & RAW materials were utilized to
complete the specific hybrid assemblies.
4. In full and final settlement of all claims by XXXXX related to the
cancellation of the CSC Purchase Orders, CSC shall pay to HYTEK
$2,304,306.00 plus interest at 9.5% per annum. Payments to HYTEK are
calculated as 66.65% applied to the following payment schedule:
Date or Event Amount
Upon execution of this Agreement by $300,000.00 ($272,629.53 Principal +
authorized representatives of the parti $27,370.47 Interest @ 9.5%)
30 September 1999 25,212.16 (Interest @ 9.5%)
29 October 1999 25,212.16 (Interest @ 9.5%)
30 November 1999 25,212.16 (Interest @ 9.5%)
31 December 1999 300,000.00 ($274,787.84 Principal +
$25,212.16 Interest @ 9.5%)
31 January 2000 23,036.75 (Interest @ 9.5%)
29 February 2000 23,036.75 (Interest @ 9.5%)
31 March 2000 400,000.00 ($376,963.25 Principal +
$23,036.75 Interest @ 9.5%)
28 April 2000 20,052.46 (Interest @ 9.5%)
31 May 2000 20,052.46 (Interest @ 9.5%)
30 June 2000 400,000.00 ($379,947.54 Principal +
$20,052.46 Interest @ 9.5%)
31 July 2000 17,044.54 (Interest @ 9.5%)
31 August 2000 2,170,039.38 ($2,152,994.84 Principal +
$17,044.54 Interest @ 9.5%)
The FGI, WIP, and RAW inventory material ("Inventory") shall be held by HYTEK as
collateral against payment hereunder. Upon receipt by HYTEK of the final payment
above, free and clear title to the Inventory shall vest in CSC. The foregoing
notwithstanding, at any time after any principal payment is received by HYTEK
hereunder, CSC shall have the right to issue written notice to HYTEK to deliver
to CSC at a specified location, and HYTEK shall so deliver, specific quantities
of completed specific hybrid assemblies held in FGI provided that the aggregate
value of such quantities, as determined by application of the Unit Prices given
in paragraph 7 below, shall not exceed the accrued principal payments made to
the date of such notice to deliver. Immediately upon CSC's receipt of such
specific quantities of completed specific hybrid assemblies, free and clear
title to them shall vest in CSC. At any time following the vesting in CSC of
free and clear title to the Inventory or any portion thereof and/or while all or
any portion of the Inventory remaining following such event is in the care,
custody and control of HYTEK, HYTEK shall, at CSC's request, execute promptly
financing statement(s) required to perfect and protect the interests of CSC in
the Inventory or any portion thereof.
5. In addition to the above $2,304,306.00 inventory value plus interest at
9.5% per annum according to the above payment schedule, CSC shall pay HYTEK
$400.00 per month in arrears as a storage fee while the Inventory is in the
care, custody and control of HYTEK. In the event that the last storage
period is a partial month of storage, such fee shall be prorated for that
period. The storage fee shall be invoiced by HYTEK to CSC monthly and shall
be due and payable Net 30.
6. While all or any portion of the Inventory is in the care, custody and
control of HYTEK, HYTEK shall:
a. Not move the Inventory to a location other than that specified in
Appendix A without CSC's prior written agreement.
b. Not commingle the Inventory with inventory of its own or third parties
but will store it separately and specifically identify it as the
Inventory subject to this Agreement.
c. Not represent to any person for any reason that the Inventory belongs
to HYTEK or to any third party except as provided for hereunder.
d. Not attempt to sell, mortgage, pledge, assign, borrow against or
otherwise create a security interest in favor of third parties in the
Inventory without the prior written consent of CSC. Upon any breach of
the foregoing, CSC shall have the right to terminate this Agreement
without liability for payments, termination charges or any other
amounts of any kind excepting only payments then due HYTEK from CSC.
e. Not use the Inventory for any purpose except for the performance of
this Agreement.
f. Maintain records of all Inventory material and any use, loss or other
event that may diminish the Inventory in any way.
g. Allow CSC, or third party CSC representatives, to enter XXXXX's
premises periodically, on reasonable notice and during normal business
hours, to inspect the Inventory, conduct physical inventories and to
audit the Inventory records.
h. Maintain the Inventory in a safe manner so as to prevent loss from any
cause or deterioration.
i. Assume all risk of loss, destruction or damage to the Inventory while
in XXXXX's custody. XXXXX will immediately notify CSC, in writing, of
any such loss, destruction or damage.
j. Credit against the Inventory value due hereunder until the final
payment is made in accordance with paragraph 3 above, or pay to CSC in
the event that title to the Inventory has vested in CSC in accordance
with paragraph 3 above, for Inventory lost, destroyed or damaged at
the value stated in Appendix A hereof or the Inventory item's
then-current replacement cost if such specific Inventory item's value
is not individually stated in Appendix A hereof. HYTEK shall maintain
insurance adequate, but not less than $3,457,323.00, to fulfill its
responsibilities herein; and shall provide CSC with a certificate of
insurance prior to commencing performance of its obligations hereunder
naming CSC as an additional insured and a Loss Payee as its interests
are at the time of loss.
k. Pay all personal property taxes and assessments that may be levied on
the Inventory until such time as free and clear title to the Inventory
vests in CSC in accordance with paragraph 3 above.
l. Defend, indemnify and hold harmless CSC from all claims, liabilities,
costs and expenses (including attorneys' fees) arising as a result of
HYTEK's storage of all or any portion of the Inventory.
7. At its sole option and discretion CSC may at any time, and as many times as
CSC may choose to do so, issue to HYTEK, and HYTEK shall accept, Purchase
Orders for the completion of all or any portion of the WIP and/or RAW
inventory into Finished Goods for delivery to CSC. In such event:
a. The Unit Price for the completed specific hybrid assemblies shall be as
follows:
CSC Part Number Description Unit Price
65-400001 OSC/ATTEN $210.00
65-400002 Old PREAMP $150.00
65-400003 TRACK/EQUAL $160.00
65-400004 West PREAMP $150.00
b. Delivery lead-times shall be mutually agreed between the parties at the time.
c. For the initial Purchase Order issued under this provision, there will
be a one-time charge not to exceed $48,500.00 to restart the production
line.
d. Credit for payments hereunder in excess of the value of any FGI
delivered to CSC as provided in paragraph 4 above may be treated and
accounted for, at CSC's sole discretion, as Progress Payments under the
Purchase Orders.
8. This Agreement shall be construed, governed, interpreted and applied in
accordance with the laws of the State of Maryland.
9. The parties hereto acknowledge that this Agreement sets forth the entire
agreement and understanding of parties hereto as to the subject matter
hereof, and shall not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto.
10. Whenever possible each provision of this Agreement shall be interpreted in
the same manner as to be effected and valid under applicable law. The
provisions of this Agreement are severable, and in the event that any
provisions of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of the law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability
of the remaining provisions hereof.
11. The failure of either party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or any other right hereunder and shall
not excuse a similar subsequent failure to perform any such term or
condition by the other party.
12. All notices and correspondence provided for herein shall be given by
depositing same in the United States Mail, first class postage prepaid,
mailed to the following addresses:
If to CSC: If to HYTEK:
Chesapeake Sciences Corporation. Hytek Microsystems, Inc.
Attention: President Attention: President
0000X Xxxxxxxx Xxxxxxxxx 000 Xxx Xxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000 Xxxxxx Xxxx, XX 00000
The above addresses are the registered offices of the parties. Changes in
address shall be given by utilizing the notice provisions of this
paragraph.
13. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
14. Neither party shall be construed as being empowered to act on behalf of the
other for any purpose.
IN WITNESS THEREOF, the parties have duly executed this Agreement to be
effective as of the date set forth above regardless of the date of last
signature hereto below.
AGREED ON BEHALF OF AGREED ON BEHALF OF
CHESAPEAKE SCIENCES CORPORATION HYTEK MICROSYSTEMS, INC.
By: /s/ Xxxx X. XxXxxxx By: /s/ Xxxxxxx Xxxxx
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Xxxx X. XxXxxxx Xxxxxxx Xxxxx
Title: President Title: President
Date: 9/16/99 Date: 9/14/99
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