Exhibit 10.1
May 29, 1997
Xx. Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
Century Electronics Manufacturing, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Dear Les:
This agreement states the essential business terms and conditions of the
merger (the "Merger") of Century Electronics Manufacturing, Inc.
("Century") with and into a wholly-owned subsidiary of DDL Electronics,
Inc. ("DDL") and related transactions.
While time is of the essence in completing this transaction, both parties
are aware that the transaction cannot be completed before the due date of a
$5.3 million acquisition debt (the DDL Notes or Xxxxxx Notes). Therefore,
an accommodation of its payment is included in this agreement.
1. Century hereby agrees that by June 1, 1997, it will make
available, through a third party, a loan to DDL Electronics of up to $3.3
million to be used exclusively for the repurchase of the DDL Notes. At
that time, DDL will make available up to $2 million, so that a total of
$5.3 million will be available to retire the DDL Notes. The amount of the
loan will be evidenced by a Promissory Note, (the "Century Note" see Annex
A) in an amount up to $3.3 million, for a term of 6 months paying interest
at the rate of 10% per annum secured by the Irlandus Asset or other
collateral acceptable to Century which can be up to $3 mil of the
Xxxxxx Note, which Xxxxxx Note Century will agree to extend for a period of
6 months. It is agreed as the DDL Notes are redeemed, that Century shall
make available under the "Century Note" its pro-rata share of the monies
needed to repurchase the DDL Notes. Should less than 100% of the DDL Notes
be redeemed, (holders of the DDL Note have the right to convert to common
shares), then Century shall be required to fund its Note only up to its
proportionate share, and the Century Note will reflect only those advances
made to redeem the DDL Notes. As the DDL Notes are repurchased, they shall
be retired. Century's obligation to loan up to $3.3 million to DDL, and
DDL's obligation to repay that loan, shall be subject only to such material
financial terms and conditions as are stated in Paragraph 1 and in the form
of a Promissory Note attached as Annex A hereto. When Century loans to DDL
their proportionate share up to $3.3 million under the "Century Note", then
the parties to this transaction shall agree to a Merger under the terms in
2 below.
2. Upon issuance of the "Century Note", DDL's legal counsel will
prepare, and DDL will negotiate in good faith, a definitive Merger
agreement and ancillary agreements, instruments and other documents
(collectively, the "Definitive Documents"), all with terms and conditions
customary in transactions of this nature but not inconsistent herewith.
DDL will direct its legal counsel to use its best efforts to deliver
initial drafts of the Definitive Documents to Century not later than 10
days from the date hereof. The Definitive Documents will include the
following terms and conditions: In consideration for the cancellation of
all issued and outstanding shares of Century common stock, Century's
stockholders will receive 33,000,000 shares of DDL common stock. The
$6,000,000 in aggregate principal amount of convertible debt of Century
held by Centennial Technologies, Inc. shall be convertible into 4,000,000
shares of common stock of DDL. This letter agreement supersedes all
previous letter agreements, and it is agreed by all parties that a letter
signed between Xxxx Xxxxxx and Xxxxxx Xxxxxxxxx on May 7, 1997, is hereby
non-binding, and all additional terms will be outlined in the Definitive
Agreement.
3. Upon consummation of the Merger, the surviving corporation will be
renamed "Century Electronics Manufacturing, Inc." or some other name
determined by its Board of Directors. Such Board of Directors will be
limited to seven directors, with the initial Board consisting of five, of
whom three (including Xxxxxx Xxxxxxxxx and two outside independent
directors) shall have been nominated and elected at the request of Century
and two (Xxxxxxx X. Xxxxxx and one outside independent director) shall have
been nominated and elected at the request of DDL. The additional directors
shall be nominated by the Board. It is agreed that the majority of the
Board of Directors shall always be outside independent directors. Our
respective legal counsel, independent accountants, financial advisors and
other consultants, and we ourselves, will use our best efforts to prepare,
execute, file, amend and distribute the proxy statements and prospectuses,
registration statements and/or other documents required by law to
consummate the Merger and related transactions. From the date of the loan
until consummation or abandonment of the Merger, each of DDL and Century
shall operate its business in a prudent manner and make no material changes
in management (including compensation or benefits) or operations or capital
structure without the consent of the other. Notwithstanding the foregoing,
without incurring any obligation under Paragraph 6 of this letter agreement
and without the consent of Century, DDL may negotiate and consummate the
sale of all or part of the business of Irlandus Circuits Limited, as
provided in Paragraph 7, and may sell up to 2 million shares of its common
stock for additional capital. It is agreed that Century may sell 1.43
shares of DDL equivalent shares for every share DDL sells. Excluding
706,667 shares in the Xxxxxx Fee Agreement the sale of such Century
shares shall not be sold at the equivalent value of not less than $.75 per
share. Century may continue to look at opportunities in the contract
engineering industry.
4. Neither DDL nor Century shall make any announcement of or touching
upon this letter agreement, the Merger or any related transaction without
obtaining prior consent of the other, except that DDL may make any and all
such announcements as it considers necessary or appropriate to discharge
its disclosure obligations under federal or state securities laws or
pursuant to the NYSE Listed Company Manual (in which case the text of the
announcement, if written, or a written summary thereof, if oral, shall be
provided promptly to Century.) This letter agreement, which may be
executed in counterparts, shall be governed by and construed in accordance
with the laws of the State of Delaware. If any provision of this letter
agreement shall be declared invalid or unenforceable by any court of
competent jurisdiction, then all provisions hereof shall nevertheless
remain in full force and effect. Each party will bear its own costs and
expenses incurred in connection with the Merger and related transactions
5. Each of DDL and Century represents and warrants to, and covenants
with, the other that its unaudited financial statements delivered most
recently to the other (such financial statements being as of and for the
interim periods ended March 31, 1997 for the P&L stated and Dec 31st 1996
for the balance sheet. in the case of Century and March 31, 1997 in the case
of DDL, see Annex B) were prepared in accordance with generally accepted
accounting principles, consistently applied, and will not be subject to any
material adjustment in connection with any audit thereof.
6. a. Each of DDL and Century and its respective affiliates and
their respective officers, directors, employees, representatives and agents
shall immediately cease all existing discussions or negotiations, if any,
with any other persons conducted heretofore with respect to any Acquisition
Proposal. The term "Acquisition Proposal" means any proposal that by its
terms would preclude the Merger and that relates to (i) a possible
acquisition of DDL or Century, as the case may be, whether by Merger,
purchase of any substantial part of the assets of such party or any similar
transaction or (ii) a tender or exchange offer for any capital stock of
such party, except for the pending deal between Centennial and Century.
b. Each of DDL and Century may, directly or indirectly, furnish
to any person information and access, in response to a request for
information or access made incident to an Acquisition Proposal, provided
that such request was not encouraged, solicited or initiated by DDL or
Century (as the case may be), any of its affiliates or any of their
respective officers, directors, employees, representatives, financial
advisors or agents, and may participate in discussions and negotiate with
such person concerning any Acquisition Proposal in each case only if the
Board of Directors of DDL or Century (as the case may be) has made a
Fiduciary Determination. The term "Fiduciary Determination" means that
directors constituting a majority of all directors then in office of DDL or
Century (as the case may be) have reasonably determined in good faith,
after consultation with and based upon the advice of legal counsel, that
the taking of action, or the failure to take action (or to withdraw or
modify a recommendation) is necessary or appropriate in execution of such
directors' fiduciary duties to stockholders under applicable law.
c. DDL or Century shall notify Century or DDL (as the case may
be) immediately once any written or oral Acquisition Proposal is made and
shall keep such other party promptly advised of the terms, conditions and
status of all Acquisition Proposals. Except provided herein, neither
DDL nor Century, nor any of their affiliates, nor any of their respective
officers, directors, employees, representatives, financial advisors or
agents, shall directly or indirectly, encourage or solicit submission of
any inquiries, proposal or offers by, participate in or initiate any
discussions or negotiations with, disclose any information about itself to,
or otherwise assist, facilitate or encourage, or enter into any agreement
or understanding with, any person (other than the other party hereto) in
connection with any Acquisition Proposal.
7. Upon execution and delivery of the Definitive Documents, we will
direct our respective legal counsel, independent accountants, financial
advisors and other consultants to use their best efforts, and we ourselves
will use our best efforts, to prepare, execute, file, amend and distribute
the proxy statements and prospectuses, registration statements and/or other
documents required by law to consummate the Merger and related
transactions. From the date of completion of 1 above until consummation or
abandonment of the Merger, each of us will operate its business prudently
and will make not material change in management (including compensation or
benefits), operations or capital structure without obtaining the consent of
the other, except as otherwise provided herein. Without incurring any
obligation under Paragraph 6 of this letter agreement, DDL may negotiate
and consummate the sale of all or part of the business Irlandus Circuits
Limited in consideration of cash and deferred payment obligations in an
aggregate principal amount not less than $5,300,000 (an "Approved Irlandus
Sale"), the proceeds then being used to repay the "Century Note" referred
to in Paragraph 1 above and Annex A. Subject to Paragraph 6 of this letter
agreement, Century may continue to consider Merger and acquisition
opportunities in the contract manufacturing industry.
8. If (i) the directors of DDL or Century approve an Acquisition
Proposal (other than the Merger or) (ii) DDL or Century abandons the Merger
in breach of this letter agreement or of any Definitive Documents, then,
not more than ten days following the occurrence of an event described by
either clause (i) or clause (ii), Century or DDL (as the case may be) will
be entitled to payment of a fee by the other party in the amount and
currency provided below (the "Termination Fee") plus up to $100,000 in the
aggregate in documented legal, financial and other expenses incurred in
pursuit of the Merger and related transactions. If payable by Century to
DDL, the Termination Fee shall be $1,000,000 in cash. If payable by DDL to
Century, the Termination Fee shall be $1,000,000 in cash.
If this letter agreement conforms with your understanding of our agreement,
then please sign below, indicating your agreement, and return it to me at
your earliest convenience, whereupon it shall evidence a binding agreement
between us as of the date first written above. Each of us represents and
warrants to the other that the terms and conditions of this letter
agreement have been approved by its Board of Directors.
Very truly yours,
DDL ELECTRONICS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
_________________________
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
Agreed:
CENTURY ELECTRONICS MANUFACTURING, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
_________________________
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
Annex A
PROMISSORY NOTE
$3,300,000 Newbury Park, California June 1, 1997
FOR VALUE RECEIVED, DDL ELECTRONICS, INC. ("DDL") promises to
pay to CENTURY ELECTRONICS MANUFACTURING, INC. ("Century") the
principal amount of Three Million Three Hundred Thousand
($3,300,000), or such lesser amount as DDL may borrow hereunder, plus
accrued but unpaid interest, on December 1, 1997. Quarterly in
arrears, DDL will pay simple interest on the unpaid principal amount
of this Note at 10% per annum until such principal amount is paid in
full.
This Note is the "Century Note" referred to in the letter
agreement dated as of May 29, 1997 between Century and DDL (the
"Letter of Intent"). This Note is secured by and as to the extent
as provided in the Letter of Intent, and may be subordinated to
existed secured credit lines presently in place. By taking this
Note, Century agrees to furnish such further assurances of such
subordination to other creditors of DDL as DDL may reasonably
request from time to time.
This Note shall be governed by and construed in accordance with
the laws of the State of Delaware.
IN WITNESS WHEREOF, DDL has executed and delivered this Note as
of the date first written above.
DDL ELECTRONICS, INC.
By: ______________________________
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
