Exhibit 10.5
AGREEMENT
AGREEMENT made as of March 15, 1999 between PC DYNAMICS CORPORATION, a
Texas corporation ("PC DYNAMICS"), and PC Dynamics of Texas, Inc. a Texas
corporation ("BUYER").
WHEREAS, PC DYNAMICS is engaged in the business of manufacturing primed
circuit boards, which business is conducted at PC DYNAMICS' owned facility
located in Frisco, Texas (the "Facility").
WHEREAS, PC DYNAMICS desires to sell to, and BUYER desires to
purchase, certain of the assets at PC DYNAMICS, subject to certain of the
liabilities of PC DYNAMICS, on the terms and conditions herein.
NOW, THEREFORE, for and in consideration of the obligations and
payments recited herein, the receipt and sufficiency of which is hereby
acknowledged, it is hereby agreed as follows:
Section 1. Purchase and Sale of Assets.
1.1 On the terms and subject to the conditions set forth in this
Agreement, at the Closing, BUYER will purchase from PC DYNAMICS, and PC
DYNAMICS will sell, transfer, assign, convey and deliver to BUYER; all of
the following assets (the "Assets"):
(a) the machinery, equipment, and furniture owned by PC DYNAMICS
on the Closing Date and listed on Schedule 1 attached hereto
(collectively, the "Equipment"); and
(b) the raw materials and supplies, work and goods in process and
finished goods inventories owned by PC DYNAMICS on the Closing Date,
excluding obsolete inventory or finished goods inventory that is not
subject to a purchase order, and listed on Schedule 2 attached hereto
(collectively, the "Inventory"):
(c) all accounts receivable due to PC DYNAMICS on the Closing
Date and listed on Schedule 3 attached hereto (collectively, the
"Accounts Receivable");
(d) all deposits of PC DYNAMICS which are listed on Schedule 4
attached hereto (collectively, the "Deposits");
(e) all contracts, agreements, purchase or sale orders to which
PC DYNAMICS is a party (collectively, the "Contracts").
(f) to the extent legally assignable, all licenses, approvals,
permits and certificates obtained from governmental agencies and held
by PC DYNAMICS as of the Closing Date;
(g) all telephone numbers currently assigned to PC DYNAMICS;
(h) the name "PC DYNAMICS" and any related or derivative name;
and
(i) the business of PC DYNAMICS as a going concern and all
goodwill of, in, related to or associated with such business.
1.2 Notwithstanding anything contained in Section 1.1 to the
contrary, PC DYNAMICS is not selling, and BUYER is not purchasing, pursuant
to this Agreement, any of the following, all of which shall be retained by
PC DYNAMICS:
(a) the consideration delivered or to be delivered to PC DYNAMICS
pursuant to this Agreement;
(b) the right of PC DYNAMICS to enforce the obligations of BUYER
under the Transaction Documents (as defined below);
(c) the cash and bank accounts of PC DYNAMICS;
(d) any claims asserted by PC DYNAMICS in any litigation
involving PC DYNAMICS;
(e) PC DYNAMICS' minute books, tax returns and other corporate
documents
(f) the Facility; and
(g) any other asset which is not specifically enumerated in
1.3 BUYER acknowledges and agrees that PC DYNAMICS makes no
warranties with respect to the Assets and the Assets are being said "AS IS"
and "WHERE IS" and all warranties, express or implied, of merchantability or
fitness for purpose or otherwise with respect in the condition, quality or
suitability of the Assets, are hereby expressly disclaimed.
1.4 As promptly as practicable after the Closing, and in consideration
of the obligations and payments recited herein, M-Wave, Inc. agrees to: (i)
cause PC DYNAMICS to transfer any remaining assets and liabilities
(contingent or otherwise) of PC DYNAMICS to M-Wave, Inc. and (ii)
immediately thereafter transfer to PlC all of the outstanding shares of PC
DYNAMICS to PIC.
Section 2. Consideration to be Paid by BUYER.
2.1 The purchase price for the Assets shall be paid by BUYER as
follows:
(a) At the Closing. BUYER shall pay to PC DYNAMICS an amount
equal to eight hundred ninety three thousand and three hundred nineteen
dollars ($893,319) by wire transfer of immediately available funds to
an account designated in writing by PC DYNAMICS;
(b) At the Closing, BUYER shall pay to PC DYNAMICS an amount
equal to seven hundred seventy three thousand four hundred and seventy
nine dollars ($773,479) in the form of BUYER's promissory note payable
to PC DYNAMICS in the form attached hereto as Exhibit A-1 (the "Note
A-1"):
(c) At the Closing, BUYER shall pay to, PC DYNAMICS an amount
equal to two hundred ninety three thousand and twenty-five dollars
($293,025) in the form of BUYER'S promissory note payable to PC
DYNAMICS in the form attached hereto as Exhibit A-2 (the "Note A-2",
and together with the Note A-1, the "Notes").
(d) At the Closing, BUYER shall execute and deliver to PC
DYNAMICS the royalty agreement in the form attached hereto as Exhibit
B (the "Royalty Agreement").
2.2 As further consideration for consummation of the transactions
contemplated hereby, BUYER shall assume and agree to thereafter pay when due
and discharge and indemnify PC DYNAMICS and hold PC DYNAMICS harmless with
respect to the executory liabilities and obligations of PC DYNAMICS under
each Contract assigned to BUYER pursuant to Section 1.1(e) hereof.
2.3 The assumption by BUYER of liabilities of PC DYNAMICS pursuant to
this Agreement shall in no way expand the rights or remedies of any third
party against BUYER or PC DYNAMICS as compared to the rights and remedies
which such third party would have had against PC DYNAMICS had BUYER not
assumed such liabilities. Without limiting the generality of the foregoing,
the assumption by BUYER of liabilities of PC DYNAMICS pursuant to this
Agreement shall not create any third party beneficiary rights.
2.4 The purchase price shall be allocated by the parties among the
Assets as follows: Accounts Receivable, Inventory, Equipment and Utility
Deposits, at book value, as of the Closing Date. The parties shall file all
tax returns and Form 8594 consistent with the allocation of the purchase
price as provided herein.
Section 3. Closing and Closing Date.
3.1 The consummation of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Xxxxxxxxxxxx
Xxxx & Xxxxxxxxx, 0000 Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, at 8:00 a.m., Chicago
time, on the date hereof (the "Closing Date"), or at such other place or on
such other date as PC DYNAMICS and BUYER may agree.
3.2 At or prior to the Closing, BUYER shall deliver to PC DYNAMICS:
(a) the cash required to be delivered by BUYER at the Closing in
accordance with Section 2.1(a) hereof,
(b) each of the Notes executed by BUYER;
(c) the Royalty Agreement executed by BUYER;
(d) a lease in the form of Exhibit C attached hereto with respect
to the Facility (the "Lease") executed by BUYER;
(e) an assumption of liabilities executed by BUYER in the form of
Exhibit D attached hereto (the "Assumption Agreement");
(f) a xxxx of sale executed by BUYER in the form of Exhibit E
attached hereto (the "Xxxx of Sale"); and
(g) such other documents executed by BUYER required to effect the
transactions contemplated hereby.
3.3 At or prior to the Closing, PC DYNAMICS shall deliver to BUYER:
(a) the Royalty Agreement executed by PC DYNAMICS;
(b) the Security Agreement executed by PC DYNAMICS;
(c) the Lease executed by PC DYNAMICS;
(d) the Assumption of Liabilities executed by PC DYNAMICS;
(e) a Xxxx of Sale executed by PC DYNAMICS;
(f) a subordination agreement in the form of Exhibit F attached
hereto;
(g) a consent by PC DYNAMICS' mortgagor to the Lease, which
consent is
mutually acceptable to such mortgagor and BUYER; and
(h) such other documents executed by PC DYNAMICS required to
effect the transactions contemplated hereby.
3.4 The parties acknowledge and agree that (a) each of Performance
Interconnect Corp., a Texas corporation, and Mr. D. Xxxxxx Xxxxx has
executed and delivered to PC DYNAMICS a guarantee in the form of Exhibit G
attached hereto (the "Guarantee"); and (b) M-Wave, Inc. has executed and
delivered the Non-Compete Agreement in the form of Exhibit H attached
hereto.
Section 4. Representations and Warranties.
4.1 PC DYNAMICS represents and warrants to BUYER as follows:
(a) PC DYNAMICS is a corporation duly organized, validly existing
and in good standing under the laws of Texas.
(b) PC DYNAMICS has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement
and all other agreements, instruments, certificates and other documents
to be entered into or delivered by any party to this Agreement in
connection with the transactions contemplated hereby (collectively, the
"Transaction Documents") and to perform its obligations pursuant to the
Transaction Documents.
(c) The execution, delivery and performance of the Transaction
Documents by PC DYNAMICS, and the consummation by PC DYNAMICS of the
transactions contemplated by the Transaction Documents, have been
authorized by the Board of Directors of PC DYNAMICS and no other
corporate action is necessary for the execution, delivery and
performance by PC DYNAMICS of the Transaction Documents and the
consummation by PC DYNAMICS of the transactions contemplated by the
Transaction Documents. Each of the Transaction Documents constitutes
the valid and legally binding obligations of PC DYNAMICS, enforceable
in accordance with its terms and conditions.
(d) All of the Assets are owned by PC DYNAMICS and are free of
any and all liens and encumbrances, except as set forth on Schedule 5.
4.2 BUYER represents and warrants to PC DYNAMICS as follows:
(a) BUYER is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation.
(b) BUYER has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and all
other Transaction Documents and to perform its obligations pursuant to
the Transaction Documents.
(c) The execution, delivery and performance of the Transaction
Documents by BUYER, and the consummation by BUYER of the transactions
contemplated by the Transaction Documents, have been authorized by the
Board of Directors of BUYER and no other corporate action is necessary
for the execution, delivery and performance by BUYER of the
Transaction Documents and the consummation by BUYER of the
transactions contemplated by the Transaction Documents. Each of the
Transaction Documents constitutes the valid and legally binding
obligations of BUYER, enforceable in accordance with its terms and
conditions.
Section 5. Indemnification.
5.1 Indemnification by PC DYNAMICS. PC DYNAMICS shall indemnify and
hold harmless BUYER in respect of any and all claims, losses,, liabilities,
and expenses (including, without limitation, settlement costs and any legal,
accounting and other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by BUYER, in connection with each
and all of the following:
(a) any breach of any representation or warranty made by PC
DYNAMICS in this Agreement;
(b) the breach of any covenant, agreement or obligation of PC
DYNAMICS contained in this Agreement or any other instrument
contemplated by this Agreement; and
(c) any liabilities or obligations of PC DYNAMICS not
specifically assumed by BUYER pursuant to this Agreement.
5.2 Indemnification by BUYER. BUYER shall indemnify and hold harmless
PC DYNAMICS in respect of any and all claims, losses, damages, liabilities
and expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by PC DYNAMICS, in connection with
each and all of the following:
(a) any breach of any representation or warranty made by BUYER in
this Agreement; and
(b) any failure by BUYER to pay any liability or fulfill any
obligation of PC DYNAMICS assumed by BUYER pursuant to this Agreement
or any other breach of any covenant, agreement or obligation of BUYER
contained in this Agreement or any other instrument contemplated by
this Agreement.
5.3 Claims for Indemnification. Whenever: any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"indemnified party") shall promptly notify the other party (the
"indemnifying party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal
proceedings by a third party, the notice to the indemnifying party shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The indemnified party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification
hereunder, without the prior written consent of the indemnifying party
(which shall not be unreasonably withheld) unless suit shall have been
instituted against it and the indemnifying party shall not have taken
control of such suit after notification thereof as provided in Section 5.4
of this Agreement.
5.4 Defense by lndemnifying Party. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement,
the indemnifying party at its sole cost and expense may, upon written notice
to the indemnified party, assume the defense of any such claim or legal
proceeding with counsel reasonably satisfactory to the party asserting such
indemnification claim if the indemnifying party acknowledges in writing its
obligations to indemnify the indemnified party with respect to all elements
of such claim. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at
its own expense. If the indemnifying parry does not assume the defense of
any such claim or litigation resulting therefrom, (a) the indemnified party
may defend against such claim or litigation, in such manner as it may deem
appropriate, including, but, not limited to, settling such claim or
litigation, after giving notice of the same in the indemnifying party, on
such terms as the indemnified party may deem appropriate, and (b) the
indemnifying party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
indemnifying party thereafter seeks to question the manner in which the
indemnified party defended such third party claim or the amount or nature of
any such settlement, the indemnifying party shall have the burden to prove
by a preponderance of the evidence that the indemnified party did not defend
or settle such third party claim in a reasonably prudent manner.
Section 6 Collection of Accounts Receivable.
6.1 For a period at three (3) months after the Closing Date (the
"Collection Period") BUYER shall use its reasonable best efforts to collect
the Accounts Receivable. BUYER may, but shall not be obligated to, use a
collection agency or commence legal actions in connection with such
collection efforts. BUYER shall maintain complete records of all customer
payments received by BUYER. During the Collection Period, authorized
representatives of PC DYNAMICS shall have reasonable access to BUYER's
premises, credit personnel and accounts receivable records, including
without limitation, bank deposits and cash receipts information, for the
purpose of monitoring BUYER's collection procedure with respect to the
Accounts Receivable and consulting with BUYER concerning such procedure. PC
DYNAMICS may, but shall not be obligated to, use a collection agency or
commence legal actions in an effort to collect the Accounts Receivable
during the Collection Period upon reasonable notice to BUYER. Within ten
(10) business days after the end of each month during the Collection Period,
BUYER shall furnish to PC DYNAMICS a statement setting forth the Accounts
Receivable showing the aging thereof as of the end of such month. Promptly
after the expiration of the Collection Period, BUYER shall advise PC
DYNAMICS of those Accounts Receivable which have not been collected as of
the end of the Collection Period which BUYER wishes PC DYNAMICS to purchase.
BUYER shall assign and sell to PC DYNAMICS (without recourse to BUYER) all
such designated Accounts Receivable then remaining unpaid for a purchase
price equal to the book value of the Accounts Receivable as set forth
Schedule 3 after deducting the aggregate amount collected by BUYER during
the Collection Period.
6.2 Upon PC DYNAMICS' repurchase of any unpaid Account Receivable
pursuant to this Section. (a) BUYER shall promptly deliver to PC DYNAMICS
any tangible evidence of such Account Receivable then in the possession of
BUYER or under its control, and (b) PC DYNAMICS shall be entitled to take
any and all actions which it may deem necessary or desirable in order to
collect such unpaid Account Receivable. BUYER will, from time to time after
such repurchase, execute and deliver to PC DYNAMICS such instruments and
other documents as PC DYNAMICS may reasonably request to assist PC DYNAMICS
in its collection efforts.
6.3 In the event that any payment received by BUYER during the
Collection Period is remitted by a customer which is indebted under both
Accounts Receivable and an account receivable arising out of the sale of
inventory in the ordinary course of business after the Closing Date (a "New
Receivable"), such payments shall first be applied to the Accounts
Receivable due from such customer and the balance remaining after payment in
full of all Accounts Receivable due from such customer shall be applied to
the New Receivable.
6.4 BUYER will cooperate, at PC DYNAMICS' expense, with PC DYNAMICS
in collecting any Accounts Receivable which are repurchased by PC DYNAMICS
pursuant to this Section; provided, however, that the foregoing shall not
require BUYER to be a party to any action brought by PC DYNAMICS to collect
such Accounts Receivable.
6.5 PC DYNAMICS hereby authorizes BUYER to open any and all mail
addressed to the PC DYNAMICS (if delivered by BUYER) if received on or after
the Closing Date and prior to the expiration of the Collection Period and
hereby grants to BUYER a power of attorney to endorse and cash any checks or
instruments made payable or endorsed to PC DYNAMICS or its order and
received by BUYER.
6.6 Any sums received by BUYER in respect of Accounts Receivable (and
so identified by the relevant account debtor) after their repurchase by PC
DYNAMICS pursuant to Section 6.1 hereof, shall be promptly transmitted by
BUYER to PC DYNAMICS.
Section 7. Post-Closing, Consents: Nonassignable Contracts.
7.1 If requested by BUYER after the Closing Date with respect to any
Contract, PC DYNAMICS will cooperate with BUYER to obtain any third party
consents with respect to such Contract: that was not obtained prior to the
Closing Date and that is required to transfer and assign such Contract to
BUYER in connection with the transactions contemplated by this Agreement. To
the extent that the transfer or attempted transfer of any Contract could
constitute a breach or a violation of any law, rule or regulation, nothing
in this Agreement will constitute a transfer or an attempted transfer
thereof or the assumption by BUYER of any liabilities or obligations arising
thereunder or otherwise relating thereto.
Section 8. Employees
8.1 BUYER shall deliver an offer of employment at least five days
prior to the Closing Date to all of the employees listed on Schedule 6
attached hereto, each of whom has been employed by PC DYNAMICS in whole or
in part in connection with the business of PC DYNAMICS. BUYER's offer shall
be contingent upon the occurrence of the Closing and shall provide that all
accrued but unused vacation earned by such employees while in the employ of
PC DYNAMICS shall be carried over and honored by BUYER upon acceptance of
BUYER's offer of employment. All employees who accept BUYER's offer of
employment shall become employees of BUYER effective upon the Closing (such
employees hereinafter referred to as the "Continuing Employees"). BUYER
shall provide to PC DYNAMICS at the Closing a list of all Continuing
Employees and PC DYNAMICS shall deliver a termination notice to each of the
Continuing Employees of BUYER.
Section 9. Miscellaneous.
9.1 No party will issue any press release or announcement relating to
the subject matter of this Agreement without the prior written approval of
the other party; provided that any party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing party will advise the other party prior to making such
disclosure).
9.2 Except as otherwise expressly provided by this Agreement, each of
the parties hereto will bear all legal and other expenses incurred by it or
on its behalf in connection with the transactions contemplated by this
Agreement.
9.3 The provisions of this Agreement may be amended or waived only by
a written agreement between PC DYNAMICS and BUYER. No course of dealing
between the parties to this Agreement or any delay in exercising any rights
hereunder will waive any rights of such parties.
9.4 No party hereto may assign or delegate any of such party's rights
or obligations under or in connection with this Agreement without the
written consent of the other party hereto; provided that (i) PC DYNAMICS may
assign this Agreement to M-Wave, Inc. and (ii) BUYER may assign this
Agreement to a wholly-owned subsidiary of BUYER (provided that any such
assignment shall nor relieve BUYER from any of its obligations under this
Agreement). Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will be binding upon and enforceable against the respective
successors and assigns of such party and will be enforceable by and will
inure to the benefit of the respective successors and permitted assigns of
such party.
9.5 Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
9.6 This Agreement may be executed simultaneously in two or more
counterparts any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and
the same Agreement.
9.7 The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
9.8 All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to
the recipient or when sent to the recipient by telecopy (receipt confirmed),
one business day after the date when sent to the recipient by reputable
express courier service (charges prepaid) or two business days after the
date when mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to PC DYNAMICS and BUYER at the addresses
indicated below, or to such other address as a party may from time to time
designate by notice to the other party given in accordance with this
Section:
If to
PC DYNAMICS: PC DYNAMICS, INC.
c/o M-Wave, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: President
If to
BUYER: PC DYNAMICS OF TEXAS, INC.
00000 XX 000 Xxxx
Xxxxxx, Xxxxx 00000
Attention: D. Xxxxxx Xxxxx
9.9 Except as otherwise expressly provided in this Agreement, this
Agreement will not confer any rights or remedies upon any person or entity
other than PC DYNAMICS, BUYER and their respected successors and permitted
assigns.
9.10 This Agreement and the other Transaction Documents constitute the
entire agreement among the parties and supersedes any prior understandings,
agreements or representations by or among the parties, written or oral, that
may have related in any way to the subject manner hereof.
9.11 The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party. The use of the
word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
9.12 The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
9.13 All questions concerning the construction, validity and
interpretation of this Agreement and the Exhibits and Schedules hereto will
be governed by the internal law, and not the law of conflicts, of the State
of Illinois. Any legal action or proceeding with respect to this Agreement
shall be brought exclusively in the courts of the State of Illinois or of
the United States of America within Xxxx County, Illinois and by execution
and delivery of this Agreement, each of the parties hereto hereby consents,
for itself and in respect of its property, to the jurisdiction of the
aforesaid courts. Each of the parties hereto hereby irrevocably waives any
objection, including without limitation, any objection to the laying of
venue or based on 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 document related hereto.
IN WITNESS WHEREOF, the parties hereto have executed and deliver this
Agreement as of the date first written above.
PC DYNAMICS CORPORATION
By: /s/
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Its:
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PC DYNAMICS OF TEXAS, INC.
By: /s/
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Its:
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For purposes of Section 1.4
of this Agreement:
M-WAVE, INC.
By: /s/
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Its:
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