EXHIBIT 10.5
INTERIM OPERATING SERVICES AGREEMENT
Circuit Acquisitions, LLC, a Nevada limited liability company ("CA") and
Circuit Source International, Inc., a Nevada corporation, ("CSI") hereby agree,
effective as of April 1, 2002 as follows:
RECITALS
1. CA, pursuant to the terms of that certain Forbearance Agreement dated
April 1, 2002 by and between the National Bank of Canada and Circuit
Technologies, Inc., an Georgia corporation (CTI), CA has the right but not the
obligation to acquire all of National Bank of Canada's right, title and interest
in and to the various loans and that security agreements by and between CTI and
the National Bank of Canada whereby in the event CA or its assignee acquires
said loans and security interests, then as successor to National Bank of Canada,
CA or its assignee shall become the secured party and CTI will remain as the
debtor. CTI is currently in default under the terms of the loans and security
agreements and in the event CSI, as the assignee of CA, acquires said loans and
security agreements CSI has agreed to forego immediately pursuing its rights
under the security agreements until July 1, 2002 (the "Diligence Period")
provided this Interim Operating Services Agreement ("Agreement") is executed.
CSI shall, during the Diligence Period, conduct a due diligence inquiry into
whether CSI wishes to acquire all or substantially all of the assets of CTI or
all of the stock of CTI held by CA or the loans and security agreements held by
the National Bank of Canada.
2. CA wishes to engage CSI, under the terms of this Interim Operating
Services Agreement ("Agreement"), to provide certain management and other
services to assist in CTI's operations during the Diligence Period or, if
earlier, the closing of any asset or stock purchase agreement that may be
entered into after CSI's completion of its due diligence, with full authority
and ultimate control remaining with the CA; and
3. The parties desire to provide for the interim operation of CTI by CSI
and to address certain issues in connection with the interim operating
arrangement.
AGREEMENT
1. TERM OF AGREEMENT. This Agreement shall remain in effect (the "Term")
for a period commencing April 1, 2002, and expiring at the closing date of the
acquisition of all or substantially all the assets ("Asset Sale") or all of the
stock of CTI ("Stock Sale") or the foreclosure pursuant to the National Bank of
Canada loan and security agreements by CSI, but in no event later than September
30, 2002.
2. ENGAGEMENT: SERVICES AND DUTIES. CSI shall provide CTI with such
purchasing services, transitional services, financial services, and other
operating services and consultation services as may be necessary for operation
of its business. At all times CA shall continue its ownership of CTI until such
time as CSI exercises one or more of its rights pursuant to the National Bank of
Canada Forbearance Agreement.
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3. NO OBLIGATION TO PURCHASE ASSETS OR STOCK. Neither party intends this
Agreement to be a contract for the Asset Sale or Stock Sale. A binding contract
for the Asset Sale or Stock Sale will not exist unless and until each party has
executed a formal written agreement approved by their respective counsel
regarding the Asset Sale or Stock Sale and containing all other essential terms
of an agreed upon transaction. The parties acknowledge that CSI has not
completed its due diligence of CTI and therefore has not set forth herein nor
agreed upon all essential terms of an agreed transaction, including without
limitation, warranties and representations, conditions precedent, indemnities
for, among other things, any actions, suits, proceedings, damages or claims, and
other terms, and that such essential terms will be the subject of further
negotiations. Efforts by each party to complete performance of any obligations
described herein shall not be considered as evidence of intent by any party to
be bound to an Asset Sale or Stock Sale. The performance by any party prior to
execution of a formal written contract of any of the obligations which may be
included in the formal written contract between the parties when negotiations
are completed shall not be considered as evidence of intent by any party to be
bound to complete an Asset Sale or Stock Sale.
4. SERVICES FEE. For the services defined in Section 2 of this Agreement,
CSI shall receive a services fee ("Services Fee") equal to the Operating Income
of CTI for the period this Agreement is in effect. For purposes of this
Agreement, Operating Income is defined as the net income of CTI before taxes,
depreciation, amortization, officer's salaries and before any distributions made
outside of the normal course of business, determined on an accrual basis in
accordance with generally accepted accounting principles. In no event shall the
Services Fee be less than $0.
5. CLOSING MATTERS. In the event, for any reason, an Asset Sale or Stock
Sale does not occur, CSI shall be entitled to all Services Fees for the period
beginning April 1, 2002 through September 30, 2002.
6. INDEMNITY. CA shall indemnify, defend and hold harmless CSI from any and
all liabilities, including reasonable attorneys' fees, caused by or resulting
from the conduct of CA or their respective agents, employees, independent
contractors (including CSI, its employees, officers and directors), officers or
directors, to the extent such liabilities are the result of any act or omission
occurring during the term of this Agreement to the extent covered by CA's
insurance, if any.
7. NO ASSIGNMENT. This Agreement is not assignable.
8. APPLICABLE LAW. This Agreement shall be construed in accordance with
substantive laws of the State of Nevada without regard to any conflict of laws
provisions thereof. The venue for any litigation, arbitration or other
proceeding relative to this Agreement shall be in Xxxxx County, state of Nevada.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one agreement.
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10. INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
11. NO EFFECT ON TERMS OF SECURITY AGREEMENT. Each party acknowledges and
agrees that, following expiration of the Diligence Period, this Agreement will
terminate and CSI may, in its sole and absolute discretion, elect not to acquire
any assets or stock but rather, exercise any and all of its rights under the
National Bank of Canada notes and security agreements.
IN WITNESS WHEREOF, intending to be legally bound, the parties have caused
this Agreement to be duly executed, under seal, as of this 27th day of March,
2002.
Circuit Acquisitions, LLC,
A Nevada Limited Liability Corporation
By: /s/ Xxx Xxxxxxxx
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Xxx Xxxxxxxx, Manager
"CSI"
Circuit Source International, Inc.
A Nevada Corporation
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President
