EXHIBIT 10.4
SALE/PURCHASE OF ASSETS
AGREEMENT
This Sale/Purchase of Assets
Agreement is entered into this 19 th , day of August, 2003, by SMTC
Corporation, a Delaware corporation (“Parent”), SMTC
Manufacturing Corporation of Wisconsin, a Wisconsin corporation
(“Seller”), and Pensar Electronic Solutions, LLC, a
Wisconsin limited liability company
(“Purchaser”).
WHEREAS, Seller operates an
electronics manufacturing facility located at 2222 East Pensar
Drive, Appleton, Wisconsin (the “Appleton Facility”),
and owns various real estate, equipment, inventories, contract
rights, and miscellaneous assets used in connection with the
operation of its business at such facility; and
WHEREAS, Purchaser desires to
acquire substantially all the assets used or useful, or intended to
be used, in the continuing operation of Seller’s Appleton,
Facility (with the exception of Seller’s product design
department and sales personnel located within the Appleton
Facility), and Seller desires to sell such assets to Purchaser;
and
NOW THEREFORE, in consideration of
these premises and of the mutual covenants contained hereafter and
other good and valuable consideration, Parent, Seller and Purchaser
agree as follows:
Section 1. Sale of Accounts Receivable . Seller
agrees to sell to Purchaser and Purchaser agrees to purchase from
Seller, the accounts receivable identified on the attached Schedule
1, Accounts Receivable – as of June 29, 2003 listing, (the
“Accounts Receivable”).
Section 2. Assets Purchased; Liabilities Assumed
.
2.1. Assets Purchased .
Seller agrees to sell and assign to Purchaser and Purchaser agrees
to purchase from Seller, on the terms and conditions set forth in
this Agreement, the assets set forth on Schedule 2.1 attached
hereto and incorporated by reference herein which shall include, to
the extent permitted, Seller’s rights to the software so
listed. (the “Assets”). The Assets are being sold to
Purchaser, and Purchaser agrees to purchase the Assets from Seller
“as is, where is” and without any warranties other than
as set forth in this Agreement.
2.2. Liabilities Assumed .
The Purchaser will assume the following liabilities of the Seller
(the “Assumed Liabilities”):
2.2.1. All accounts payable or
accrued liabilities of the Seller (a) included on Schedule 2.2 or
(b) incurred since June 29, 2003;
2.2.2. All liabilities of the Seller
under the contracts assumed by Purchaser arising after the
Effective Date;
2.2.3. All liabilities of the Seller
under the leases identified on Schedule 2.2;
2.2.4. Any obligation to provide any
former employees, their spouses and dependants so-called COBRA
continuation coverage if the selling group (as defined in section
54.4980B-9 of Treasury Regulations) ceases to provide any group
health plan to any employee in connection with the transaction
contemplated by this Agreement;
2.2.5. all obligations with respect
to unfilled purchase orders assigned to Purchaser pursuant to
Section 2.1;
2.2.6. all current, potential and
pending liabilities related to suppliers.
Section 3. Excluded Assets . Excluded from this sale
and purchase are the assets of Seller’s product design
department located within the Appleton facility listed on Schedule
3 and any other assets of the Appleton facility set forth on
Schedule 3 attached hereto and incorporated by reference
herein.
Section 4. Purchase Price .
4.1. The purchase price for the
Accounts Receivable shall be One Million Eight Hundred Sixty-Six
Thousand Dollars ($1,866,000), (the “Accounts Receivable
Purchase Price”).
4.2. The purchase price for the
Assets shall be One Million One Hundred Ninety-Two Thousand Three
Hundred Six Dollars ($1,192,306), subject to adjustment pursuant to
Section 6 hereof, together with the Assumed Liabilities (the
“Asset Purchase Price”). The Asset Purchase Price shall
be allocated as set forth on Schedule 4.2 attached hereto and
incorporated by reference herein.
Section 5. Closing .
5.1. Time and Place . This
Agreement shall be closed at the Appleton Facility (the
“Closing”) or such other mutually agreed upon location
at such date that is mutually agreed upon by the parties and is no
earlier than one (1) week after the receipt by the Seller of a
required approvals and releases from its lenders, but in no event
later than August 21, 2003 (“Closing Date”).
5.2. Payment of Purchase
Price . The Accounts Receivable Purchase Price plus the cash
portion of the Asset Purchase Price (an aggregate of Three Million
Fifty-Eight Thousand Three Hundred and Six Dollars ($3,058,306),
subject to adjustment pursuant to Section 6 hereof) shall be paid
in full on the Closing Date by cashier’s check or wire
transfer of immediately available funds to the account of Seller
per the written instructions of the Seller.
Section 6. Adjustments . The net income or net loss,
calculated in accordance with past practice of the Seller, of the
Appleton Facility from the close of business on June 29, 2003 (the
“Effective Date”) to the day preceding the Closing Date
(the “Interim Period”) shall be for the account of
Purchaser (so that the economic benefits and burdens for the
Interim Period are transferred to the Purchaser.) For the avoidance
of doubt, the calculation of net income or loss shall include all
income and expenses, including but not limited to utilities,
personal property taxes, rents, real property taxes, wages,
vacation pay, payroll taxes, lease payments and fringe benefits of
employees of Seller. For purposes of clarification, the calculation
of net income or loss shall include as expenses (but not be limited
to) all amounts paid by the Seller or any of its affiliates under
equipment leases from June 30, 2003, through the Closing Date for
those pieces
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of equipment being transferred to the Purchaser
from the Seller. An estimated net purchase price adjustment,
decreasing the Asset Purchase Price in the amount of any estimated
net income for the Interim Period and increasing the Asset Purchase
Price for the amount of any estimated net loss for the Interim
Period shall be made on the Closing Date. Furthermore, the
estimated net purchase price adjustment shall include the real
estate property tax proration for the year 2003, as of the
Effective Date, based upon the 2002 net personal property tax bill
of $63,411.78 and a personal property tax proration for the year
2003, as of the Effective Date, based upon the 2002 net personal
property tax bill of $13,270.01 (the “Tax Prorations”).
Anything herein to the contrary notwithstanding, the Seller and
Purchaser agree that an adjusting payment in the amount of $442,000
shall be made by Purchaser to Seller pursuant to the calculations
on the worksheet attached hereto as Schedule 6 and incorporated by
reference herein. No later than one week following the Closing
Date, the final net purchase price adjustment through the Closing
Date shall be calculated (by calculating final net income or loss
and the Tax Prorations) and the difference between the final net
purchase price adjustment and the estimated net purchase price
adjustment shall be paid by the Seller to the Purchaser or by the
Purchaser to the Seller, as appropriate. The calculation of such
final net purchase price adjustment shall follow the same
methodology as the worksheet attached hereto as Schedule
6.
Section 7. Miscellaneous Post-Closing Matters
.
7.1. Seller’s Continued
Occupancy Right . Seller’s Appleton product design
personnel shall be entitled to continue to occupy the currently
allocated design facilities and design office space within the
Appleton Facility through June 30, 2005. Such right of continued
occupancy shall be “rent-free”. In the event that the
Seller and Parent cease all product design activities within a 50
mile radius of Appleton, Wisconsin, all remaining so-called
engineering assets identified on Schedule 3 shall revert to and
shall be retained by Purchaser without any further
consideration.
7.2. Customer Inventories .
In the event that any customer listed on Schedule 7.2 re-sources
from Purchaser to Seller prior to July 1, 2004, Seller shall
purchase from Purchaser, at Purchaser’s cost, all of such
customer’s inventory on hand and on order.
Section 8. Other Agreements . At Closing, the
parties shall execute a Software Licensing Agreement, under which,
the Seller will license to the Purchaser, to the extent permitted,
the Appleton Software Applications listed on Schedule
2.1.
Section 9. Seller’s Representations and
Warranties . Seller represents and warrants to Purchaser as
follows:
9.1. Corporate Existence .
Seller is a corporation duly organized and validly existing and in
good standing under the laws of the State of Wisconsin. Seller has
all requisite corporate power and authority to own, operate and/or
lease the Assets, as the case may be, and to carry on its business
as now being conducted.
9.2. Authorization . The
execution, delivery, and performance of this Agreement have been
duly authorized and approved by the board of directors and the
shareholder of Seller, and this Agreement constitutes a valid and
binding Agreement of Seller in accordance with its
terms.
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9.3. Brokers and Finders .
Seller has not employed any broker or finder in connection with the
transactions contemplated by this Agreement, or taken action that
would give rise to a valid claim against any party for a brokerage
commission, finder’s fee, or other like payment.
9.4. Litigation . Seller has
no knowledge of any claim, litigation, proceeding, or investigation
pending or threatened against Seller that might result in any
material adverse change in the business or condition of Assets
being conveyed under this Agreement.
9.5. Accuracy of Representations
and Warranties . None of the representations or warranties of
Seller contains any untrue statement of a material fact or omit or
will omit or misstate a material fact necessary in order to make
statements in this Section 9 not misleading.
Section 10. Representations of Purchaser . Purchaser
represents and warrants as follows:
10.1. Company Existence .
Purchaser is a limited liability company duly organized, validly
existing, and in good standing under the laws of the State of
Wisconsin. Purchaser has all requisite power and authority to enter
into this Agreement and perform its obligations
hereunder.
10.2. Authorization . The
execution, delivery, and performance of this Agreement have been
duly authorized and approved by the members of Purchaser, and this
Agreement constitutes a valid and binding Agreement of Purchaser in
accordance with its terms.
10.3. Brokers and Finders .
Purchaser has not employed any broker or finder in connection with
the transaction contemplated by this Agreement and has taken no
action that would give rise to a valid claim against any party for
a brokerage commission, finder’s fee, or other like
payment.
10.4. Litigation . Purchaser
has no knowledge of any claim, litigation, proceeding, or
investigation pending or threatened against Seller that might
result in any material adverse change in the business or condition
of Assets being conveyed under this Agreement.
10.5. Accuracy of Representations
and Warranties . None of the representations or warranties of
Purchaser contains or will contain any untrue statement of a
material fact or omit or will omit or misstate a material fact
necessary in order to make the statements contained in this Section
10 not misleading.
Section 11. Covenants of Seller .
11.1. Seller’s Operation of
Business Prior to Closing . Seller agrees that between the date
of this Agreement and the Closing Date, Seller will:
11.1.1. Continue to operate the
business of the Appleton Facility that is the subject of this
Agreement in the usual and ordinary course and in substantial
conformity with all applicable laws, ordinances, regulations,
rules, or orders.
11.1.2. Not assign, sell, lease, or
otherwise transfer or dispose of any of the assets used in the
conduct of its business at the Appleton Facility, whether now owned
or hereafter acquired, except in the normal and ordinary course of
business and in connection with its normal operation.
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11.1.3. Maintain all of its assets
other than inventories in their present condition, reasonable wear
and tear and ordinary usage excepted, and maintain the inventories
at levels normally maintained.
11.2. Employee Matters
.
11.2.1. Prior to the Closing Date,
Seller will not, without Purchaser’s prior written consent,
enter into any material agreement with its employees, increase the
rate of compensation or bonus payable to or to become payable to
any employee, or effect any changes in the management, personnel
policies, or employee benefits, except in accordance with existing
employment practices.
11.2.2. With respect to
Seller’s Appleton employees who are employed by Purchaser
upon the Closing pursuant to Section 12.1 herein (“Affected
Employees”), such Affected Employees shall cease
participation in the SMTC 401(k) Plan immediately upon Closing. All
of such Affected Employees shall be fully vested in the employer
matching contributions account under the SMTC 401(k) Plan,
effective as of the Effective Date. SMTC 401(k) Plan account
balances for all Affected Employees shall be transferred from the
SMTC 401(k) Plan to Purchaser’s 401(k) Plan as soon as
reasonably practicable following the Closing Date.
11.2.3. As of the Effective Date,
Seller shall bear sole responsibility for the salaries and benefits
of its employees within the product design department and the sales
department located within the Appleton Facility as listed on
Schedule 11.2.3 (the “Design Employees”). Purchaser
hereby agrees that, for a period of three (3) years from the date
hereof, it will not solicit to employ any of Design Employees for
so long as they are employed by Seller or any of Seller’s
affiliates without obtaining the prior written consent of
Seller.
11.2.4. All of the so-called
“manufacturing employees” which shall be understood to
mean all of the employees at the Appleton Facility except the
Design Employees will be terminated by Seller as of the Closing
Date.
11.2.5. Effective as of the Closing
Date, any currently existing non-compete obligations of David E.
Steel and William M. Moeller are hereby waived by Seller.
Furthermore, effective as of the Closing Date, Seller waives any
and all other non-compete obligations of Seller’s employees
who will continue as employees of Purchaser.
11.3. Conditions . Seller
will use commercially reasonable efforts to effectuate the
transactions contemplated by this Agreement, to fulfill all the
conditions of the obligations of Seller under this Agreement, to do
all acts and things as may be required to carry out its obligations
under this Agreement and to consummate and complete this
Agreement.
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Section 12. Covenants of Purchaser .
12.1. Employee Matters . As
of the Closing Date, Purchaser agrees to offer current employment
to all employees of the Appleton Facility, excluding the Design
Employees.
12.2. Conditions . Purchaser
will use commercially reasonable efforts to effectuate the
transactions contemplated by this Agreement, to fulfill all the
conditions of Purchaser’s obligations under this Agreement,
to do all acts and things as may be required to carry out
Purchaser’s obligations and to consummate and complete this
Agreement.
Section 13. Conditions Precedent to Purchaser’s
Obligations . The obligation of Purchaser to purchase the
Assets is subject to the fulfillment, prior to or at the Closing
Date, of each of the following conditions, any one or portion of
which may be waived in writing by Purchaser:
13.1. Representations,
Warranties, and Covenants of Seller . All representations and
warranties made in this Agreement by Seller shall be true as of the
Closing Date as fully as though such representations and warranties
had been made on and as of the Closing Date, and, as of the Closing
Date, Seller shall not have violated or shall not have failed to
perform in accordance with any covenant contained in this
Agreement.
13.2. Financing . Purchaser
shall have obtained financing from Bank One Wisconsin, N.A., in an
amount of not less that $2,400,000.00 upon terms and conditions
satisfactory to Purchaser.
13.3. Consents . Purchaser or
Seller shall have obtained the consent of the lessors of those
leases, agreements, and other contracts listed on Schedule 2.1
which Purchaser shall assume and for which it would cause a
material adverse change on the business of the Appleton Facility
not to obtain.
13.4. Conditions of the
Business . There shall have been no material adverse change by
the Parent with regard to the operation of Seller’s Appleton
Facility prior to the Closing Date.
13.5. Bill of Sale . Seller
shall have provided Purchaser with a Bill of Sale for the Assets
reasonably satisfactory to Purchaser.
13.6. Deed . Upon payment of
the Asset Purchase Price allocated to the Real Estate, Seller shall
convey such Real Estate by warranty deed free and clear of all
liens and encumbrances except as disclosed on Schedule
13.6.
13.7. No Suits or Actions .
At the Closing Date no suit, action, or other proceeding shall have
been threatened or instituted to restrain, enjoin, or otherwise
prevent the consummation of this Agreement or the contemplated
transactions.
Section 14. Conditions Precedent to Obligations of
Seller . The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to the
fulfillment, prior to or at the Closing Date, of each of the
following conditions, any one or a portion of which may be waived
in writing by Seller:
14.1. Representations,
Warranties, and Covenants of Purchaser . All representations
and warranties made in this Agreement by Purchaser shall be true as
of the Closing Date as fully as
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though such representations and warranties had
been made on and as of the Closing Date, and Purchaser shall not
have violated or shall not have failed to perform in accordance
with any covenant contained in this Agreement.
14.2. Consent of Lenders .
Seller shall have obtained any required consents and releases from
its lenders to allow for Seller’s consummation of this
Agreement. Lenders shall have released the mortgage on the Real
Estate and terminated any security interests in the Accounts
Receivable and the Assets.
14.3. Novation from Lessors.
With respect to the equipment leases assumed by Purchaser,
Purchaser shall obtain and provide to Seller a novation from each
of the equipment lessors releasing the Seller from any future
liabilities under such leases.
14.4. Opinion of Counsel for
Purchaser . Purchaser shall have furnished Seller with an
opinion of counsel in form and substance reasonably satisfactory to
Seller’s counsel to the effect that the representations and
warranties contained in Sections 10.1 and 10.2 are true.
Section 15. Purchaser’s Acceptance . Purchaser
represents and acknowledges that it has entered into this Agreement
on the basis of its own examination, personal knowledge, and
opinion of the value of the Appleton Facility. Purchaser has not
relied on any representations made by Seller other than those
specified in this Agreement. Purchaser further acknowledges that
Seller has not made any agreement or promise to repair or improve
any of the leasehold improvements, equipment, or other
pers
