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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number 0-19143
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DYNAMOTION/ATI CORP.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
NEW YORK 93-1192354
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
1639 E. EDINGER AVE., SANTA ANA, CA 92705
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(Address of Principal Executive Offices)
(714) 541-4818
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(Issuer's Telephone Number, Including Area Code)
Indicate by a check mark whether the small business issuer (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
As of November 6, 1996, there were 2,826,896 shares outstanding of the issuer's
common stock, $.04 par value, 953,279 shares outstanding of the issuer's Class A
preferred stock, $.01 par value and 2,250,000 shares outstanding of the issuer's
Class B preferred stock, $.01 par value.
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DYNAMOTION/ATI CORP.
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
BALANCE SHEET - SEPTEMBER 30, 1996 3
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 4
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
</TABLE>
2
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DYNAMOTION/ATI CORP.
PART I - ITEM 1.
BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1996
(IN 000'S, EXCEPT SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Trade accounts receivable, less allowance
for doubtful accounts of $168 $ 3,993
Inventories (Note 1) 4,636
Prepaid expenses and other current assets 102
Note receivable - current (Note 6) 620
--------
TOTAL CURRENT ASSETS 9,351
MACHINERY AND EQUIPMENT -
Net of accumulated depreciation of $790 654
NOTE RECEIVABLE - Long term (Note 6) 722
INTANGIBLE AND OTHER ASSETS 111
PATENTS - Net of accumulated amortization of $1,024 3,180
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$ 14,018
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,610
Unfunded disbursements 287
Revolving credit facility (Note 2) 3,297
Current maturities of long-term debt (Note 3) 970
Accrued commissions 488
Accrued payroll and related expenses 534
Other current liabilities 1,044
Note payable to bank (Note 2) 1,596
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TOTAL CURRENT LIABILITIES 11,826
LONG-TERM DEBT (Note 3) 565
REDEEMABLE PREFERRED STOCK (Note 4) 1,852
SHAREHOLDERS' EQUITY (Notes 4 and 5):
Convertible preferred stock, non-cumulative at
$.44 per share, $.01 par value, liquidation preference $5.50, authorized
2,062,500 shares, issued and outstanding
954,479 shares 10
Common stock, $.04 par value, authorized
20,000,000 shares, issued and outstanding
2,825,674 shares 113
Additional paid-in capital 15,657
Common stock warrants 270
Accumulated deficit (16,275)
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TOTAL SHAREHOLDERS' EQUITY (225)
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$ 14,018
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
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DYNAMOTION/ATI CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN 000'S, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 3,331 $ 5,182 $ 12,279 $ 13,903
COSTS AND EXPENSES:
Cost of sales 2,637 3,704 9,446 11,298
Inventory write-down -- -- -- 600
Selling, general and administrative
expenses 1,065 1,127 2,845 2,969
Research and development expenses 479 313 1,384 1,016
Amortization of intangible assets 89 115 258 443
(Gain) on sale of division and assets (45) -- (45) --
Goodwill write-off -- -- -- 3,517
-------- -------- -------- --------
Total costs and expenses 4,225 5,259 13,888 19,843
-------- -------- -------- --------
LOSS FROM OPERATIONS (894) (77) (1,609) (5,940)
INTEREST EXPENSE, NET 244 146 574 467
-------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAX BENEFIT (1,138) (223) (2,183) (6,407)
-------- -------- -------- --------
INCOME TAX BENEFIT -- 32 -- 98
-------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS (1,138) (191) (2,183) (6,309)
-------- -------- -------- --------
LOSS FROM DISCONTINUED
OPERATIONS -- -- -- 50
-------- -------- -------- --------
NET LOSS $ (1,138) $ (191) $ (2,183) $ (6,359)
======== ======== ======== ========
NET LOSS PER COMMON SHARE:
(Primary and fully dilutive)
Loss from continuing operations $ (.43) $ (.12) $ (.86) $ (3.95)
Loss from discontinued operations -- -- -- (.03)
-------- -------- -------- --------
Net loss $ (.43) $ (.12) $ (.86) $ (3.98)
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
USED IN COMPUTATION:
Primary and fully dilutive 2,814 1,642 2,698 1,598
======== ======== ======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
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DYNAMOTION/ATI CORP.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN 000'S)
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<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,183) $(6,359)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 507 605
Deferred income taxes -- (98)
Loss on sale of equipment -- 13
Goodwill write-off -- 3,517
Inventory writedown -- 600
Reserve for discounted operations -- 350
Provision for doubtful accounts 50 36
Gain on sales of division and assets (45) --
Gain on extinguishment of debt -- (53)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (314) 291
(Increase) decrease in inventories (109) (1,691)
(Increase) decrease in prepaid expenses and other assets (26) 17
Increase (decrease) in accounts payable (177) 1,650
Increase (decrease) in accrued expenses and other liabilities (336) 148
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NET CASH (USED) IN OPERATING ACTIVITIES (2,633) (974)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (163) (212)
Proceeds on sale of assets 145 40
Proceeds on sale of division and assets 300 --
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NET CASH (USED) IN INVESTING ACTIVITIES 282 (172)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in unfunded disbursements (201) 491
Proceeds on revolving credit loan, net 1,149 457
Net proceeds from issuance of redeemable preferred stock 1,984 --
Proceeds from note receivable 7 3
Proceeds from issuance of note payable 133 --
Principal payments on long-term debt (638) (64)
Payment of deferred financing fees (93) --
Proceeds from issuance of common stock 10 --
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NET CASH PROVIDED BY FINANCING ACTIVITIES 2,351 887
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NET INCREASE (DECREASE) IN CASH -- (259)
CASH - Beginning of period -- 259
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CASH - End of period $ -- $ --
======= =======
CASH PAID DURING THE PERIOD
Interest $ 472 $ 427
======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
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DYNAMOTION/ATI CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
These interim financial statements should be read in conjunction with
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1995.
The accompanying unaudited financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair
presentation of the financial position and the results of operations
for the interim periods presented. All such adjustments are of a
normal, recurring nature. The results of the Company's operations for
any interim period are not necessarily indicative of the results
attained for a full fiscal year.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventory balances at
September 30, 1996, are as follows (in 000's):
<TABLE>
<S> <C>
Raw materials $1,430
Work-in-progress 2,098
Finished goods - Dynamotion 404
Finished goods - ATI routers 704
------
$4,636
======
</TABLE>
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per share is based on the weighted average number of
common shares and common share equivalents outstanding during the
period. Common share equivalents are excluded if their effect is
anti-dilutive. The computation includes an adjustment for Class A
preferred stock dividends in 1995, and none for 1996, due to
management's uncertainty regarding the payment of a preferred stock
dividend for 1996. Class B preferred stock dividends and accretion of
stock issuance costs are included in earnings per share for 1996.
2. REVOLVING CREDIT FACILITY
On March 20, 1996, the Company entered into a new debt facility with
IBJ Schroder Bank and Trust Company ("IBJ"), superseding all terms of
the original credit facility with IBJ ("New Debt Facility"). The New
Debt Facility provided for up to $7.0 million in senior secured
financing segregated into two credit facilities secured by a first
priority lien against all of the Company's assets. The first credit
facility allows for borrowings on a revolving line of credit up to $4.0
million with advances up to 80% of eligible accounts receivable and up
to 40% of eligible inventory (subject to a sub-limit of $1.0 million).
The second credit facility was a $2.5 million term loan amortizing in
monthly installments of $27,778 in year one, $45,000 in year two,
$55,000 in year three, and final payment aggregating $966,664 due at
December 31, 1999, the date of maturity. Additionally, in August 1996
the Company made a $300,000 payment against the term loan from the
proceeds of the sale of the ATI product line thereby reducing the
amount due at the maturity to $666,664. Additional repayments are
required equal to 25% of excess cash flow (as defined in the credit
agreement) of each fiscal year period payable on April 15th of the
subsequent year. Interest, due monthly, is at IBJ's base rate plus
1.75% on the revolver portion of the loan and at IBJ's base rate plus
2.25% on the term loan portion. Loan origination fees totaled $55,000
and were paid upon completion of the transaction. An additional $25,000
of other loan related fees were also incurred related to the New Debt
Facility and were recorded in March 1996. A collateral evaluation fee
and unused facility fee, due monthly, total $1,500, and .5% per annum,
respectively. As of September 30, 1996 the Company's outstanding
indebtedness under the line of credit and term loan was approximately
$3.3 million and $2.0 million, respectively. As of September 30, 1996,
the Company had approximately $167,000 of availability provided by the
New Debt Facility. As of September 30, 1996 and through the date of
this filing, the Company has been in violation of certain
6
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DYNAMOTION/ATI CORP.
financial loan covenants contained in the New Debt Facility. The
Company is currently negotiating with IBJ to obtain a waiver of such
covenants. Although no assurances can be given management believes that
IBJ will not attempt to accelerate payment on the New Debt Facility in
the near term. If a default is declared and demand is made for payment,
the Company would not be able to meet such demand.
3. NOTE PAYABLE
In May 1996, $86,055 of payables to the former chairman of the
Company's Board of Directors was converted to a note payable in
twenty-four monthly installments of approximately $3,900 beginning June
1996 and bearing interest at 7.3%.
4. REDEEMABLE PREFERRED STOCK
On March 20, 1996, the Company issued to new investors 2,000,000 new
shares of series Class B redeemable cumulative convertible preferred
stock, par value $.01, in exchange for $2,000,000. The preferred stock
is entitled to receive an annual 8% cumulative dividend, payable in
cash or shares of common stock at the option of the Company. As of
September 30, 1996, approximately $85,000 has been transferred from
accumulated deficit into redeemable preferred stock as a result of
accretion. Each share of preferred stock is convertible into
approximately .99 shares of common stock at any time. Each holder of
preferred stock had the right to put the shares back to the Company any
time after the fifth anniversary of their issuance date for cash at a
price equal to the liquidation value ($1.00 per share) thereof, plus
all accrued and unpaid dividends. As of the date of this filing the
investors have agreed in principle to relinquish control of the
redemption right to the Company in return for an increase in the
dividend rate. The Company is currently negotiating the final terms of
this change. The pro forma information disclosed herein is as if the
aforementioned agreement was signed by September 30, 1996:
<TABLE>
<CAPTION>
Balance Adjustment Adjusted Balance
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<S> <C> <C> <C>
REDEEMABLE PREFERRED STOCK (Note 4) $ 1,852 $ (1,852) $ 0
SHAREHOLDERS' EQUITY (Notes 4 and 5):
Convertible preferred stock, non-cumulative at
$.44 per share, $.01 par value, liquidation preference $5.50, authorized
2,062,500 shares, issued and outstanding
954,479 shares 10 0 10
Convertible preferred stock, 8% cumulative, 0 22 22
$.01 par value, issued and outstanding 2,250,000 shares
Common stock, $.04 par value, authorized
20,000,000 shares, issued and outstanding
2,825,674 shares 113 0 113
Additional paid-in capital 15,657 1,830 17,487
Common stock warrants 270 0 270
Accumulated deficit (16,275) 0 (16,275)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY $ (225) $ 0 $ 1,627
======== ======== ========
</TABLE>
The preferred stock will vote with the common stock as a single class
on most corporate matters with each share of preferred stock entitled
to the number of votes equal to the number of shares of common stock
into which it is convertible. Additionally, the holders of the
preferred stock are entitled to elect two members of the Board of
Directors and have the right to approve certain transactions. The
preferred stock also contains demand registration rights once converted
to common stock. Approximately $266,000 of issuance costs and $270,000
of warrant value were offset against the proceeds from the sale of the
Class B preferred stock. As of September 30,1996, approximately $54,000
of the previously mentioned costs were accreted and added to the
balance of the redeemable preferred stock from accumulated deficit.
In July 1996, the Company issued 250,000 shares in a private placement
of its series Class B redeemable cumulative convertible preferred stock
for a total price of $250,000. The shares are pari passu with the
original issuance of series Class B shares issued on March 20, 1996
with the following exceptions (i) the shares have no demand
registration rights and (ii) the piggyback registration rights
associated with such shares are subordinate to the rights of the other
shares of such preferred stock. The net proceeds of the private
placement were applied against the outstanding indebtedness under the
Company's New Debt Facility.
7
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DYNAMOTION/ATI CORP.
5. SHAREHOLDERS' EQUITY
On March 20, 1996, the Company issued a warrant to acquire 330,302
shares of common stock at $1.01 per share to the investors, in
connection with the New Debt Facility. These warrants expire on March
20, 2001 and have been valued at $270,000.
The aforementioned common stock warrants contain anti-dilution
provisions that will increase the common stock issuable upon the
occurrence of certain events. The Company has also entered into an
agreement to issue to the new investors a warrant to acquire .538
shares of common stock for each share of common stock acquired with the
warrants issued in connection with the Company's 1993 issuance of Class
A preferred stock. The warrant would provide for a purchase price equal
to the weighted average price paid by the Class A preferred stock
warrant holders. The new warrant is to be issued in July 1998 and
expires on March 20, 2001. The agreement also contains certain
acceleration clauses in the event of the sale of 50% or more of the
Company's common stock.
In April 1996, $78,216 of payables were converted to 41,826 common
stock shares at a rate of $1.87 per share, the current market value at
the time of the conversion.
6. SALE OF DIVISION AND ASSETS
On August 20, 1996 the Company sold substantially all of the assets
(other than finished goods) associated with its ATI router product line
to Advanced Technologies, Inc. ("Purchaser"). The purchase price for
the assets consisted of (a) $1,100,000 ($300,000 paid in cash which was
applied to the Company's term loan balance under the New Debt Facility
with the balance of the purchase price paid by delivery to the Company
of a $800,000 promissory note (the "Note") ) and (b) the value of
certain assumed liabilities. Principal under the Note is payable
monthly at a rate equal to 15% of Purchaser's monthly gross revenue and
interest at prime is payable quarterly with all unpaid principal and
unpaid accrued interest due on December 31, 1997.
The finished goods associated with the Company's ATI router product
line will be sold to the Purchaser pursuant to the terms of a Finished
Goods Agreement (the "Agreement"). Such finished goods will be sold to
the Purchaser as customers agree to purchase the finished goods;
provided, however, Purchaser agrees, subject to certain conditions, to
purchase on December 31, 1996 all finished goods not sold to customers
on or before such date (payments of these finished goods are to be made
through June 30, 1997).
Purchaser's obligation under the Note and the Agreement are secured by
(i) a second priority security interest in all of Purchaser's assets
and (ii) a second priority lien in all of the outstanding stock of
Purchaser (which lien on such stock can be foreclosed upon only in the
event of fraud or malfeasance). As of the date of this filing, the
Purchaser is in default of the Note for lack of payment. The Company
has made demand for payment. Although no assurances can be given,
management believes the default will be remedied within the fourth
quarter of 1996. Currently, management has not reserved for this
receivable as it believes the amount to be fully collectible.
The Company sold substantially all of the assets associated with its
Production Machine Control ("PMC") division on September 30, 1996 to
the Company's largest supplier (the "Buyer"). The purchase price for
the assets consisted of (a) $1,000,000 ($300,000 receivable and the
$700,000 balance was applied to $1.2 million of outstanding trade
payables due the Buyer) and (b) the value of certain assumed
liabilities. The $300,000 receivable was collected in full in October
1996. In addition, the Company agreed to pay on or before December 31,
1996 the remaining $500,000 in outstanding trade payables due to the
Buyer.
The following pro-forma information is disclosed for the current
interim periods and the corresponding interim periods of the preceding
fiscal year as though the aforementioned transactions occurred at the
beginning of the periods;
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DYNAMOTION/ATI CORP.
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
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<S> <C> <C> <C> <C>
Revenue $ 3,287 $ 2,945 $ 9,708 $ 7,426
Loss from Continuing Operations (971) (620) (2,408) (7,358)
Net Loss (971) (620) (2,408) (7,408)
Earnings (loss) per share
Loss from Continuing Operations (.37) (.38) (.94) (4.61)
Net Loss (.37) (.38) (.94) (4.64)
</TABLE>
7. MANAGEMENT PLANS
For the nine months ended September 30, 1996 and 1995, the Company's
net loss was $2.2 million and $6.4 million, respectively. Inclusive in
the 1995 net loss was a $3.5 million write-off of goodwill and several
charges to cost of sales primarily to slow-moving and obsolete
inventory. Management attributes these losses to two main issues.
First, inefficient raw material procurement resulting in inefficient
production performance and greater than average cycle times. Second,
revenue levels thus far achieved during 1996 have been significantly
below the Company's expectations due to the slowdown in demand in the
worldwide printed circuit board industry. These two issues combined
with collectibility issues on several large receivables have placed a
severe strain on the Company's liquidity and working capital and
diverted management attention to financial matters, as well as
substantially increased administrative fees and the cost of financing.
The Company has taken actions to reduce its losses including
replacement of senior management in 1996 and 1995, disposing of
operations and product lines which produced negative cash flow or did
not fit with the Company's long term strategies, arranging of new
financing which included the New Debt Facility (Note 2), the issuance
of Class B preferred stock for $2.3 million (Note 4) and reducing
operating expenses, specifically, workforce reductions in April and
June of 1996.
Management believes the actions taken will allow the Company to meet
its obligations assuming revenue levels do not continue to decline.
However, no assurances can be given that the Company will be successful
in achieving profitability or positive cash flow.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This filing contains forward-looking statements which involve risks and
uncertainties. The Company's actual future may differ significantly
from the results discussed in the forward-looking statements. Factors
that might cause a difference include, but are not limited to, product
demand and the rate of market acceptance, the effect of economic
conditions, the impact of competitive products and pricing, delays in
product development, capacity and supply constraints or difficulties,
general business and economic conditions, and other risks detailed in
the Company's Securities and Exchange Commission filings.
GENERAL
On August 20, 1996 the Company sold substantially all of the assets
(other than finished goods) associated with its ATI router product line
to Advanced Technologies, Inc. ("Purchaser"). The purchase price for
the assets consisted of (a) $1,100,000 ($300,000 paid in cash which was
applied to the Company's term loan balance under the New Debt Facility
with the balance of the purchase price paid by delivery to the Company
of a $800,000 promissory note (the "Note") ) and (b) the value of
certain assumed liabilities. Principal under the Note is payable
monthly at a rate equal to 15% of Purchaser's monthly gross revenue and
interest at prime is payable quarterly with all unpaid principal and
unpaid accrued interest due on December 31, 1997. The finished goods
associated with the Company's ATI router product line will be sold to
the Purchaser pursuant to the terms of a Finished
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DYNAMOTION/ATI CORP.
Goods Agreement (the "Agreement"). Such finished goods will be sold to
the Purchaser as customers agree to purchase the finished goods;
provided, however, Purchaser agrees, subject to certain conditions, to
purchase on December 31, 1996 all finished goods not sold to customers
on or before such date (payments of these finished goods are to be made
through June 30, 1997).
Purchaser's obligation under the Note and the Agreement are secured by
(i) a second priority security interest in all of Purchaser's assets
and (ii) a second priority lien in all of the outstanding stock of
Purchaser (which lien on such stock can be foreclosed upon only in the
event of fraud or malfeasance). As of the date of this filing, the
Purchaser is in default of the Note for lack of payment. The Company
has made demand for payment. Although no assurances can be given,
management believes the default will be remedied within the fourth
quarter of 1996. Currently, management has not reserved for this
receivable as it believes the amount to be fully collectible.
The Company sold substantially all of the assets associated with its
Production Machine Control ("PMC") division on September 30, 1996 to
the Company's largest supplier (the "Buyer"). The purchase price for
the assets consisted of (a) $1,000,000 ($300,000 receivable and the
$700,000 balance was applied to $1.2 million of outstanding trade
payables due the Buyer) and (b) the value of certain assumed
liabilities. The $300,000 receivable was paid in full in October 1996.
In addition, the Company agreed to pay on or before December 31, 1996
the remaining $500,000 in outstanding trade payables due to the Buyer.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Total revenues for the quarter ended September 30, 1996 were $3.3
million, compared to total revenues of $5.2 million for the
corresponding period in 1995. Total revenues from machine sales for the
quarter ended September 30,1996 were $2.7 million, compared to $4.4
million for the corresponding period in 1995. The machine revenue
decrease of 39% is primarily attributable to a significant decrease in
unit volume which is the result of two issues. First, is the slowdown
in the worldwide printed circuit board industry. No assurances can be
given that the industry demand will accelerate in the near future. The
second issue is the sale of the ATI router product line in August 1996
which accounted for $1.8 million of machine revenue in the third
quarter of 1995. Although router machine sales were significant in
1995, the Company sold the router product line in response to the 1996
slowdown and to enable the Company to focus resources on the Company's
higher margin, more technologically advanced products. Field service
revenue, which includes parts sales and repairs and maintenance sales,
was $650,000 for the 1996 quarter, compared to $667,000 for the
corresponding period in 1995. The 3% revenue decrease is primarily
attributable to a decrease in parts sales and repair and maintenance
sales due to the sale of the ATI router product line in August 1996. As
a result of the sale of the ATI router product line, and the PMC
division, field service revenue is expected to be at lower levels in
the near future.
Cost of sales for the quarter ended September 30, 1996 was $2.6
million, or 80% of revenues, compared to $3.7 million, or 71% of
revenues for the corresponding period in 1995. The cost of sales
increase is due primarily to the sale of several machines at low
margins in addition to higher than expected overhead costs resulting
from low machine production volume. Decreasing the cost of sales
percentage is contingent upon product mixes, prices, increased volume
and successful execution of the Company's plans to improve
manufacturing efficiencies.
Selling, general and administrative expenses for the quarter ended
September 30, 1996 was $1.1 million, or 32% of revenues, compared to
$1.1 million or 22% of revenues for the corresponding period in 1995.
The percentage increase over the comparable period in 1995 is primarily
due to the 37% decrease in total revenues. However, in an effort to
further contain costs as a result of the revenue decrease, the Company
sold its PMC division in September of 1996. The PMC division incurred
approximately $25,000 per month in administrative expenses. Other
factors impacting administrative expenses include; $50,000 of bad debt
expense recorded in the third quarter of 1996 in response to specific
delinquent receivables and; an increase in legal fees incurred related
to the sale of the two entities previously noted. Additionally,
effective as of December 31, 1996, the Company will have eliminated all
of its outside sales representatives thereby anticipating a reduction
in its commission expense. Management believes that a direct sales
effort (which has already begun to be implemented) will not only be
less expensive but more effective as well.
Research and development expenses for the quarter ended September 30,
1996 were $479,000, or 14% of revenues, compared to $313,000, or 6% of
revenues for the corresponding period in 1995. The increase in research
and development expenses of $166,000 is primarily attributable to an
increase in labor costs and
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DYNAMOTION/ATI CORP.
research and development materials related to the development of
several new products of which two have already been released into
production and sold. Additionally, depreciation expense has increased
approximately $24,000 in the quarter related to the addition of a
testing machine. Research and development expenses are expected to
decrease in the fourth quarter due to sale of the PMC division.
Amortization of intangible assets for the quarter ended September 30,
1996 was $89,000, compared to $115,000 for the corresponding period in
1995. The $26,000 decrease is primarily due to the elimination of
deferred financed costs related to the original credit facility which
was superseded in March 1996 by the New Debt Facility.
Interest expense was $244,000 for the quarter ended September 30, 1996,
compared to $146,000 for the corresponding period in 1995. The increase
in interest expense is primarily a result of $53,000 of interest
expense related to a significant overdue trade payable due the
purchaser of the PMC division and the increase in the Company's
outstanding indebtedness under the revolving credit facility from
approximately $4.1 million on September 30, 1995 to $5.3 million on
September 30, 1996 under the New Debt Facility. The higher bank level
is the result of funding working capital needs, including the build-up
of finished goods due to revenue levels which were significantly below
the Company's expectations. In addition, the Company has experienced
delays in the collection of several large trade receivables, one of
which was resolved late in the third quarter. The Company is actively
engaged in collection efforts and believes a portion of the delayed
collections will be resolved in the fourth quarter of 1996. Management
has not reserved for these receivables. The bank debt level and
interest expense are expected to remain relatively high through the
fourth quarter of 1996.
For the reasons set forth above, the Company incurred a net loss for
the quarter ended September 30, 1996, of $1.1 million compared to a net
loss of $191,000 for the comparable period in 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Total revenues were $12.3 million, compared to total revenues of $13.9
million for the corresponding period in 1995. Total revenues from the
sale of drilling and routing machines were $9.8 million, compared to
$11.4 million for the corresponding period in 1995. Revenue levels
achieved were significantly below the Company's expectations which is
the result of two issues. First, is due to the slowdown in demand in
the worldwide printed circuit board industry. No assurances can be
given that the industry demand will accelerate in the near future. The
second issue is the sale of the ATI router product line in August 1996
which accounted for $5.0 million of machine revenue in the nine months
ended September 30, 1995. Although router machine revenues were
significant during 1995, the Company sold its router line in response
to the 1996 slowdown and to enable the Company to focus resources on
the Company's higher margin, more technologically advanced products.
Field service revenue, which includes parts sales and repairs and
maintenance sales, remained comparable at $2.5 million for the nine
months ended September 30, 1996 and 1995. However, field service
revenue is expected to be at lower levels in the fourth quarter as a
result of the sale of the ATI product line and PMC division.
Cost of sales for the nine months ended September 30, 1996 was $9.4
million, or 77% of revenues, compared to $11.3 million, or 81% of
revenues for the corresponding period in 1995. The cost of sales
decrease is due primarily to an inventory adjustment recorded in June
1995. However, the cost of sales percentage for 1996 remains high
primarily due to the sale of several machines at low margins including
the sale of two engineering prototype machines at negative margins and
higher than expected overhead costs resulting from low machine
production volume. Decreasing the cost of sales percentage in the
remainder of 1996 is contingent upon product mixes, prices, increased
volume and successful execution of the Company's plans to improve
manufacturing efficiencies. In response to the industry slowdown, in
April and June of 1996, the Company reduced its workforce by
approximately, 10% and 20%, respectively, in an attempt to achieve
better margins at current or reduced sales levels. A significant
portion of the June workforce reduction were employees related to the
ATI router product line, which as previously noted, was sold in August
1996.
Selling, general and administrative expenses for the nine months ended
September 30, 1996 was $2.8 million, or 23% of revenues, compared to
$3.0 million, or 21% of revenues for the corresponding period in 1995.
The percentage increase (as a function of revenues) over the comparable
period in 1995 is primarily due to the 12% decrease in total revenues.
In an effort to further contain costs as a result of the revenue
decrease, the Company reduced its workforce in April and June of 1996
and sold its PMC division in September of 1996. The PMC division
incurred approximately $25,000 per month in administrative expenses.
Other factors impacting administrative expenses include; $50,000 of bad
debt expense recorded in the third quarter of 1996 in response
11
<PAGE> 12
DYNAMOTION/ATI CORP.
to specific delinquent receivables and; an increase in legal fees
incurred in the sale of two entities previously noted. Additionally,
effective as of December 31, 1996, the Company will have eliminated all
of its outside sales representatives thereby anticipating a reduction
in its commission expense. Management believes that a direct sales
effort (which has already begun to be implemented) will not only be
less expensive but more effective as well.
Research and development expenses for the nine months ended September
30, 1996 was $1.4 million, or 11% of revenues, compared to $1 million
or 8% of revenues for the corresponding period in 1995. The increase in
research and development expenses of approximately $400,000 is
primarily attributable to an increase in labor costs and research and
development materials related to the development of several new
products, of which two have already been introduced into the production
line and sold. Additionally, depreciation expense has increased
approximately $68,000 related to the addition of a testing machine.
Research and development expenses are expected to decrease due to the
sale of the PMC division which incurred related costs of $366,000
during 1996.
Amortization of intangible assets for the nine months ended September
30, 1996 was $258,000, compared to $443,000 for the corresponding
period in 1995. The $185,000 decrease is primarily due to the
elimination of amortization for $3.5 million of goodwill written-off in
June 1995 and the elimination of deferred financing costs related to
the original credit facility superseded in March 1996 by the New Debt
Facility.
Interest expense was $574,000 for the nine months ended September 30,
1996, compared to $467,000 for the corresponding period in 1995. The
increase in interest expense is primarily a result of $53,000 of
interest expense recorded in the third quarter of 1996 related to a
significant overdue trade payable due to the purchaser of the PMC
division and the increase in the Company's outstanding indebtedness
under the revolving credit facility from approximately $4.1 million on
September 30, 1995 to $5.3 million on September 30, 1996 under the New
Debt Facility. The higher bank level is the result of funding working
capital needs, including the build-up of finished goods due to revenue
levels which were significantly below the Company's expectations. In
addition, the Company has experienced delays in the collection of
several large trade receivables one of which was resolved late in the
third quarter. The Company is actively engaged in collection efforts
and believes a portion of the delayed collections will be resolved in
the fourth quarter of 1996. Management has not reserved for these
receivables. The bank debt level and interest expense are expected to
remain relatively high through the fourth quarter of 1996.
For the reasons set forth above, the Company incurred a net loss for
the nine months ended September 30, 1996, of $2.2 million compared to a
net loss of $6.4 million for the comparable period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
On March 20, 1996, the Company entered into the New Debt Facility with
IBJ, superseding all terms of the Company's original credit facility.
The New Debt Facility provided for up to $7.0 million in senior secured
financing segregated into two credit facilities secured by a first
priority lien against all of the Company's assets. The first credit
facility allows for borrowings on a revolving line of credit up to $4.0
million with advances up to 80% of eligible accounts receivable and up
to 40% of eligible inventory (subject to a sub-limit of $1.0 million).
The second credit facility was a $2.5 million term loan amortizing in
monthly installments of $27,778 in year one, $45,000 in year two,
$55,000 in year three, and final payment aggregating $966,664 due at
December 31, 1999, the date of the maturity. Additionally, in August
1996 the Company made a $300,000 payment against the term loan from the
proceeds of the sale of the ATI product line thereby reducing the
amount due at maturity to $666,664. Additional repayments are required
equal to 25% of excess cash flow (as defined in the credit agreement)
of each fiscal year period payable on April 15th of the subsequent
year. Interest, due monthly, is at IBJ's base rate plus 1.75% on the
revolver portion of the loan and at IBJ's base rate plus 2.25% on the
term loan portion. Loan origination fees totaled $55,000 and were paid
upon completion of the transaction. An additional $25,000 of other loan
related fees were also incurred related to the New Debt Facility and
have been recorded in March 1996. A collateral evaluation fee and
unused facility fee, due monthly, total $1,500, and .5% per annum,
respectively. As of September 30, 1996 the Company's outstanding
indebtedness under the line of credit and term loan was approximately
$3.3 million and $2.0 million, respectively. As of September 30, 1996,
the Company had approximately $167,000 of availability provided by the
New Debt Facility. As of September 30, 1996 and through the date of
this filing, the Company has been in violation of certain financial
loan covenants contained in the New Debt Facility. The Company is
currently negotiating with IBJ to obtain a waiver of such covenants.
Although no assurances can be given management believes that IBJ will
not attempt to accelerate payment on the New Debt
12
<PAGE> 13
DYNAMOTION/ATI CORP.
Facility in the near term. If a default is declared and demand is made
for payment, the Company would not be able to meet such demand.
Concurrent with the aforementioned agreement, on March 20, 1996, the
Company issued to new investors 2,000,000 shares of its newly created
series Class B cumulative redeemable convertible preferred stock for a
total price of $2.0 million. The 2,000,000 preferred shares convert
into approximately 30% of the Company's common stock on a diluted
basis. Approximately $266,000 of issuance costs and $270,000 of warrant
value were offset against the proceeds from the sale of the Class B
preferred stock. The net proceeds were applied against the outstanding
indebtedness under the Company's New Debt Facility.
So long as any of the Class B preferred shares are outstanding, the
Company may not declare or pay any dividends or distributions on, or
acquire, any shares of any class or series of its capital stock having
rights with respect to dividends or upon liquidation that are junior to
those of the Class B preferred shares unless all accrued and payable
Class B dividends have been paid or declared. The Class B preferred
stock purchase agreement prohibits the Company from issuing, selling or
otherwise disposing of any shares of its capital stock or securities
convertible or exchangeable or exercisable for shares of its capital
stock for three years after March 20, 1996, without the prior written
approval of the investor, if such action could cause the Company to
undergo an "ownership change" as defined in Section 382 of the Internal
Revenue Code.
In addition, in connection with such investment, the Company entered
into a consulting agreement, with the aforementioned investors,
pursuant to which the Company pays the consultant a quarterly fee equal
to three-tenths of one percent of the Company's net revenues for each
fiscal quarter until termination of the consulting agreement, which
expires in 2001. As of September 30, 1996, approximately $23,000 of
management fees have been accrued and remain unpaid.
In July 1996, the Company issued 250,000 shares in a private placement
of its series Class B redeemable cumulative convertible preferred stock
for a total price of $250,000. The shares are pari passu with the
original issuance of series Class B shares on March 20, 1996 with the
following exceptions (i) the shares have no demand registration rights
and (ii) the piggyback registration rights associated with such shares
are subordinate to the rights of the other shares of such preferred
stock. The net proceeds of the private placement were applied against
the outstanding indebtedness under the Company's New Debt Facility.
On August 20, 1996 the Company sold substantially all of the assets
(other than finished goods) associated with its ATI router product line
to Advanced Technologies, Inc. ("Purchaser"). The purchase price for
the assets consisted of (a) $1,100,000 ($300,000 paid in cash which was
applied to the Company's term loan balance under the New Debt Facility
with the balance of the purchase price paid by delivery to the Company
of a $800,000 promissory note (the "Note") ) and (b) the value of
certain assumed liabilities. Principal under the Note is payable
monthly at a rate equal to 15% of Purchaser's monthly gross revenue and
interest at prime is payable quarterly with all unpaid principal and
unpaid accrued interest due on December 31, 1997.
The finished goods associated with the Company's ATI router product
line will be sold to the Purchaser pursuant to the terms of a Finished
Goods Agreement (the "Agreement"). Such finished goods will be sold to
the Purchaser as customers agree to purchase the finished goods;
provided, however, Purchaser agrees, subject to certain conditions, to
purchase on December 31, 1996 all finished goods not sold to customers
on or before such date (payments of these finished goods are to be made
through June 30, 1997).
Purchaser's obligation under the Note and the Agreement are secured by
(i) a second priority security interest in all of Purchaser's assets
and (ii) a second priority lien in all of the outstanding stock of
Purchaser (which lien on such stock can be foreclosed upon only in the
event of fraud or malfeasance). As of the date of this filing, the
Purchaser is in default of the Note for lack of payment. The Company
has made demand for payment. Although no assurances can be given,
management believes the default will be remedied within the fourth
quarter of 1996. Currently, management has not reserved for this
receivable as it believes the amount to be fully collectible.
The Company sold substantially all of the assets associated with its
Production Machine Control ("PMC") division on September 30, 1996 to
the Company's largest supplier (the "Buyer"). The purchase price for
the assets consisted of (a) $1,000,000 ($300,000 receivable and the
$700,000 balance was applied to $1.2 million of outstanding trade
payables due the Buyer) and (b) the value of certain assumed
liabilities. The $300,000
13
<PAGE> 14
DYNAMOTION/ATI CORP.
receivable was paid in full in October 1996. In addition, the Company
agreed to pay on or before December 31, 1996 the remaining $500,000 in
outstanding trade payables to the Buyer.
As of September 30, 1996 the Company's outstanding indebtedness under
the New Debt Facility increased to $3.3 million from $2.6 million on
March 31, 1996. The higher bank debt level is primarily attributable to
two factors: 1) second and third quarter revenue and earnings and 2)
delays in the collection of several large trade receivables. The delays
in the collection of several large receivables is primarily due to
several customers experiencing cash flow problems. The Company is
actively engaged in collection efforts and believes a significant
portion of the delayed collections of accounts receivable will be
resolved within the fourth quarter of 1996. Management has not reserved
for these receivables. The Company has also significantly reduced the
production of machines built to stock. Additionally, the Company
currently has a high finished goods balance that has significantly
contributed to the higher bank debt level.
For the nine months ended September 30, 1996 and 1995, the Company's
net loss was $2.2 million and $6.4 million, respectively. Inclusive in
the 1995 net loss was a $3.5 million write-off of goodwill and several
charges to cost of sales primarily to slow-moving and obsolete
inventory. Management attributes these losses to two main issues.
First, inefficient raw material procurement resulting in inefficient
production performance and greater than average cycle times. Second,
revenue levels thus far achieved during 1996 have been significantly
below the Company's expectations due to the slowdown in demand in the
worldwide printed circuit board industry. These two issues combined
with collectibility issues on several large receivables have placed a
severe strain on the Company's liquidity and working capital and
diverted management attention to financial matters, as well as
substantially increased administrative fees and the cost of financing.
The Company has taken actions to reduce its losses including
replacement of senior management in 1996 and 1995, disposing of
operations and product lines which produced negative cash flow or did
not fit with the Company's long term strategies, arranging of new
financing which included the New Debt Facility (Note 2), the issuance
of Class B preferred stock for $2.3 million (Note 4) and reducing
operating expenses, specifically, workforce reductions in April and
June of 1996.
Although no assurances can be given and assuming no demand for payment
is made under the Company's New Debt Facility, management believes the
actions taken will allow the Company 's sources of capital to be
adequate to support operations through 1996, assuming fourth quarter
revenue does not drop below present sales levels and the Company
resolves the collection issues on the aforementioned receivables.
However, no assurances can be given that the Company will be successful
in achieving profitability or positive cash flow.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10rr. Purchase and Sale Agreement, dated
September 30, 1996, regarding the
sale of the Production Machine
Control division between the
Company and the buyer PMC
Electronics, Inc.
27. Financial data schedule.
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed on September 5, 1996,
related to the sale of the ATI router product line.
A report on Form 8-KA was filed on October 17, 1996
related to the sale of the ATI router product line.
The report amended the prior 8-K filing by including
pro-forma financial statements.
14
<PAGE> 15
DYNAMOTION/ATI CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYNAMOTION/ATI CORP.
Date: November 12, 1996 By: /S/ Jon R. Hopper
-------------------- -----------------
Jon R. Hopper
Chairman, President and
Chief Executive Officer
Date: November 12, 1996 By: /S/ Kirk A. Waldron
--------------------- -------------------
Kirk A. Waldron
Chief Financial Officer and
Chief Accounting Officer
15
<PAGE> 1
ASSET PURCHASE AGREEMENT
BY AND AMONG
DYNAMOTION/ATI CORP.,
PMC ELECTRONICS, INC.
AND
SIEB & MEYER ELEKTRONIK GMBH
SEPTEMBER 27, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase of the Purchased Assets ................................ 1
1.1 Purchase of the Purchased Assets ....................... 1
1.2 The Excluded Assets .................................... 2
1.3 Purchased Assets Free of Liens ......................... 2
1.4 Assumption of Specified Liabilities .................... 2
1.5 Excluded Liabilities ................................... 3
1.6 Consideration for the Purchased Assets ................. 3
2. The Closing ................................................. 3
3. Representations and Warranties of Seller ........................ 3
3.1 Organization and Existence ............................. 3
3.2 Authorization of Seller ................................ 4
3.3 No Conflict or Violation ............................... 4
3.4 Consents and Approvals ................................. 4
3.5 No Actions or Proceedings Related to the Agreements .... 4
3.6 Violation of Applicable Law ............................ 4
3.7 Books and Records ...................................... 5
3.8 Financial Statements and Other Information ............. 5
3.9 No Material Adverse Change ............................. 5
3.10 Absence of Certain Changes or Events ................... 5
3.11 The Purchased Assets ................................... 6
3.12 Condition and Possession of the Purchased Assets ....... 6
3.13 Leases ................................................. 7
3.14 Assumed Contracts ...................................... 7
3.15 Customers and Suppliers ................................ 7
3.16 Insurance .............................................. 7
3.17 Permits ................................................ 7
3.18 Intellectual Property .................................. 8
3.19 Employees and Related Matters .......................... 8
3.20 Anticipated Receipts by Seller ......................... 8
3.21 Full Disclosure ........................................ 9
4. Representations and Warranties of Purchaser ..................... 9
4.1 Organization and Existence of Purchaser ................ 9
4.2 Authority of Purchaser ................................. 9
4.3 No Conflict or Violation ............................... 9
4.4 Consents and Approvals ................................. 9
4.5 No Actions or Proceedings Related to the Agreements .... 10
4.6 Capitalization of Purchaser ............................ 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5. Covenants of Seller .................................................... 10
5.1 Due Diligence Investigation ................................... 10
5.2 Conduct of Business ........................................... 10
5.3 Third Party Consents .......................................... 10
5.4 Payments of Remaining Account Receivable Owed to Sieb & Meyer . 10
6. Conditions Precedent to Purchaser's Performance ........................ 11
6.1 Accuracy of Representations and Warranties .................... 11
6.2 Performance of Seller ......................................... 11
6.3 Consents and Permits .......................................... 11
6.4 Absence of Litigation ......................................... 11
6.5 Absence of Material Adverse Changes ........................... 11
6.6 Updates to Schedule of Exceptions ............................. 11
6.7 Execution of Transfer Documents ............................... 11
6.8 Minimum Working Capital ....................................... 12
6.9 Execution of Lease ............................................ 12
6.10 Payment of Rents .............................................. 12
6.11 Payroll Obligations ........................................... 12
6.12 Additional Agreements ......................................... 12
7. Conditions Precedent to Seller's Performance ........................... 12
7.1 Accuracy of Purchaser's Representations and Warranties ........ 12
7.2 Performance of Purchaser ...................................... 13
7.3 Absence of Litigation ......................................... 13
7.4 Execution of Assumption Documents ............................. 13
7.5 Additional Agreements ......................................... 13
8. Indemnification ........................................................ 13
8.1 Indemnification by Seller ..................................... 13
8.2 Indemnification by Purchaser .................................. 14
8.3 Claims for Indemnity .......................................... 14
8.4 Insurance Proceeds ............................................ 14
8.5 Defense of Claimed Breaches ................................... 14
8.6 Limitations on Indemnification ................................ 14
8.7 Indemnification Exclusive ..................................... 15
9. Covenant Not to Compete ................................................ 15
9.1 Covenant Not to Compete ....................................... 15
9.2 Reasonableness of Restrictions ................................ 15
9.3 Injunctive Relief ............................................. 15
10. Miscellaneous Provisions ............................................... 16
10.1 Business Terms Going Forward .................................. 16
10.2 Purchaser to Act as Agent for Seller .......................... 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
10.3 Termination Prior to Closing ......................... 16
10.4 Further Assurances ................................... 16
10.5 Bulk Sales Law ....................................... 16
10.6 No Third Party Beneficiaries ......................... 17
10.7 Confidentiality; Press Releases and Announcements .... 17
10.8 Taxes ............................................... 17
10.9 Survival of Representations and Warranties ........... 17
10.10 Expenses ........................................... 17
10.11 Entire Agreement ................................... 17
10.12 Governing Law and Choice of Forum .................. 17
10.13 Interpretation ..................................... 17
10.14 Waiver and Amendment ............................... 18
10.15 Assignment ......................................... 18
10.16 Notices ............................................ 18
10.17 Severability ....................................... 19
10.18 Counterparts ....................................... 19
</TABLE>
iii
<PAGE> 5
EXHIBITS
Exhibit A Form of Bill of Sale
Exhibit B Assumption Agreement
SCHEDULES
Schedule of Payables
Schedule of Assumed Contracts
Schedule of Other Assumed Liabilities
Schedule of Exceptions
Schedule of Tangible Property
Schedule of Benefit Plans
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
September 27, 1996, by and among Dynamotion/ATI Corp., a New York corporation
("Seller"), PMC Electronics, Inc., a Delaware corporation ("Purchaser") and Sieb
& Meyer Elektronik GmbH, a German corporation ("Sieb & Meyer").
R E C I T A L S
---------------
A. Seller, through its PMC division (the "PMC Division"), the principal
executive offices of which are located at 4460 Lake Forest, Suite 228,
Cincinnati, Ohio 45242, develops and sells computerized control systems for a
wide range of production machinery.
B. Purchaser was formed on September 25, 1996 as a wholly owned
subsidiary of Sieb & Meyer for the purpose of effecting the transactions
contemplated by this Agreement.
C. Purchaser desires to purchase all of the assets, and to assume
certain specified liabilities, of the PMC Division from Seller on the terms and
subject to the conditions of this Agreement, and Seller desires to sell all of
the assets, and assign certain specified liabilities, of the PMC Division to
Purchaser on the terms and subject to the conditions of this Agreement.
A G R E E M E N T
-----------------
In consideration of the foregoing recitals and the respective
covenants, agreements, representations and warranties contained herein, the
parties, intending to be legally bound, agree as follows:
1. PURCHASE OF THE PURCHASED ASSETS
1.1. PURCHASE OF THE PURCHASED ASSETS. Subject to the terms
and conditions of this Agreement, at the Closing (as such term is defined in
Section 2 below), Seller shall sell, transfer, assign and deliver to Purchaser,
and Purchaser shall purchase and acquire from Seller, all of Seller's right,
title and interest in and to all of the assets, rights and claims (other than
the Excluded Assets, as such term is defined in Section 1.2 below) used by,
useful in or allocated to the PMC Division (collectively, the "Purchased
Assets"), including without limitation, the following:
(i) all raw materials, parts, supplies, inventory,
work-in-process, finished goods and tooling;
(ii) all accounts receivable, notes receivable and other
receivables, all prepaid items, deposits and similar
assets;
(iii) all furniture, furnishings, fixtures, machinery,
vehicles, equipment and other items of tangible
property located at the offices or other facilities
of the PMC Division;
<PAGE> 7
(iv) all customer lists, supplier lists, catalogs, price
lists, brochures and related sales materials;
(v) all telephone and facsimile numbers, including "800"
numbers, all telephone directory listings and similar
listings pertaining to the PMC Division, and all post
office boxes, used in connection with the PMC
Division;
(vi) all PMC Intellectual Property (as such term is
defined in Section 3.18 below), including without
limitation, all rights to the names "PMC" and
"Production Machine Controls" and other names
utilizing "PMC" or "Production Machine Controls";
(vii) all of Seller's contract rights in and to open sales
orders and sales contracts;
(viii) all of Seller's rights under each of the Assumed
Contracts (as such term is defined in Section 1.4
below);
(ix) all Permits (as such term is defined in Section 3.17
below), to the extent transferable;
(x) all Books and Records (as such term is defined in
Section 3.7 below); and
(xi) the goodwill of the PMC Division.
1.2. THE EXCLUDED ASSETS. The foregoing notwithstanding, but
without waiving or limiting the minimum working capital condition set forth in
Section 6.8, the Purchased Assets shall not include cash on hand or in bank
accounts (the "Excluded Assets").
1.3. PURCHASED ASSETS FREE OF LIENS. Except as otherwise
specifically provided in this Agreement, all of the Purchased Assets shall be
transferred by Seller to Purchaser free and clear of any claims, liens, pledges,
options, charges, security interests, restrictions, encumbrances or other rights
of third parties, of any kind or nature ("Encumbrances").
1.4. ASSUMPTION OF SPECIFIED LIABILITIES. Purchaser shall, on
and as of the Closing Date, expressly assume and agree to pay, perform or
otherwise discharge as the same shall become due in accordance with their
respective terms, all of the following liabilities, obligations and commitments
of Seller, but only such liabilities, obligations and commitments (the "Assumed
Liabilities"):
(i) the accounts payable listed on the Schedule of
Payables attached hereto;
2
<PAGE> 8
(ii) Seller's liabilities, obligations and commitments
arising under the contracts listed on the Schedule of
Assumed Contracts attached hereto (the "Assumed
Contracts"); and
(iii) the liabilities and obligations listed on the
Schedule of Other Assumed Liabilities attached
hereto.
1.5. EXCLUDED LIABILITIES. Except for the Assumed Liabilities,
Purchaser shall not assume or be responsible for any liabilities, obligations or
commitments of Seller, whether arising before, on or after the Closing Date, and
all such liabilities, obligations and commitments (the "Excluded Liabilities")
shall remain the exclusive liabilities, obligations and commitments of Seller.
1.6. CONSIDERATION FOR THE PURCHASED ASSETS. Subject to the
terms and conditions hereof, at the Closing, as consideration for the sale,
transfer, assignment and delivery of the Purchased Assets to Purchaser,
Purchaser shall (i) assume the Assumed Liabilities, (ii) pay to Seller Three
Hundred Thousand Dollars ($300,000) by wire transfer to such account as Seller
may designate and (iii) deem the Assigned Account Receivable (as such term is
defined in Section 4.6 below) to be paid in full. The purchase price shall be
allocated among the Purchased Assets in the manner required by Section 1060 of
the Internal Revenue Code and the regulations thereunder.
2. THE CLOSING. Subject to the satisfaction of the conditions set forth
in Sections 6 and 7 hereof, the closing of the sale and purchase of the
Purchased Assets (the "Closing") shall take place at the Orange County office of
Riordan & McKinzie on September 30, 1996 and shall be effective as of 12:01 a.m.
on October 1, 1996 (the "Closing Date"). At the Closing, Seller shall deliver to
Purchaser a Bill of Sale in substantially the form attached hereto as Exhibit A
and such other instruments of transfer as may be reasonably necessary to
transfer to Purchaser all of Seller's right, title and interest in and to the
Purchased Assets, all in form and substance reasonably satisfactory to Purchaser
and duly executed by Seller, against delivery by Purchaser to Seller of the
payment provided for in Section 1.6 hereof. At the Closing, Purchaser shall
deliver to Seller an Instrument of Assumption in substantially the form attached
hereto as Exhibit B and such other instruments of assumption as may be
reasonably necessary to evidence Purchaser's assumption of the Assumed
Liabilities, all in the form and substance reasonably satisfactory to Seller and
duly executed by Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that, except to the extent
otherwise set forth on the schedule of exceptions attached hereto (the "Schedule
of Exceptions"), the following statements are true and correct:
3.1. ORGANIZATION AND EXISTENCE. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Seller has the requisite corporate power and authority to own the
Purchased Assets and operate the PMC
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Division as presently conducted. Seller is qualified to do business as a foreign
corporation in Ohio and each other jurisdiction in which the conduct of the
business of the PMC Division or the ownership of the Purchased Assets makes such
qualification necessary.
3.2. AUTHORIZATION OF SELLER. Seller has full power, authority
and legal right and capacity to enter into this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
The execution, delivery and performance by Seller of this Agreement have been
duly authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by Seller and constitutes a valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms.
3.3. NO CONFLICT OR VIOLATION. Neither the execution and
delivery of this Agreement by Seller, nor the consummation of the transactions
contemplated hereby, will result in (i) a violation of, or a conflict with,
Seller's Articles of Incorporation or Bylaws, (ii) a breach of, or a default (or
an event which, with notice or lapse of time or both would constitute a default)
under or result in the termination of, or accelerate the performance required
by, or create a right of termination or acceleration under, any contract or
Permit to which Seller is a party or by which the Purchased Assets or the PMC
Division is bound or affected, (iii) a violation by Seller of any applicable
law, statute, code, ordinance, rule, regulation or order whether federal, state,
local or other ("Laws"), or a violation by Seller of any order, judgment, writ,
injunction, decree or award to which Seller is a party or by which the Purchased
Assets or the PMC Division are bound, or (iv) an imposition of any Encumbrance
on the Purchased Assets.
3.4. CONSENTS AND APPROVALS. No consent, Permit, approval or
authorization of, or declaration, filing, application, transfer or registration
with, any governmental or regulatory authority, or any other person or entity is
required to be made or obtained by Seller by virtue of its execution, delivery
and performance of this Agreement or to avoid the loss of any Permit, or the
violation, breach or termination of, or the creation of Encumbrances on any
Purchased Assets pursuant to the terms of, any Law, or to enable Purchaser to
own the Purchased Assets and continue the operation of the PMC Division on and
after the Closing Date in substantially the same manner as it is presently
conducted by Seller.
3.5. NO ACTIONS OR PROCEEDINGS RELATED TO THE AGREEMENTS.
There are no pending or, to Seller's knowledge, threatened actions, claims,
lawsuits, proceedings, arbitrations, mediations or other disputes ("Actions"),
whether private or public, affecting the PMC Division or the Purchased Assets or
which could reasonably be expected to affect the enforceability of this
Agreement or Seller's ability to consummate the transactions contemplated by
this Agreement.
3.6. VIOLATION OF APPLICABLE LAW. Seller's operation of the
PMC Division and ownership and/or use of the Purchased Assets is in compliance
with all Laws (including, but not limited to, environmental Laws). Seller has
not received any notice from or otherwise been advised that any governmental
authority or other person is claiming any violation or potential
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violation of any Law. Seller has delivered to the Purchaser a copy of the Phase
I environmental investigation relating to the facility occupied by the PMC
Division.
3.7. BOOKS AND RECORDS. Seller has made and kept Books and
Records pertaining to the PMC Division, which, in reasonable detail, accurately
and fairly reflect, in all material respects, the activities and transactions of
the PMC Division, the Purchased Assets, the Assumed Liabilities and the
financial condition and results of operations of the PMC Division. As used
herein, "Books and Records" means all books, ledgers, files, records, manuals
and other materials (in any form or medium) maintained by Seller with respect to
the business of the PMC Division or the Purchased Assets, including, but not
limited to, any and all correspondence, personnel records, purchasing records,
credit information, vendor lists, operation and quality control records and
procedures, research and development files, intellectual property disclosures
and documentation, accounting records and systems, litigation files, sales order
files, purchase order files, advertising materials, catalogs, price lists,
brochures, mailing lists, customer lists, distribution lists, sales and
promotional materials and all other records utilized by Seller in connection
with the PMC Division and all computer hardware, software and data files
necessary to access or review or continue to compile or utilize any of the
foregoing.
3.8. FINANCIAL STATEMENTS AND OTHER INFORMATION. Seller has
furnished to Purchaser copies of the monthly financial statements for the PMC
Division for March, April, May, June and July 1996 (the "Financial Statements").
The Financial Statements are complete and correct, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the respective periods, and fairly present in all material respects
the financial condition of the PMC Division as of the dates thereof and the
results of operations of the PMC Division for the periods covered by the
statements of income contained therein. All reserves made by Seller in the
Financial Statements are appropriate and adequate for all known or anticipated
liabilities. Seller has provided and disclosed to Purchaser, its accountants and
other representatives all material facts and information relating to the
preparation of the Financial Statements.
3.9. NO MATERIAL ADVERSE CHANGE. Since July 31, 1996, there
have been no changes in the condition, financial or otherwise, of the PMC
Division, or in its prospects, earnings or properties, whether or not arising
from transactions in the ordinary course of business, that, individually or in
the aggregate, have been, or could reasonably be expected to be, materially
adverse to the prospects, earnings, properties or condition, financial or
otherwise, of the PMC Division.
3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July 31,
1996, there has not been any:
(i) transaction by Seller in connection with the
conduct of the PMC Division except in the ordinary course of business;
(ii) destruction, damage to, or loss of any material
asset of Seller (whether or not covered by insurance) used in the PMC Division;
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(iii) labor dispute or other event or condition of
any character materially and adversely affecting the prospects, earnings,
properties or condition, financial or otherwise, of the PMC Division;
(v) increase in the salary or other compensation
payable or to become payable by Seller to any of its officers, consultants,
contractors or employees employed in the PMC Division, or the declaration,
payment, commitment or obligation of any kind for the payment, by Seller, of a
bonus or other additional salary or compensation to any such person;
(vi) amendment or termination of any contract or
Permit related to either the Purchased Assets or the PMC Division, except in the
ordinary course of business;
(vii) grant of any preferential rights to purchase
any of the assets, properties or rights (including management and control
thereof) related to the PMC Division, or requiring the consent of any party to
the transfer or assignment of any such assets, properties or rights (including
management and control thereof);
(viii) agreement by Seller to do any of the things
described in clauses (i) through (vii), above;
(ix) failure to pay or satisfy when due any
obligation of the PMC Division;
(x) citation or notice of threatened citation
received for any violations or alleged violations of any Law or by any
governmental entity or agency;
(xi) claim incurred for damages or alleged damages
for actual or alleged negligence or other tort or breach of contract (whether or
not fully covered by insurance); or
(xii) other event or condition of any character which
it is reasonable to expect will or could, individually or in the aggregate,
materially and adversely affect the Purchased Assets or the PMC Division.
3.11. THE PURCHASED ASSETS. Seller either owns or holds under
leases or licenses all of the material properties used by in the PMC Division
and all such properties other than the Excluded Assets are included in the
Purchased Assets. Seller has good, indefeasible and marketable title to all of
the Purchased Assets, free and clear of all Encumbrances. The Schedule of
Tangible Property attached hereto lists the furniture, furnishings, fixtures,
machinery, vehicles, equipment and other items of tangible property located at
the offices or other facilities of the PMC Division and included in the
Purchased Assets, as shown on Seller's books.
3.12. CONDITION AND POSSESSION OF THE PURCHASED ASSETS. The
Purchased Assets are adequate and sufficient for the operation of the business
of the PMC Division as presently conducted by Seller. Seller enjoys peaceful and
undisturbed possession of all of the
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Purchased Assets. None of the Purchased Assets is subject to any commitment or
other arrangement for their use by any affiliated party of Seller or any third
party. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER EXCLUDES AND
DISCLAIMS ANY AND ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. SELLER MAKES NO WARRANTIES OTHER THAN THOSE EXPRESSLY SET
FORTH IN THIS AGREEMENT.
3.13. LEASES. True and complete copies of all leases,
subleases, and other occupancy or lease agreements under which Seller leases,
subleases, occupies or uses any real or personal property included in the
Purchased Assets, including all amendments, modifications, renewals and
extensions thereof (the "Leases") have been previously furnished to Purchaser.
All of the Leases are legal, valid and binding obligations of the parties
thereto and are in full force and effect. There is no existing default,
violation or breach under any Lease nor any event or condition which after
notice or lapse of time or both would constitute such a default, violation or
breach.
3.14. ASSUMED CONTRACTS. True and complete copies of all
Assumed Contracts and all material contracts of the PMC Division with customers,
suppliers, vendors, and employees including all amendments, modifications,
renewals or extensions thereof, have been previously furnished to Purchaser. All
of the Assumed Contracts are enforceable, legal, valid and binding obligations
of the parties thereto and are in full force and effect.
3.15. CUSTOMERS AND SUPPLIERS. A true and correct list of all
of the customers and suppliers of the PMC Division during the twelve full months
prior to the date hereof, indicating the existing contractual arrangements with
each, has been previously furnished to Purchaser. The PMC Division has no
outstanding contracts with any customers or suppliers which require payments in
excess of $10,000 on an annualized basis. There are no outstanding disputes with
any major customer or supplier and no major customer or supplier has refused to
do business with the PMC Division or has stated its intention not to continue to
do business with or increase or reduce its purchases from or sales to the PMC
Division or Purchaser upon consummation of the transactions contemplated hereby.
Seller has no reason to believe that any customer account of the PMC Division is
not collectible in accordance with its terms except to the extent of any
reserves reflected in the Financial Statements. No existing contractual
arrangement with a customer of the PMC Division other than purchase orders which
will be filled within twelve months contains any fixed price arrangement.
3.16. INSURANCE. Purchaser has been provided with a true and
complete list and summary of all insurance policies currently maintained by
Seller with respect to the PMC Division or the Purchased Assets.
3.17. PERMITS. Seller holds, free from all Encumbrances and
burdensome restrictions, all permits, licenses, qualifications, approvals,
authorizations, orders, consents, and other rights from, and filings with, any
governmental authority necessary for the lawful and
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efficient operation of the PMC Division as presently conducted or the ownership
of the Assets ("Permits"). A true and complete list of all Permits has been
furnished to Purchaser.
3.18. INTELLECTUAL PROPERTY. Seller owns, has a license for,
or rightfully possesses all designs, drawings, patterns, processes, trade names,
trademarks, copyrights, patents, licenses, patent applications, trademark
registrations, trade secrets, inventions, know-how, formulae and other
information and intellectual property necessary and sufficient for the lawful
and efficient operation of the PMC Division as presently conducted, including
all rights to the name "PMC" and other names utilizing "PMC" (the "PMC
Intellectual Property"), without any known conflict with the rights of others.
There are no outstanding licenses or agreements of any kind relating to Seller's
grant of any of its rights, title and interest in and to any PMC Intellectual
Property. Seller has not received any communication alleging that it has
violated or, by operating the business of the PMC Division, would violate, any
of the proprietary rights of any other person or entity.
3.19. EMPLOYEES AND RELATED MATTERS. Purchaser has been
provided with a list of the names, current annual salaries, bonuses, employee
benefits, accrued vacation times, sick pay and other compensation, date of hire
and location of all the present employees of Seller who provide services to the
PMC Division. The Schedule of Benefit Plans attached hereto includes a true and
complete list of all pension, bonus, profit sharing, stock option and employee
benefit plans maintained by Seller or to which Seller contributes or is required
to contribute ("Benefit Plans"). All Benefit Plans have been maintained and
administered in compliance with the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other applicable Laws. There
are no employment or consulting contracts or arrangements, including pensions,
bonus or profit sharing plans, or other severance or termination contracts or
arrangements which may constitute contractual obligations of Seller relating to
the PMC Division which are not terminable on 30 days' notice or less. There are
no collective bargaining agreements with any union or other bargaining group for
any of Seller's employees employed in the PMC Division, nor is Seller aware of
any efforts by any such employees to organize or participate in any of the
foregoing. To the best knowledge of Seller, no employee of the PMC Division is
in violation of any of its obligations to, or any employment agreement with, a
prior employer. Seller has conducted the business of the PMC Division in
compliance with all Laws pertaining to the employment of employees, including,
without limitation, all Laws relating to labor relations, equal employment
practices, fair employment practices, entitlements, COBRA, prohibited
discrimination, ERISA, terms and conditions of employment, wages and hours, and
other similar employment practices and acts, and Seller is not engaged in any
unfair labor practices and is not a party to any Action involving a violation or
alleged violation of any of the foregoing Laws. There are no pending or, to
Seller's knowledge, threatened Actions against Seller by any employee with
respect to any matter arising out of, relating to or in connection with such
employee's employment by Seller.
3.20. ANTICIPATED RECEIPTS BY SELLER. Seller is a party to an
agreement with a customer pursuant to which such customer has agreed to pay to
Seller at least $1,500,000 prior to the date hereof. Although such payment has
not been received to date, Seller is not aware
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of any reason that such payment will not be made and believes in good faith that
it will receive such payment prior to October 31, 1996.
3.21. FULL DISCLOSURE. No representation, warranty or other
statement of Seller contained in this Agreement or any other document,
certificate or written statement furnished to Purchaser in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Sieb & Meyer represent and warrant to Seller that the
following statements are true and correct:
4.1. ORGANIZATION AND EXISTENCE OF PURCHASER. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of Delaware. Sieb & Meyer is a Gesellshaft mit beschrankter
Haftung, duly formed and validly existing under German law. Purchaser and Sieb &
Meyer have all requisite corporate power to enter into and perform this
Agreement and the transactions contemplated hereby. Purchaser was formed for the
purpose of consummating the transactions contemplated by this Agreement and has
conducted no business except in connection therewith.
4.2. AUTHORITY OF PURCHASER. Purchaser and Sieb & Meyer have
full power, authority and legal right and capacity to enter into this Agreement,
to perform their obligations hereunder, and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Purchaser of
this Agreement have been duly authorized by Purchaser and Sieb & Meyer and no
further corporate action is necessary on the part of Purchaser or Sieb & Meyer
to make this Agreement valid and binding upon them in accordance with its terms.
This Agreement has been duly executed and delivered by Purchaser and Sieb &
Meyer and constitutes a valid and binding obligation of Purchaser and Sieb &
Meyer, enforceable against each of them in accordance with its terms.
4.3. NO CONFLICT OR VIOLATION. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will result in (i) a violation of, or a conflict with,
Purchaser's Certificate of Incorporation or Bylaws, (ii) a violation by
Purchaser or Sieb & Meyer of any Law, or (iii) a violation by Purchaser or Sieb
& Meyer of any order, judgment, writ, injunction decree or award to which
Purchaser or Sieb & Meyer is a party.
4.4. CONSENTS AND APPROVALS. No consent, permit, approval or
authorization of, or declaration, filing, application, transfer or registration
with, any governmental or regulatory authority, or any other person or entity is
required to be made or obtained by Purchaser or Sieb & Meyer by virtue of their
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
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4.5. NO ACTIONS OR PROCEEDINGS RELATED TO THE AGREEMENTS.
There is no pending or, to Purchaser's or Sieb & Meyer's knowledge, threatened
Action affecting Purchaser or Sieb & Meyer which could reasonably be expected to
affect the enforceability of this Agreement or which could reasonably be
expected to materially and adversely affect Purchaser's or Sieb & Meyer's
ability to consummate the transactions contemplated by, or to perform their
obligations under, this Agreement.
4.6. CAPITALIZATION OF PURCHASER. Sieb & Meyer has
capitalized, or prior to the Closing will capitalize, Purchaser, by contributing
and/or lending to Purchaser a cash amount at least equal to the cash to be paid
to Seller pursuant to Section 1.6 and by assigning the right to receive $700,000
of the amounts owed to Sieb & Meyer by Seller for products sold to Seller by
Sieb & Meyer, including interest thereon (the "Assigned Account Receivable") to
Purchaser. At such time as Purchaser deems the Assigned Account Receivable to be
paid in full as contemplated by Section 1.6, the parties agree that the balance
of the amount owed by Seller to Sieb & Meyer for products delivered on or prior
to September 30, 1996 will be $500,000 (the "Remaining Account Receivable").
5. COVENANTS OF SELLER
5.1. DUE DILIGENCE INVESTIGATION. From and after the date
hereof until the Closing Date, Seller shall (i) grant Purchaser and its counsel,
accountants and other representatives full access during normal business hours
to all properties, Books and Records, contracts, Permits and other documents of
or relating to the PMC Division and the Purchased Assets and (ii) furnish or
cause to be furnished to Purchaser and its representatives all data and
information concerning the business of the PMC Division, its finances and
properties as may reasonably be requested.
5.2. CONDUCT OF BUSINESS. From and after the date hereof until
the Closing Date, Seller will carry on the business of the PMC Division
diligently, in the ordinary course and in substantially the same manner as it
has previously been conducted. Without limiting the generality of the foregoing,
Seller shall use reasonable efforts to (i) preserve the business of the PMC
Division intact, and (ii) preserve the present relationships between the PMC
Division and its customers, suppliers, employees and others having business
relationships with Seller.
5.3. THIRD PARTY CONSENTS. Seller shall take, as promptly as
possible, all action to obtain all waivers, Permits, consents, approvals,
authorizations and clearances and to effect all registrations, filings and
notices with or to third parties or governmental, regulatory or public bodies or
authorities which are, in the reasonable opinion of Purchaser, necessary or
desirable in connection with the transactions contemplated by this Agreement.
5.4. PAYMENTS OF REMAINING ACCOUNT RECEIVABLE OWED TO SIEB &
MEYER. Seller shall pay the Remaining Account Receivable as soon as and to the
extent Seller has available cash flow; provided, however, that in any event
Seller shall pay in full the Remaining Account Receivable on or prior to
December 31, 1996. Sieb & Meyer shall not impose any interest charge with
respect to the Remaining Account Receivable; provided, however, that to
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the extent any portion of the Remaining Account Receivable has not been paid by
December 31, 1996, Sieb & Meyer shall be entitled to interest at the rate of 8%
per annum from and after January 1, 1997 and shall be entitled to pursue any and
all lawful remedies to collect such unpaid account.
6. CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE. The obligation of
Purchaser to purchase the Purchased Assets pursuant to this Agreement is subject
to the satisfaction, at or before the Closing Date, of all of the following
conditions:
6.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Seller in this Agreement or in any
written Schedule or statement delivered to Purchaser by Seller under this
Agreement shall be true, correct and not materially misleading on and as of the
Closing Date as though made on the Closing Date.
6.2. PERFORMANCE OF SELLER. Seller shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it on or before the Closing
Date.
6.3. CONSENTS AND PERMITS. All agreements, waivers, approvals,
authorizations, assurances and consents of third parties and all Permits
necessary for the consummation of the transactions contemplated by this
Agreement shall have been obtained by Seller in form and substance reasonably
satisfactory to Purchaser.
6.4. ABSENCE OF LITIGATION. No Action shall have been
instituted or threatened which (i) questions the validity or enforceability of
the transactions contemplated hereby, (ii) materially and adversely affects the
Purchased Assets or the PMC Division, (iii) is reasonably likely to result in
any material liability to Purchaser if the transactions contemplated by this
Agreement are consummated, or (iv) could reasonably be expected to adversely
affect Purchaser's ability to own the Purchased Assets following the Closing
Date.
6.5. ABSENCE OF MATERIAL ADVERSE CHANGES. There shall not have
occurred any damage, destruction or loss which has (whether or not covered by
insurance) materially and adversely affected the Purchased Assets nor any
material adverse change in the business of the PMC Division nor shall there
exist any event or condition of any character which, individually or in the
aggregate, could reasonably be expected to materially and adversely affect the
assets, properties, financial condition, operating results or prospects of the
PMC Division.
6.6. UPDATES TO SCHEDULE OF EXCEPTIONS. Seller shall have
delivered to Purchaser a revised Schedule of Exceptions reflecting any and all
changes thereto necessary to make the Schedule of Exceptions accurate as of the
Closing Date; provided, however, that nothing herein shall relieve Seller of any
liability hereunder due to the fact that the Schedule of Exceptions was not true
and correct, or was materially misleading, as of the date hereof. Purchaser
shall have approved all changes to the Schedule of Exceptions.
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6.7. EXECUTION OF TRANSFER DOCUMENTS. Seller shall have
executed and delivered to Purchaser a Bill of Sale in substantially the form
attached hereto as Exhibit A and such other assignments, certificates of title
and any and all other instruments of conveyance and transfer as shall have been
required by Purchaser in order to effectively convey and transfer to Purchaser
the Purchased Assets, free and clear of all Encumbrances. Without limiting the
generability of the foregoing, Seller shall deliver to Purchaser releases, in
form and substance satisfactory to Purchaser from IBJ Schroder, Coast Business
Credit and any other creditor with a security interest in any of the Purchased
Assets, which release shall confirm the release of all such security interests
and shall include a covenant to take all reasonable action, including without
limitation, the filing of termination statements, necessary to evidence such
release.
6.8. MINIMUM WORKING CAPITAL. Purchaser shall have received a
working capital schedule, certified by the Chief Financial Officer of Seller,
listing as of the Closing Date (a) all of the accounts payable, accrued paid
time off and miscellaneous expenses as set forth in the balance sheet dated as
of the Closing Date (collectively, the "Selected Current Liabilities") and (b)
all of the accounts receivable (including interest accrued in connection
therewith), prepaid expenses and other assets and other currents assets as set
forth in the balance sheet as of the Closing Date (collectively, the "Selected
Current Assets"). As of the Closing Date, the working capital of the PMC
Division (defined for the purposes of this Agreement only as the Selected
Current Assets minus the Selected Current Liabilities) shall be at least equal
to One Dollar ($1.00).
6.9. EXECUTION OF LEASE. Purchaser shall have entered into a
lease (or a sublease with Seller) of the facility (the "PMC Facility") currently
leased by the PMC Division on terms and conditions acceptable to Purchaser.
6.10. PAYMENT OF RENTS. Seller shall pay any amounts due to
Miller-Valentine Partners ("Lessor") on or prior to the Closing Date in
connection with Seller's lease with Lessor of the PMC Facility.
6.11. PAYROLL OBLIGATIONS. Seller shall pay the payroll for
the PMC Division through and including the Closing Date (excluding any
obligation with respect to paid time off).
6.12. ADDITIONAL AGREEMENTS. Seller shall have executed and
delivered to Purchaser (a) an agreement (the "Joint Development Agreement")
between Seller and Purchaser regarding the joint development of products between
Seller and Purchaser, and (b) an agreement (the "Pricing Agreement") between
Seller and Purchaser regarding the pricing terms of certain products to be sold
by Purchaser to Seller after the Closing Date.
7. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE. The obligation of
Seller to sell and transfer the Purchased Assets under this Agreement is subject
to the satisfaction, at or before the Closing Date, of all the following
conditions:
7.1. ACCURACY OF PURCHASER'S REPRESENTATIONS AND WARRANTIES.
All representations and warranties by Purchaser contained in this Agreement
shall be true, correct
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and not materially misleading on and as of the Closing Date as though made on
the Closing Date.
7.2. PERFORMANCE OF PURCHASER. Purchaser shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by it on or before
the Closing Date.
7.3. ABSENCE OF LITIGATION. No Action shall have been
instituted or threatened which (i) questions the validity or enforceability of
the transactions contemplated hereby, (ii) materially and adversely affects
Purchaser's business, or (iii) is reasonably likely to result in any material
liability to Seller if the transactions contemplated by this Agreement are
consummated.
7.4. EXECUTION OF ASSUMPTION DOCUMENTS. Purchaser shall have
executed and delivered to Seller an Instrument of Assumption in substantially
the form attached hereto as Exhibit B and such other instruments of assumption
as may be reasonably necessary to evidence Purchaser's assumption of the Assumed
Liabilities.
7.5. ADDITIONAL AGREEMENTS. Purchaser shall have executed and
delivered to Seller the Joint Development Agreement and the Pricing Agreement.
8. INDEMNIFICATION
8.1. INDEMNIFICATION BY SELLER. Seller shall indemnify, defend
and hold harmless Purchaser, Sieb & Meyer and Purchaser's and Sieb & Meyer's
respective affiliates, officers, directors, partners, agents, employees,
attorneys and representatives, and their respective heirs, executors,
administrators, successors and assigns (collectively, "Purchaser Indemnified
Parties"), and shall reimburse each Purchaser Indemnified Party, on demand, for
any claim, demand, loss, liability, damage or expense, including without
limitation, interest, penalties and reasonable attorneys', accountants' and
experts' fees and costs of investigation incurred as a result thereof
("Damages"), resulting from, arising from or relating to the following: (i) the
Excluded Liabilities; (ii) the operation of the PMC Division on or prior to the
Closing Date; (iii) any breach or default in the performance by Seller of any
covenant or agreement of Seller contained herein, or in any Schedule or Exhibit
hereto, or in any other instrument delivered or to be delivered by or on behalf
of Seller pursuant hereto; (iv) any breach of warranty or inaccurate or
erroneous representation made by Seller herein, or in any Schedule or Exhibit
hereto, or in any other instrument delivered or to be delivered by or on behalf
of Seller pursuant hereto; (v) the failure to comply with any applicable bulk
sale or transfer Law in connection with the transactions contemplated hereby;
and (vi) any liability arising out of any and all Actions, demands, judgments,
costs and expenses incident to any of the foregoing; provided, however, that the
foregoing indemnification obligation shall not apply to the Assumed liabilities.
8.2. INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify,
defend and hold harmless Seller and all of Seller's affiliates and their
respective officers, directors, partners,
13
<PAGE> 19
agents, employees, attorneys and representatives, and their respective heirs,
executors, administrators, successors and assigns (collectively, "Seller
Indemnified Parties"), and shall reimburse each Seller Indemnified Party, on
demand, for any Damages resulting from, arising from or relating to the
following: (i) the Assumed Liabilities; (ii) the operation of the PMC Division
after the Closing Date; (iii) any breach or default in the performance by
Purchaser of any covenant or agreement of Purchaser contained herein, or in any
Schedule or Exhibit hereto, or in any other instrument delivered or to be
delivered by or on behalf of Purchaser pursuant hereto; (iv) any breach of
warranty or inaccurate or erroneous representation made by Purchaser herein, or
in any Schedule or Exhibit hereto, or in any other instrument delivered or to be
delivered by or on behalf of Purchaser pursuant hereto; and (v) any liability
arising out of any and all Actions, demands, judgments, costs and expenses
incident to any of the foregoing.
8.3. CLAIMS FOR INDEMNITY. Whenever a claim for Damages shall
arise for which one party (the "Indemnified Party") shall be entitled to
indemnification hereunder, the Indemnified Party shall notify the other party
hereto (the "Indemnifying Party") in writing within 30 days of the first receipt
of notice of such claim, and in any event within such shorter period as may be
necessary for the Indemnifying Party to take appropriate action to resist such
claim. Such notice shall specify all facts known to the Indemnified Party giving
rise to such indemnity rights and shall estimate the amount of the liability
arising therefrom. The right of the Indemnified Party to indemnification and the
estimated amount thereof, as set forth in this notice, shall be deemed agreed to
by the Indemnifying Party unless, within 30 days after the mailing of such
notice, the Indemnifying Party shall notify the Indemnified Party in writing
that it disputes the right of the Indemnified Party to indemnification. If the
Indemnified Party shall be duly notified of such dispute, the parties shall
attempt to settle and compromise the same, or if unable to do so within 20 days
of the Indemnifying Party's delivery of notice of a dispute, such dispute shall
be settled by binding arbitration before a single arbitrator in the County of
Hamilton, State of Ohio, in proceedings conducted by the American Arbitration
Association and pursuant to such organization's rules for commercial disputes,
and any rights of indemnification established by reason of such settlement,
compromise or arbitration shall promptly thereafter be paid and satisfied by the
Indemnifying Party.
8.4. INSURANCE PROCEEDS. Neither party shall be entitled to
indemnification for any claim for Damages for which it would otherwise be
entitled to indemnification hereunder to the extent that such party has received
insurance proceeds covering such Damages.
8.5. DEFENSE OF CLAIMED BREACHES. For purposes of this
Section, any assertion of fact and/or law by a third party which, if true, would
constitute a breach of a representation or warranty made by a party to this
Agreement shall, on the date that assertion is made, immediately invoke that
party's obligation to protect, defend, hold harmless and indemnify the other
party to this Agreement.
8.6. LIMITATIONS ON INDEMNIFICATION. No amount may be
recovered by any Indemnified Party under this Section 8 unless and until the
aggregate amount of the Damages suffered by such Indemnified Party exceeds
$10,000, whereupon such Indemnified Party shall be entitled to recover all
Damages in excess of such amount; provided that the maximum
14
<PAGE> 20
aggregate amount of Damages for which any Indemnified Party shall be entitled to
indemnification shall in no event exceed $1,000,000. Seller's liability for
indemnification under clauses (iii) and (iv) of Section 8.1 shall expire on the
first day of the first month which begins twenty-four (24) months after the
Closing Date as to all claims not asserted by written notice specifying the
basis for such claim and referring to this Agreement by such date, except for
obligations arising or under Section 3.2 hereof, the second sentence of Section
3.11 hereof and Section 9 hereof.
8.7. INDEMNIFICATION EXCLUSIVE. Following the Closing, the
indemnification provisions of this Section 8 shall be the exclusive remedy for
any breach of any representation, warranty, covenant or agreement made in this
Agreement.
9. COVENANT NOT TO COMPETE
9.1. COVENANT NOT TO COMPETE. Seller shall not, for a period
of five years from the Closing Date, directly or indirectly, own, manage,
finance, operate, join, control or participate in the ownership, management,
financing, operation or control of, or connected in any manner with, any
business that competes with the PMC Division in the areas of business in which
the PMC Division operates as of the Closing Date; provided, however, that this
Section 9.1 shall not preclude Seller from developing, for use in its own
products and not for separate resale to others, computerized control systems
which do not incorporate any proprietary technology owned by Purchaser. For
purposes of this Agreement, the term "compete" shall mean (i) calling on,
soliciting or taking away, as a client or customer any individual or entity that
was a client or customer of the PMC Division, during the 24 calendar month
period immediately preceding any such act for the purpose of competing with
Purchaser; (ii) hiring, soliciting, taking away or attempting to hire, solicit
or take away any employee of Purchaser either on behalf of itself or any other
person or entity; or (iii) entering into or attempting to enter into any
business substantially similar to or competing in any way with the business of
the PMC Division, either alone or with any individual or entity in the areas of
business in which the PMC Division operates as of the Closing Date.
9.2. REASONABLENESS OF RESTRICTIONS. Seller agrees that the
restrictions set forth in Section 9.1, above are reasonable and not burdensome
and that they are properly required to protect the goodwill of the business of
the PMC Division for Purchaser. In the event that such restrictions are deemed
to be unreasonable by a court of competent jurisdiction in any respect, then
Seller and Purchaser agree that they will submit to the reduction of such
restrictions to such extent as the court shall deem reasonable.
9.3. INJUNCTIVE RELIEF. Seller acknowledges that a breach by
it of the provisions of this Section 9 cannot be reasonably or adequately
compensated in damages in an action at law and that such breach will cause
Purchaser irreparable injury and damage. By reason thereof, Seller agrees that
Purchaser shall be entitled, in addition to any other remedies it may have under
this Agreement or otherwise, to temporary, preliminary and/or permanent
injunctive and other equitable relief to prevent or curtail any breach of this
Agreement, without
15
<PAGE> 21
proof of actual damages that have been or may be caused to Purchaser by such
breach or threatened breach.
10. MISCELLANEOUS PROVISIONS
10.1. BUSINESS TERMS GOING FORWARD. Sieb & Meyer shall process
each purchase order from Seller received by Sieb & Meyer after the Closing Date
and prior to the date Seller has paid in full the Remaining Account Receivable
in a similar manner as Sieb & Meyer has processed purchase orders of Seller
during the previous two months; provided, however, that prior to the date Seller
has paid in full the Remaining Account Receivable, Sieb & Meyer shall be under
no obligation to sell or ship any products to Seller in connection with any
purchase order unless Seller provides Sieb & Meyer with written confirmation of
the Federal Wire Transfer Number for a wire in an amount which is sufficient to
cover payment of the products requested in such purchase order.
10.2. PURCHASER TO ACT AS AGENT FOR SELLER. Nothing in this
Agreement is intended to constitute an agreement to assign any asset, right or
claim if such assignment, without the consent of another party, would be
ineffective or would constitute a breach of an agreement relating thereto or
otherwise adversely affect the value of such asset, right or claim such that
Purchaser would not receive all of the value thereof. To the extent any such
third party consent is required with respect to any asset, right or claim, then
Seller shall provide to Purchaser the benefits thereunder, including without
limitation, enforcement thereof for the benefit of Purchaser.
10.3. TERMINATION PRIOR TO CLOSING. This Agreement and the
transactions contemplated hereby may be terminated at any time prior to the
Closing Date (i) by the mutual written consent of Purchaser and Seller, (ii) by
either Purchaser or Seller in writing, without liability to the party
terminating this Agreement on account of such termination, if the Closing shall
not have occurred on or before October 15, 1996, or (iii) by either Purchaser or
Seller in writing, without liability to the party terminating this Agreement on
account of such termination, if the non-terminating party (A) fails to perform
in any material respect any agreement contained herein required to be performed
prior to the Closing Date, or (B) materially breaches any of its
representations, warranties or covenants contained herein; provided, however,
that termination pursuant to this Section 10.3 shall not relieve the defaulting
or breaching party from any liability to the non-defaulting party.
10.4. FURTHER ASSURANCES. Each party hereto shall, at any time
on or after the Closing Date, execute, acknowledge and deliver any further
assignments and other assurances, documents and instruments of transfer,
reasonably requested by the other party, and will take any other action that may
be requested by the other party, for the purpose of assigning, transferring,
granting, conveying and confirming to Purchaser, or reducing to possession, any
or all property to be conveyed and transferred by this Agreement. Without
limiting the generality of the foregoing, from and after the Closing Date,
Seller shall promptly, and in any event within three business days, transfer or
convey to Purchaser any cash or other property which may come into Seller's
possession relating to the Purchased Assets or the PMC Division.
16
<PAGE> 22
10.5. BULK SALES LAW. Without admitting that the bulk sales
law of any state is applicable to the transactions contemplated by this
Agreement, the parties waive compliance with the bulk sales laws of all states.
10.6. NO THIRD PARTY BENEFICIARIES. The representations,
warranties, covenants and agreements contained in this Agreement are for the
sole benefit of the parties hereto, and their respective successors and
permitted assigns, and no provision of this Agreement shall be construed as
conferring any rights on any third party or parties.
10.7. CONFIDENTIALITY; PRESS RELEASES AND ANNOUNCEMENTS. The
parties shall, and shall cause their respective employees, officers, directors
and other representatives to, hold in strict confidence any and all information
or data obtained in connection with this Agreement. Except as may otherwise
required by Law, neither party will issue or authorize to be issued any press
release or other announcement concerning this Agreement or any of the terms
hereof or the transactions contemplated hereby without the prior written
approval of the other party.
10.8. TAXES. Seller shall pay all sales and use taxes and
transfer fees, if any, arising out of the transfer of the Purchased Assets and
shall pay its portion, prorated as of the Closing Date, of state and local
property taxes. Purchaser shall not be responsible for any payroll, excise,
income, business, occupation, withholding or similar tax, or any taxes of any
kind, related to any period up to and including the Closing Date.
10.9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless
of any investigation at any time made by or on behalf of any party, or of any
information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing.
10.10. EXPENSES. Each of the parties shall pay all costs and
expenses incurred by it or on its behalf in connection with this Agreement and
the transactions contemplated hereby, including, without limiting the generality
of the foregoing, fees and expenses of its own financial consultants,
accountants and counsel.
10.11. ENTIRE AGREEMENT. All agreements, covenants,
representations and warranties, express or implied, oral and written, of the
parties with regard to the subject matter of this Agreement are contained in
this Agreement, the Schedules and Exhibits hereto, the documents referred to
herein or the documents or instruments implementing the provisions hereof. This
is an integrated agreement.
10.12. GOVERNING LAW AND CHOICE OF FORUM. The validity,
construction and performance of this Agreement, and any Action arising out of or
relating to this Agreement, shall be governed by the Laws of the State of Ohio,
without regard to the Laws as to choice or conflict of Laws.
10.13. INTERPRETATION. The language in all parts of this
Agreement shall be in all cases construed simply according to its fair meaning
and not strictly for or against any party.
17
<PAGE> 23
The captions of the Sections and Subsections of this Agreement are for
convenience only and shall not affect the construction or interpretation of any
of the provisions of this Agreement.
10.14. WAIVER AND AMENDMENT. This Agreement may be amended,
supplemented or modified only through an express written instrument signed by
both parties or their respective successors and permitted assigns. Any party may
specifically and expressly waive in writing any portion of this Agreement or any
breach hereof, but only to the extent such provision is for the benefit of the
waiving party, and no such waiver shall constitute a further or continuing
waiver of any preceding or succeeding breach of the same or any other provision.
The consent by one party to any act for which such consent was required shall
not be deemed to imply consent or waiver of the necessity of obtaining such
consent for the same or similar acts in the future, and no forbearance by a
party to seek a remedy for noncompliance or breach by the other party shall be
construed as a waiver of any right or remedy with respect to such noncompliance
or breach.
10.15. ASSIGNMENT. Neither this Agreement nor any interest
herein or right hereunder shall be assignable (voluntarily, involuntarily, by
judicial process, operation of Law or otherwise), in whole or in part, by any
party without the prior written consent of all other parties. Any attempt at
such an assignment without such consent shall be void. Notwithstanding the other
provisions of this Section 10.15, if Seller, in connection with any sale of all
or substantially all of its assets or any merger or consolidation in which
Seller does not survive, obtains a written agreement from the purchaser of such
assets or the surviving entity in such merger or consolidation expressly
assuming and agreeing to perform, for the benefit of Purchaser, all of Seller's
obligations hereunder, then Purchaser's consent shall not be required. Each of
the terms, provisions and obligations of this Agreement shall be binding upon,
shall inure to the benefit of, and shall be enforceable by the parties and their
respective legal representatives, successors and permitted assigns.
10.16. NOTICES. All notices, requests, demands and other
communications made under this Agreement shall be in writing, correctly
addressed to the recipient at the addresses set forth below and shall be deemed
to have been duly given (i) upon delivery, if served personally on the party to
whom notice is to be given, (ii) upon transmittal, if telecopied and receipt is
confirmed, or (iii) on the date or receipt, refusal or non-delivery indicated on
the receipt if mailed to the party to whom notice is to be given by first class
mail, registered or certified, postage prepaid, or by air courier:
If to Seller: Dynamotion/ATI Corp.
1639 E. Edinger Ave.
Santa Ana, California 92705
Attn: President
Facsimile: (714) 541-4469
18
<PAGE> 24
with a copy to: Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, Suite 1700
Costa Mesa, California 92626
Attn: Scott N. Leslie, Esq.
Facsimile: (714) 979-1921
If to Purchaser: PMC Electronics, Inc.
4460 Lake Forest, Suite 228
Cincinnati, Ohio 45242
Attn: President
Facsimile: (513) 563-7576
with copies to: Sieb & Meyer Elektronik GmbH
Auf dem Schmaarkamp 21
D-21339 Luneberg
Germany
Attn: President
Facsimile: 49-4102-1511
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, California 92626
Attn: James W. Loss, Esq.
Facsimile: (714) 549-3244
Any party may give written notice of a change of address in accordance with the
provisions of this Section 10.16 and after such notice of change has been
received, any subsequent notice shall be given to such party in the manner
described at such new address.
10.17. SEVERABILITY. Each provision of this Agreement is
intended to be severable. Should any provision of this Agreement or the
application thereof be judicially declared to be or become illegal, invalid,
unenforceable or void, the remainder of this Agreement shall continue in full
force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto.
10.18. COUNTERPARTS. 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 a single agreement.
19
<PAGE> 25
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
"SELLER": "PURCHASER":
DYNAMOTION/ATI CORP., PMC ELECTRONICS, INC.,
a New York corporation a Delaware corporation
By:__________________________ By:__________________________
_____________________________ _____________________________
Print or Type Name Print or Type Name
_____________________________ _____________________________
Print or Type Title Print or Type Title
"SIEB & MEYER":
SIEB & MEYER ELEKTRONIK
GMBH, a German corporation
By:__________________________
_____________________________
Print or Type Name
_____________________________
Print or Type Title
20
<PAGE> 26
EXHIBIT A
BILL OF SALE
THIS BILL OF SALE (this "Bill of Sale") is being executed and delivered
by Dynamotion/ATI Corp., a New York corporation ("Seller"), pursuant to Section
2 of that certain Asset Purchase Agreement dated September 27, 1996 (the "Asset
Purchase Agreement"), by and among Seller, PMC Electronics, Inc., a Delaware
corporation ("Purchaser"), and Sieb & Meyer Elektronik GmbH, a German
corporation. Capitalized terms used herein without definition shall have the
meanings given to them in the Asset Purchase Agreement.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, Seller does hereby give, grant, bargain, sell,
transfer, set over, assign and deliver unto Purchaser, all of Seller's right,
title and interest in and to all of the Purchased Assets as such term is defined
in Section 1.1 of the Asset Purchase Agreement. The transfer evidenced by this
Bill of Sale is made free and clear of all claims, liens, rights, restrictions,
equities, security interests, title defects or other encumbrances of any nature.
Seller hereby covenants that it will, at any time and from time to
time, upon written request therefor, execute and deliver to Purchaser, or to
Purchaser's successors, nominees or assigns, any new or confirmatory instruments
which may be reasonably necessary or desirable in order to protect or to fully
assign and transfer to and vest in Purchaser or such successor, nominee or
assign, all of Seller's right, title and interest in and to the Purchased
Assets.
This Bill of Sale shall be binding upon and inure to the benefit of the
legal representatives, successors and assigns of Seller and Purchaser.
IN WITNESS WHEREOF, Seller has duly executed this Bill of Sale as of
September 30, 1996.
DYNAMOTION/ATI CORP.,
a New York corporation
By:___________________________
______________________________
Print or Type Name
______________________________
Print or Type Title
<PAGE> 27
EXHIBIT B
ASSUMPTION AGREEMENT
Pursuant to that certain Asset Purchase Agreement dated as of September
27, 1996 (the "Agreement") by and among Dynamotion/ATI Corp., a New York
corporation ("Seller"), PMC Electronics, Inc., a Delaware corporation
("Purchaser"), and Sieb & Meyer Elektronik GmbH, a German corporation, for good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Purchaser hereby assumes the Assumed Liabilities (as such term is
defined in Section 1.4 of the Agreement) by and subject to the terms and
conditions of the Agreement. Except as expressly assumed herein, Purchaser does
not assume and shall not in any manner be responsible for any Excluded
Liabilities (as such term is defined in Section 1.5 of the Agreement).
Dated this 30th day of September, 1996.
PMC ELECTRONICS, INC.
By:___________________________
Its:__________________________
<PAGE> 28
Schedule of Payables
<PAGE> 29
Schedule of Assumed Contracts
1. Seller's Quotation for Advanced Technology Inc. dated as of
August 19, 1996
2. Lease between Seller (as lessee) and Pitney Bowes Credit
Corporation (as lessor) dated as of January 27, 1994
3. Letter from Seller to Lawrence E. Schloemer dated August 19,
1996
4. Obligations of Seller under outstanding Purchase Orders of
Seller as set forth on attached Schedule
5. Obligations of Seller under the Escrow Agreement between
Seller, Advanced Technology Inc. and Michael S. Goodman, as
escrow agent dated as of August 20, 1996
6. Obligations of Seller under Section 15 of the Purchase and
Sale Agreement between Seller and Advanced Technology Inc.
dated as of August 20, 1996
7. Obligations of Seller under the Software License Agreement
dated November 29, 1995 between Seller and Integrated Systems,
Inc.
8. Obligations of Seller under the Master Binary Software License
Agreement dated February 28, 1986, as amended, between Seller
and Microtec (formerly Ready Systems Corporation)
<PAGE> 30
Schedule of Other Assumed Liabilities
1. Accrued paid time off
2. Accrued Workers Compensation
3. Personal property taxes
<PAGE> 31
Schedule of Exceptions
3.4 CONSENTS AND APPROVALS
Seller is required to file with the Securities and
Exchange Commission a Form 8-K related to the
disposition of the PMC Division
3.8 FINANCIAL STATEMENTS AND OTHER INFORMATION
Seller believes an appropriate and adequate reserve
for inventory would be approximately $25,000-$50,000,
however, the inventory is currently reserved at
approximately $2,500
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS
(ix) Failure to pay or satisfy when due any
obligation of the PMC Division.
Seller is in default under its credit facility with
IBJ Schroder Bank & Trust Company
Seller defines past due as any trade payables due
more than 45 days. The total past due balance for PMC Division
trade payables totals $24,040. See the Schedule of Payables
for the detail on the vendors and balances exceeding 45 days
<PAGE> 32
Schedule of Tangible Property
<PAGE> 33
Schedule of Benefit Plans
Regular employees of Seller are eligible for benefits after 90 days unless
otherwise stated.
1. Medical-California residents are eligible for HMO or PPO.
Out of state employees are eligible for PPO only.
(See attached rate sheet)
2. Dental and Life insurance is at no cost to the employee. This
cost is basically included in the Medical premium. The life
insurance policy is two times the employees annual salary up
to $50K.
3. Employees are eligible after 90 days to enroll in the 401(k)
plan. Enrollment is quarterly and vesting is 100% immediately.
Seller matches 20% of the first $2000 of employee deferment.
($400 maximum).
4. Long term disability is available to the employee, at their
cost.
5. Credit Union benefits are also available to employees.
6. Direct Deposit of payroll checks is available.
7. Paid time off ("PTO") is accrued at date of hire. Attached is
the PTO policy.
<PAGE> 34
Schedule of Accounts Receivable
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5,335
<ALLOWANCES> 168
<INVENTORY> 4,636
<CURRENT-ASSETS> 9,351
<PP&E> 654
<DEPRECIATION> 790
<TOTAL-ASSETS> 14,018
<CURRENT-LIABILITIES> 11,826
<BONDS> 0
1,852
10
<COMMON> 113
<OTHER-SE> (348)
<TOTAL-LIABILITY-AND-EQUITY> 14,018
<SALES> 12,279
<TOTAL-REVENUES> 12,279
<CGS> 9,446
<TOTAL-COSTS> 13,888
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 574
<INCOME-PRETAX> (2,183)
<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (2,183)
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