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Exhibit 2.1
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RECAPITALIZATION AGREEMENT
by and among
MICRON ELECTRONICS, INC.,
MICRON CUSTOM MANUFACTURING SERVICES, INC.,
and
CORNERSTONE EQUITY INVESTORS IV, L.P.
dated as of
December 21, 1997
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RECAPITALIZATION AGREEMENT
INDEX
Page
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ARTICLE I
Certain Definitions....................................................2
ARTICLE II
Representations and Warranties of MEI and the Company..................5
Section 2.1. Authorization; No Conflicts; etc.........................5
Section 2.2. Incorporation; Capitalization; Structure.................6
Section 2.3. Financial Statements.....................................7
Section 2.4. Undisclosed Liabilities..................................8
Section 2.5. Properties...............................................8
Section 2.6. Environmental Matters....................................9
Section 2.7. Absence of Certain Changes...............................9
Section 2.8. Litigation; Orders......................................11
Section 2.9. Intellectual Property...................................11
Section 2.10. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc..........................................12
Section 2.11. Labor Matters..........................................13
Section 2.12. Compliance with Laws...................................13
Section 2.13. Employee Benefit Plans.................................13
Section 2.14. Tax Returns............................................14
Section 2.15. Brokers, Finders, etc..................................15
Section 2.16. Customers and Suppliers................................15
Section 2.17. Real Property..........................................15
Section 2.18. Material Agreements....................................16
Section 2.19. Transactions with Affiliates...........................18
Section 2.20. Insurance..............................................18
Section 2.21. Computer Systems.......................................18
Section 2.22. Products and Services Liability........................18
Section 2.23. Predecessor Businesses; Former Facilities..............19
Section 2.24. Disclosure.............................................19
Section 2.25. No Representations Regarding Projections...............20
Section 2.26. Construction of Certain Provisions.....................20
ARTICLE III
Representations and Warranties of Investor............................20
Section 3.1. Incorporation; Authorization; No Conflicts; etc.........20
Section 3.2. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc............................................21
Section 3.3. Brokers, Finders, etc...................................21
Section 3.4. Financing...............................................21
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Section 3.5. Investment..............................................22
ARTICLE IV
Covenants.............................................................22
Section 4.1. Investigation of Business; Access to Properties and
Records; Records Retention..............................22
Section 4.2. Efforts; Obtaining Consents.............................24
Section 4.3. Further Assurances......................................24
Section 4.4. Conduct of Business.....................................24
Section 4.5. Preservation of Business................................25
Section 4.6. Public Announcements....................................25
Section 4.7. Intercompany Accounts...................................26
Section 4.8. Notice of Breach........................................26
Section 4.9. Acquisition Proposals...................................26
Section 4.10. Noncompetition; Nonsolicitation........................27
Section 4.11. Confidentiality........................................28
Section 4.12. Nonsolicitation by the Company.........................28
Section 4.13. Alternative Financing..................................28
Section 4.14. License Agreements.....................................29
Section 4.15. Use of Micron Name.....................................29
Section 4.16. Schedule Supplements...................................29
Section 4.17. Capital Expenditures...................................29
ARTICLE V
Employee Benefits.....................................................30
Section 5.1. Provision of Benefits...................................30
Section 5.2. Savings Plan............................................30
Section 5.3. Welfare Benefits........................................31
Section 5.4. Intercompany Charges....................................31
ARTICLE VI
Conditions of Investor's Obligation to Close..........................32
Section 6.1. Representations, Warranties and Covenants of MEI and
the Company............................................32
Section 6.2. Filings; Consents; Waiting Periods......................32
Section 6.3. No Injunction...........................................32
Section 6.4. Transitional Services Agreement.........................32
Section 6.5. Stockholders Agreement and Registration Rights
Agreement..............................................32
Section 6.6. Financing...............................................33
Section 6.7. Indebtedness............................................33
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Section 6.8. Material Adverse Effect................................33
Section 6.9. Opinion of Counsel.....................................33
Section 6.10. Resignation of Directors...............................33
Section 6.11. Other Closing Documents................................33
Section 6.12. Articles of Incorporation..............................34
Section 6.13. Bylaws.................................................34
Section 6.14. Booster Pump and Power Substation......................34
Section 6.15. Patent Agreement.......................................34
Section 6.16. Know-How Agreement.....................................34
Section 6.17. MTI License Agreement..................................34
ARTICLE VII
Conditions to MEI's and the Company's Obligation to Close.............34
Section 7.1. Representations, Warranties and Covenants of Investor...34
Section 7.2. Filings; Consents; Waiting Periods......................35
Section 7.3. No Injunction...........................................35
Section 7.4. Transitional Services Agreements........................35
Section 7.5. Stockholders Agreement and Registration Rights
Agreement..............................................35
Section 7.6. Patent Agreement........................................35
Section 7.7. Know-How Agreement......................................35
Section 7.8. MTI Agreement...........................................35
ARTICLE VIII
The Recapitalization; Closing.........................................35
Section 8.1. Authorization...........................................35
Section 8.2. Stock Purchase..........................................36
Section 8.3. Stock Redemption........................................36
Section 8.4. Closing.................................................36
ARTICLE IX
Tax Matters...........................................................37
Section 9.1. Tax Indemnification by MEI..............................37
Section 9.2. Tax Indemnification by the Company......................37
Section 9.3. Filing Responsibility...................................37
Section 9.4. Refunds.................................................38
Section 9.5. Cooperation and Exchange of Information.................38
Section 9.6. Allocation of Certain Taxes.............................40
Section 9.7. Certain Taxes...........................................40
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ARTICLE X
Termination...........................................................40
Section 10.1. Termination............................................40
Section 10.2. Procedure and Effect of Termination....................41
ARTICLE XI
Miscellaneous.........................................................41
Section 11.1. Entire Agreement; Beneficiaries........................41
Section 11.2. Survival of Representations and Warranties and
Covenants of Investor.................................41
Section 11.3. Counterparts...........................................42
Section 11.4. Governing Law..........................................42
Section 11.5. Expenses...............................................42
Section 11.6. Notices................................................42
Section 11.7. Successors and Assigns.................................44
Section 11.8. Headings; Definitions..................................45
Section 11.9. Consent to Jurisdiction................................45
Section 11.10. Waivers and Amendments................................45
Section 11.11. Severability..........................................45
ARTICLE XII
INDEMNIFICATION.......................................................45
Section 12.1. General Indemnification Obligations....................45
Section 12.2. General Indemnification Procedures.....................46
Section 12.3. Indemnification Basket.................................47
Section 12.4. Indemnification Cap....................................47
Section 12.5. Indemnity Exclusive Remedy.............................47
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EXHIBITS
Exhibit A Term Sheet for Transitional Services Agreement
Exhibit B Company Financial Statements
Exhibit C Term Sheet for the Stockholders Agreement and the Registration
Rights Agreement
Exhibit D Form of Patent and Invention Disclosure Assignment and License
Agreement
Exhibit E Form of Know-How License Agreement
Exhibit F Form of MTI Agreement
LISTS OF SCHEDULES
2.1(c) No Conflicts
2.2(a) Incorporation; Capitalization; Structure
2.2(c) List of Transferred Subsidiaries
2.4 Undisclosed Liabilities
2.5 Permitted Encumbrances
2.6 Environmental Matters
2.7 Absence of Certain Changes
2.8 Litigation; Orders
2.9 Intellectual Property
2.10(a) Licenses, Approvals, Other Authorizations, Consents, Reports, etc.
2.10(c) Lists all consents, approvals, registrations, filings, applications,
etc.
2.11 Labor Matters
2.12 Compliance with laws
2.13(a) Employee Benefits Plans
2.13(c) Compliance with ERISA
2.14 Tax Matters
2.16 Customers and Suppliers
2.17 Real Property
2.18 Material Agreements
2.19 Transactions with Affiliates
2.20 Insurance
2.21 Computer Systems
2.22 Products and Services Liability
2.23 Predecessor Businesses; Former Facilities
3.2 Licenses, Approvals, Other Authorizations, Consents, Reports, etc.
4.4 Conduct of Business
4.12 Nonsolicitation by the Company
4.14 License Agreements
6.2 Filings; Consents; Waiting Periods
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT (this "Agreement"), dated as of
December 21, 1997, is by and among Micron Electronics, Inc., a Minnesota
corporation ("MEI"), Micron Custom Manufacturing Services, Inc., an Idaho
corporation and a wholly-owned subsidiary of MEI (the "Company") and Cornerstone
Equity Investors IV L.P., a Delaware limited partnership ("Investor").
WHEREAS, MEI owns 1,000 shares (the "Shares") of the Company's
common stock, par value $.01 per share (the "Company Common Stock"), which
Shares comprise all of the issued and outstanding shares of the Company's
capital stock;
WHEREAS, Investor will contribute $61.2 million (the "Purchase
Price") to the Company in exchange for 900 shares (such number to be
appropriately adjusted for any stock split or stock dividend of the Company
Common Stock after the date hereof and prior to the Closing Date) of the Company
Common Stock and such other securities of the Company (collectively, the
"Purchase Shares") as Investor shall request (such purchase, the "Stock
Purchase");
WHEREAS, Investor has proposed, and the Company and MEI have agreed,
that the Company arrange through BT Alex. ▇▇▇▇▇ Incorporated for the issuance by
the Company of notes, debt securities and/or preferred stock in exchange for
approximately $215 million and the entering into by the Company of a $40 million
revolving credit facility with Bankers Trust Company (the "Credit Facility") to
provide for the working capital needs of the Company (such issuance, and
revolving credit facility collectively, the "BTAB Financing");
WHEREAS, the parties hereto desire that, immediately after the Stock
Purchase and the BTAB Financing, the Company shall redeem from MEI 900 shares
(such number to be appropriately adjusted for any stock split or stock dividend
of the Company Common Stock after the date hereof and prior to the Closing Date)
(the "Redemption Shares") of Company Common Stock in exchange for the Redemption
Price (as herein defined) (such redemption, the "Stock Redemption") and MEI
shall retain 100 shares (such number to be appropriately adjusted for any stock
split or stock dividend of the Company Common Stock after the date hereof and
prior to the Closing Date) (the "MEI Retained Shares") of Company Common Stock
such that immediately after Closing MEI shall own 10% of the outstanding Company
Common Stock and Company Common Stock equivalents;
WHEREAS, the Stock Purchase, the BTAB Financing and the Stock
Redemption are referred to herein as the "Recapitalization"; and
WHEREAS, it is intended that the Recapitalization be recorded as a
recapitalization for financial reporting purposes.
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NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement the following terms shall have the
following respective meanings:
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding, order, claim or investigation by or before any Governmental
Authority.
"Affiliate" shall mean any person, and any corporation, partnership
or other entity, that directly or indirectly through one or more intermediaries,
controls or is controlled by or under common control with the party specified.
"Business" shall mean the business of design, assembly and testing
of custom complex printed circuit boards, memory intensive products and system
level assemblies for third party electronics original equipment manufacturers
primarily in the networking, telecommunications and computer systems industries
conducted by the Company and the Transferred Subsidiaries as of the date hereof;
provided, that in no event shall Business mean any of the services, properties
or assets to be provided or licensed to the Company or any Transferred
Subsidiary pursuant to any Transitional Services Agreement. For purposes of this
definition, in all circumstances, MTI shall be deemed to be a "third party".
"Business Condition" shall mean the results of operations or
financial condition of the Company and the Transferred Subsidiaries, taken as a
whole.
"Closing" shall mean the consummation of the Recapitalization and
other transactions contemplated hereby.
"Closing Date" shall mean five business days after the date on which
the conditions set forth in Articles VI and VII shall be satisfied or duly
waived, or if MEI and Investor mutually agree on a different date, the date upon
which they have mutually agreed.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"Company Employee" shall mean an individual who is, as of the
Closing Date, em ployed by the Company or any Transferred Subsidiary, whether
such individual is then actively at
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work, on approved leave of absence or on short-term disability leave, or who is
entitled to be rehired by the Company or any Transferred Subsidiary pursuant to
any applicable law or regulation or pursuant to the terms of any contract or
collective bargaining or similar agreement.
"Company Expenses" means (a) all fees and expenses (including,
without limitation, all legal, accounting and investment banking fees and
expenses) paid or payable by, or incurred by the Company or any of the
Transferred Subsidiaries in each case prior to the Closing in connection with
the auction of the Company, the negotiation, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby other
than any expenses related solely to the comfort letter referred to in Section
4.1(e) provided that expenses related to transition services incurred, paid or
payable between the date hereof and the Closing Date are addressed in the
Transitional Services Agreement and (b) all fees and expenses (including,
without limitation, all legal, accounting and investment banking fees and
expenses) paid or payable by, or incurred by the Company or any of the
Transferred Subsidiaries on behalf of MEI in connection with the auction of the
Company, the negotiation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
"Continuing Affiliate" shall mean MEI and any direct or indirect
Subsidiary of MEI other than the Company and the Transferred Subsidiaries.
"Controlled Group Liability" shall mean any and all Damages under
(a) Title IV of ERISA, (b) section 302 of ERISA, (c) sections 412 and 4971 of
the Code, or (d) the continuation coverage requirements of section 601, et seq.,
of ERISA and section 4980B of the Code, other than such Damages that arise
solely out of, or relate solely to, the Company Plans.
"Damages" shall mean any and all losses, liabilities, claims,
damages (including punitive, consequential or treble damages), obligations,
liens, assessments, judgments, awards and fines (including, without limitation,
those arising out of any pending or threatened Action, including any settlement
or compromise thereof) and any related reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable attorneys' fees and expenses
incurred in connection with any pending or threatened Action).
"Employee Benefit Plan" means (a) an employee benefit plan as
defined in Section 3(3) of ERISA and (b) any bonus, incentive, profit sharing,
stock option or stock purchase, severance, fringe benefit or other compensation
plan or arrangement.
"Encumbrance" shall mean any lien, claim, charge, security interest,
option, mortgage, pledge or other legal or equitable encumbrance or restriction
of any kind
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor thereto.
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"Former Company Employee" shall mean an individual who was an
employee of the Company or a Transferred Subsidiary before the Closing Date, is
not a Company Employee, and whose last employment with MEI and any of its
Affiliates was with the Company or a Transferred Subsidiary.
"Governmental Authority" shall mean any government or governmental
or regulatory body thereof, or political subdivision thereof, or any agency or
instrumentality thereof, or any court or arbitrator, in each case, whether
federal, state, local, foreign or otherwise.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Income Taxes" shall mean all Taxes based upon or measured by
income, gain or similar items.
"IRS" shall mean the Internal Revenue Service.
"MCMS Malaysia" shall mean M.C.M.S. Sdn. Bhd. (f/n/a Courageous
Expedition Sdn. Bhd.), a company organized under the laws of Malaysia, and an
indirect, wholly-owned subsidiary of the Company.
"MTI" shall mean Micron Technology, Inc., a Delaware corporation.
"Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Returns" shall mean returns, reports and forms required to be filed
with any domestic or foreign Taxing Authority.
"Subsidiary" shall mean with respect to any Person, any corporation,
partnership, joint venture, business trust or other entity, of which such
Person, directly or indirectly, owns or controls at least 50% of the securities
or other interests entitled to vote in the election of directors or others
performing similar functions with respect to such corporation or other
organization, or to otherwise control such corporation, partnership, joint
venture, business trust or other entity.
"Tax Laws" shall mean the Code, federal, state, county, local, or
foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"Taxes" shall mean (a) all taxes (whether federal, state, local or
foreign) based upon or measured by income and any other tax whatsoever,
including gross receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, employment, excise,
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or property taxes, together with any interest or penalties imposed with respect
thereto and (b) any obligations under any agreements or arrangements with
respect to any Taxes described in clause (a) above.
"Taxing Authority" shall mean any Governmental Authority having
jurisdiction over the assessment, determination, collection, or other imposition
of Tax.
"Transferred Subsidiaries" shall mean the direct and indirect
Subsidiaries of the Company.
"Transitional Services Agreement" shall mean the Transitional
Services Agreement containing the terms set forth in Exhibit A hereto.
ARTICLE II
Representations and Warranties of MEI and the Company
MEI and the Company hereby represent and warrant to Investor as
follows:
Section 2.1. Authorization; No Conflicts; etc.
(a) MEI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota. MEI has full corporate
power to execute and deliver this Agreement and to perform its obligations
hereunder, and MEI has full corporate power to consummate the transactions
contemplated hereby. All corporate acts and other proceedings required to be
taken by MEI to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and properly taken. This Agreement has been duly executed and delivered by
MEI and, assuming the due execution and delivery hereof by the other parties
hereto, this Agreement constitutes the legal, valid and binding obligation of
MEI, enforceable against MEI in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity.
(b) The Company has full corporate power to execute and deliver this
Agreement and to perform its obligations hereunder, and the Company has full
corporate power to consummate the transactions contemplated hereby. All
corporate acts and other proceedings required to be taken by the Company to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken. This Agreement has been duly executed and delivered by the Company and,
assuming the due execution and delivery hereof by the other parties hereto, this
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights and remedies of creditors generally and to
general principles of equity.
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(c) The execution, delivery and performance of this Agreement by MEI
and the Company and the consummation by MEI and the Company of the transactions
contemplated hereby will not (1) violate any provision of the charter or by-laws
of MEI, the Company or any Transferred Subsidiary, (2) except as disclosed in
Schedule 2.1(c), violate any provision of, or constitute a default (with or
without notice or lapse of time) under, or give rise to a right of termination,
cancel lation or acceleration of (or entitle any party to accelerate whether
after the giving of notice or lapse of time or both) any obligation under, or
result in the imposition of any lien upon or the creation of any Encumbrance on
any of the Shares or any of the Company's or any Transferred Subsidiary's assets
or properties pursuant to, any note, bond, debt instrument, mortgage, indenture,
lien, lease, agreement or other instrument, or any judgment, injunction, order
or decree to which any of MEI, the Company or any Transferred Subsidiary is a
party or by which any of them is bound or (3) except as disclosed in Schedule
2.1(c), violate or conflict with any federal, state, local or foreign law,
statute, ordinance, rule or regulation (collectively, "Laws") applicable to MEI,
the Company or any Transferred Subsidiary or by which any of their properties or
assets is bound.
Section 2.2. Incorporation; Capitalization; Structure.
(a) Except as set forth in Schedule 2.2(a) hereto, the Company and
each Transferred Subsidiary (1) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (2) has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as it is now being
con ducted and (3) is in good standing and is duly qualified to transact
business in each jurisdiction in which the nature of property owned or leased by
it or the conduct of its business requires it to be so qualified.
(b) As of the date hereof, the authorized capital stock of the
Company consists of 10,000 shares of the Company Common Stock, 1,000 shares of
which are issued and outstanding. All of the outstanding Company Common Stock is
duly authorized, validly issued, fully paid and non-assessable. No shares of
capital stock of the Company are held in the Company's treasury. As of the date
hereof, the Shares constitute all of the issued and outstanding shares of
Company Com mon Stock. As of immediately after the Closing, (i) the Purchase
Shares which are Company Common Stock and the MEI Retained Shares shall
constitute all of the issued and outstanding shares of the Company Common Stock
and (ii) the Purchase Shares, the MEI Retained Shares and any shares of the
Company's preferred stock (the "Preferred Shares") issued pursuant to the BTAB
Financing shall constitute all of the issued and outstanding shares of the
Company's capital stock. MEI is the record and beneficial owner of, and has
valid title to, the Shares, free and clear of any Encumbrance. Upon delivery to
the Company at the Closing of certificates representing the Redemption Shares,
duly endorsed by MEI for transfer to the Company, and upon MEI's receipt of
payment therefor, valid title to the Redemption Shares will pass to the Company,
free and clear of any Encumbrance. Immediately after the Closing, the Purchase
Shares and the Preferred Shares, if any, will be duly authorized, validly issued
and non-assessable and free and clear of any Encumbrances (except to the extent
contemplated hereby) and will have been issued free and clear of any preemptive
or other similar rights.
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(c) Schedule 2.2(c) lists each of the Transferred Subsidiaries and
its jurisdiction of incorporation; the authorized, issued and outstanding
capital stock of each Transferred Subsidiary; and the record and beneficial
owners of all such capital stock. Other than the Transferred Subsidiaries, the
Company does not, directly or indirectly, own any capital stock of, or equity
ownership interest in, any corporation, partnership, joint venture,
unincorporated association, limited liability company or other business entity.
Except as disclosed on Schedule 2.2(c), all of the outstanding shares of capital
stock or other equity interests of each of the Transferred Subsidiaries have
been validly issued and are fully paid and non-assessable and, except for
directors' qualifying shares and other nominal share interests issued to third
parties to comply with requirements of law, are owned by the Company and/or one
or more of the Transferred Subsidiaries free and clear of any Encumbrance.
(d) Except as specifically provided in this Agreement, there are no
authorized or outstanding options, warrants, convertible securities, preemptive
rights, calls, commitments or other rights or obligations of any kind to
acquire, or to issue, deliver or sell any shares of capital stock of any class
of, or other equity interests in, or securities convertible into or exchangeable
for any capital stock of or other ownership interests in the Company or any
Transferred Subsidiary, and there are no agreements, instruments or
understandings to grant or enter into any such option, warrant, convertible
security, preemptive right, call, commitment, right or obligation. There are no
shareholders agreements or similar agreements, and there are no rights of first
offer, rights of first refusal, stock appreciation rights, phantom stock rights,
profit participation rights or similar rights, in each case, relating to the
capital stock of or other ownership interests in the Company or any Transferred
Subsidiary.
Section 2.3. Financial Statements.
(a) Attached hereto as Exhibit B is a true and complete copy of the
following financial statements (the following financial statements, together
with the notes to such financial statements, collectively, the "Company
Financial Statements"):
(1) the audited consolidated financial statements of the
Company for the fiscal years ended August 31, 1995, August 29, 1996 and August
28, 1997;
(2) the audited financial statements of MCMS Malaysia for the
fiscal year ended August 28, 1997; and
(3) the unaudited consolidated balance sheet of the Company as
of November 27, 1997, together with the related consolidated statements of
income, and cash flows for the three-month period ended on such date (the
"Interim Financial Statements").
(b) The Company Financial Statements: (i) are true, correct and
complete in all material respects, (ii) are in accordance with the books and
records of the Company and the Transferred Subsidiaries (which books and records
are accurate and complete in all material
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respects), (iii) fairly present the consolidated financial condition, assets and
liabilities of the Company as of their respective dates and the results of
operation and changes in cash flows of the Company, on a consolidated basis, for
the periods covered thereby, and (iv) have been prepared in accordance with
United States generally accepted accounting principles ("GAAP"), consistently
applied, subject, in the case of the Interim Financial Statements, to normal
year-end adjustments.
Section 2.4. Undisclosed Liabilities. Except as disclosed in
Schedule 2.4 hereto, and except as reflected, reserved against or otherwise
disclosed in the Company Financial Statements (including the notes thereto), the
Company does not have any liabilities or obligations of any kind whatsoever
(whether accrued or contingent) except (1) liabilities and obligations which
were incurred after August 28, 1997 in the ordinary course of business
consistent with past practice, (2) obligations under this Agreement or (3)
obligations under contracts which do not create liabilities for purposes of
GAAP. Schedule 2.4 hereto sets forth all liabilities and obligations of the
Company and the Transferred Subsidiaries as of the date hereof for borrowed
money other than (i) receivables, payables and loans relating to ongoing
business between the Continuing Affiliates and MTI on the one hand, and the
Company and the Transferred Subsidiaries on the other hand and (ii) trade
payables and trade receivables incurred in the ordinary course of business
("Borrowed Money"). As of the Closing, neither the Company nor any Transferred
Subsidiary will have any liability or obligation for Borrowed Money except for
liabilities or obligations for Borrowed Money arranged by the Company in order
to finance or otherwise in connection with the transactions contemplated by this
Agreement.
Section 2.5. Properties. The Company and/or one or more of the
Transferred Subsid iaries has good title to, or holds by valid and existing
lease or license, free and clear of all Encum brances other than Permitted
Encumbrances, each piece of tangible personal property currently used by them
in, and reasonably necessary to enable them to carry on, the Business as
presently con ducted. "Permitted Encumbrances" shall mean those Encumbrances
which (1) are set forth in Schedule 2.5 or in the case of real property Schedule
2.17, (2) are reflected or reserved against in the Company Financial Statements,
(3) arise by statute out of mechanics', carriers', workmen's, repairmen's or
other like statutory liens arising or incurred in the ordinary course of
business for sums not yet due or which are otherwise reflected in the Company
Financial Statements, (4) consist of liens for Taxes and other charges of
Governmental Authorities which are not due and payable or which may be paid
without penalty or interest or the validity of which is being contested in good
faith by appropriate proceedings, (5) in the case of real property, consist of
zoning, land use and other similar legal restrictions existing generally with
respect to properties of a similar character and which are not violated in any
respect by the current use and operation of any such real property, or (6) in
the case of real property, consist of easements, covenants, licenses, rights of
way, conditions, restrictions, defects and other Encumbrances which are of
record, would be shown by a survey or are typical of similar properties and
which do not impair the current occupancy or use of such real property in the
Business. Such personal property, taken as a whole, are free from any material
defects, have been maintained in accordance with normal industry practice and
any regulatory standard or procedure to which such properties are subject, and
are in an operating condition and
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repair (subject to normal wear and tear) adequate and suitable for the purposes
for which such properties are presently used.
Section 2.6. Environmental Matters. Except as set forth on Schedule
2.6: (i) no real property currently or formerly owned or operated by the Company
or any Transferred Subsidiary is contaminated with any Hazardous Substances to
an extent or in a manner or condition which would give rise to any liability of
the Company or any Transferred Subsidiary (contingent or otherwise) or
investigatory, corrective or remedial obligation of the Company or any
Transferred Subsidiary under Environmental Law, (ii) no judicial or
administrative proceeding is pending or, to the knowledge of MEI or the Company,
threatened relating to liability of the Company or any Transferred Subsidiary
for any on-site or off-site disposal or contamination or any noncompliance with
Environmental Laws by or with respect to the Company, any Transferred
Subsidiary, or any property or facility associated therewith, (iii) neither MEI,
the Company, nor any Transferred Subsidiary has received written notice of any
claims or written notices alleging any violation by the Company or any
Transferred Subsidiary of, or any liability of the Company or any Transferred
Subsidiary (contingent or otherwise) under, any Environmental Law, and neither
MEI nor the Company is aware of any facts, events, or circumstances that exist
or have occurred (including any disposal or arrangement for disposal on or prior
to the Closing Date) that would give rise to any such claim or notice or give
rise to any such violation or liability, and (iv) the Company and each
Transferred Subsidiary have complied and are in compliance with all
Environmental Laws. "En vironmental Law" means any applicable federal, state or
local law, regulation, order, decree or ▇▇▇▇ cial opinion or other agency
requirement having the force and effect of law, and any common law, relating to
noise, odor, Hazardous Substances or the protection of public health or safety,
workplace health or safety or pollution or protection of the environment.
"Hazardous Substance" means any toxic or hazardous substance that is regulated
by or under authority of, or as to which liability or standards of conduct are
imposed pursuant to, any Environmental Law, including any petroleum products,
asbestos or polychlorinated biphenyls.
Section 2.7. Absence of Certain Changes. Except as disclosed in
Schedule 2.7, since August 28, 1997:
(a) there has been no material adverse change in the Business
Condition except for any change resulting from (1) any change or any development
in worldwide, foreign or national economic, financial or market conditions, (2)
war, insurrection or other political change or instability or (3) the
announcement of the transactions contemplated hereby;
(b) there has been no physical damage, destruction or loss to any
assets or proper ties of the Company or any of the Transferred Subsidiaries,
after taking into account any insurance recoveries in respect thereof, which in
the aggregate exceeds $100,000; and
(c) neither the Company nor any of the Transferred Subsidiaries has:
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(1) sold, leased, assigned or otherwise transferred any of its
tangible assets, except in the ordinary course of business consistent with past
practice.
(2) incurred any liabilities or obligations other than current
liabilities incurred, or obligations (including contingent obligations) under
contracts entered into, in the ordinary course of business consistent with past
practice;
(3) canceled, waived, or released in writing any material debt
owed to the Company or any Transferred Subsidiary or, claim or right of the
Company or any Transferred Subsidiary;
(4) delayed or postponed the payment of the accounts payable
or any other liabilities of the Business other than in the ordinary course of
business consistent with past practice;
(5) issued any capital stock or other equity securities or any
securities convertible, exchangeable, or exercisable into any capital stock or
other equity securities, other than to the Company by Transferred Subsidiaries
in connection with the formation of Transferred Subsidiaries and other than as
contemplated hereby;
(6) declared, set aside, or paid any dividend or distribution
with respect to its capital stock or, except for the Stock Purchase and the
Stock Redemption, redeemed, purchased or otherwise acquired any of its capital
stock;
(7) sold, leased, assigned, licensed, or otherwise transferred
any of its Intellectual Property or other intangible assets, except for any
license granted by the Company to any Transferred Subsidiary or by any
Transferred Subsidiary to the Company;
(8) permitted any of its material assets, tangible or
intangible, to become subject to any material Encumbrance (other than Permitted
Encumbrances);
(9) made any capital expenditures or commitments, or series
thereof, involving in excess of $17,200,000 in the aggregate for the Company and
the Transferred Subsidiaries during the fiscal quarter ended November 27, 1997;
(10) invested or committed to invest in any business entity
not organized under the laws of a jurisdiction within the United States of
America other than investments in Transferred Subsidiaries;
(11) written off as uncollectible any accounts receivable
other than in ordinary course of business consistent with past practice and
other than reserve adjustments relating to accounts receivable on a basis
consistent with past practice;
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(12) terminated or amended other than in the ordinary course
of business consistent with past practice, suffered the termination or amendment
of, failed to perform in any material respect all of its obligations under or
suffered or permitted any material default to exist under, any material
agreement, contract, license, or permit;
(13) made any loans or advances to, guarantees for the benefit
of, or any investments (including any intercompany advance but excluding loans
or advances to, guaranties for the benefit of or investments in Transferred
Subsidiaries) in any Person, other than advances to employees in the ordinary
course of business consistent with past practice that do not exceed $10,000
individually or $50,000 in the aggregate;
(14) paid any amount to or entered into any agreement,
arrangement or transaction with any employee or officer or any Affiliate or
director (in each case, other than in the ordinary course of business consistent
with past practice);
(15) granted any increase in the compensation of any officer
or employee or made any other change in the employment terms of any officer or
employee other than in the ordinary course of business consistent with past
practice;
(16) made any material change in any method of accounting or
accounting practice; or
(17) agreed, in writing or otherwise, to any of the foregoing.
Section 2.8. Litigation; Orders. Except as disclosed in Schedule
2.8, there are no Actions pending or, to MEI's or the Company's knowledge,
threatened against the Company or any Transferred Subsidiary by or before any
Governmental Authority. Except as disclosed in Schedule 2.8, there are no
judgments or outstanding orders, injunctions, decrees, stipulations or awards
rendered by any Governmental Authority (collectively, "Orders") (a) against the
Company or any Transferred Subsidiary or any of their respective properties or
the Business or (b) which affects the ability of MEI to perform its obligations
hereunder.
Section 2.9. Intellectual Property.
(a) Except as set forth on Schedule 2.9, the Company or a
Transferred Subsidiary owns, or has a valid and enforceable license to use, or
as of the Closing will own or have a valid and enforceable license to use, free
and clear of all Encumbrances, all of the patents, trademarks, trade names,
service marks, copyrights, registrations for or applications to register any of
the foregoing, trade secrets, confidential information, know-how, computer
software and all other intellectual property rights ("Intellectual Property")
currently used by them which are material and necessary to enable them to carry
on their business as it is presently being conducted ("Company Intellectual
Property"); provided, however, that the foregoing sentence shall not be deemed
to be a representation as to non infringement of third party Intellectual
Property or an assignment or other
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transfer of Intellectual Property. Except as set forth on Schedule 2.9, to the
knowledge of MEI, the operation of the business of the Company and the
Transferred Subsidiaries does not infringe the Intellectual Property of any
third party.
(b) Schedule 2.9 contains a complete list of all domestic and
foreign patents, patent applications, invention disclosures, trade names,
registered and material unregistered trademarks and service marks
("Trademarks"), Trademark registrations and applications, copyright
registrations and applications, and licenses or similar agreements or
arrangements with respect to Intellectual Property, in each case which are owned
(in whole or in part) by (or as of the Closing will be owned by), filed by or on
behalf of, or to which the Company or any of the Transferred Subsidiaries is a
party.
(c) Except as disclosed in Schedule 2.9, no claims have been
asserted in writing by any Person (1) challenging the ownership, validity,
enforceability or effectiveness of any Intel lectual Property owned, used, filed
by or licensed to the Company or a Transferred Subsidiary, (2) to the effect
that the Company or the sale of any product or the provision of any service as
now sold or provided by the Company or a Transferred Subsidiary infringes on or
misappropriates any Intellectual Property of a third party or (3) against the
use by the Company or a Transferred Subsid iary of any Intellectual Property
necessary to enable the Company and the Transferred Subsidiaries to carry on
their business as it is presently being conducted. The Company and the
Transferred Subsidiaries have taken all necessary and reasonable action to
maintain and protect all of the Company Intellectual Property, and until the
Closing Date, will continue to maintain and protect the Company Intellectual
Property, in each case, so as not to adversely affect the validity or
enforceability thereof. MEI has taken all necessary and reasonable action to
maintain and protect those patents and patent applications listed on Schedule
2.9 and indicated as those to be assigned to the Company prior to the Closing.
Except as set forth on Schedule 2.9, to MEI's and the Company's knowledge, no
third party has infringed or misappropriated any of the material Company
Intellectual Property.
Section 2.10. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc.
(a) Except as set forth on Schedule 2.10(a), the Company and the
Transferred Subsidiaries (other than MCMS Belgium, S.A.) have all governmental
licenses, permits, franchises, approvals and other authorizations of any
Governmental Authority (the "Licenses") necessary to own, lease and operate its
properties and enable them to carry on the Business as presently conducted. All
such Licenses are in full force and effect. No proceeding is pending or, to
MEI's or the Company's knowledge, threatened seeking the revocation or
limitation of any such License.
(b) As of the Closing, MCMS Belgium, S.A. will have all Licenses
necessary to own, lease and operate its present properties and enable it to
carry on the Business as presently conducted. As of the Closing, all such
Licenses will be in full force and effect. No proceeding is pending or, to MEI's
or the Company's knowledge, threatened seeking the revocation or limitation of
any such License.
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(c) Schedule 2.10(c) lists all consents, approvals, registrations,
filings, applications, notices, orders, authorizations, qualifications and
waivers required to be made, filed, given or obtained by any of MEI, the Company
or any of the Transferred Subsidiaries with, to or from any Persons or
Governmental Authorities in connection with the consummation of the
Recapitalization and the other transactions contemplated by this Agreement,
except for those that become applicable solely as a result of the specific
regulatory status of Investor or its Affiliates.
Section 2.11. Labor Matters. Except as set forth on Schedule 2.11,
neither the Company nor any of the Transferred Subsidiaries is a party to any
labor union agreement or involved in or, to MEI's or the Company's knowledge,
threatened with any labor action, arbitration, lawsuit or administrative
proceeding relating to labor matters involving the employees of the Company or
the Transferred Subsidiaries (excluding routine workers' compensation claims).
Section 2.12. Compliance with Laws. Except as set forth on Schedule
2.12, the conduct of the Business substantially complies with all applicable
Laws and all Orders applicable thereto.
Section 2.13. Employee Benefit Plans.
(a) Schedule 2.13(a) lists all material employee benefit plans and
programs providing benefits to any Company Employee or Former Company Employee
or beneficiary or dependent thereof, sponsored or maintained by MEI or any of
its Affiliates, or to which MEI or any of its Affiliates currently contributes
or is obligated to contribute ("Plans"). Without limiting the generality of the
foregoing, the term "Plans" includes all employee welfare benefit plans within
the meaning of Section 3(1) of ERISA and all employee pension benefit plans
within the meaning of Section 3(2) of ERISA. Schedule 2.13(a) also specifically
identifies those Plans that are sponsored, maintained or contributed to
exclusively by the Company and the Transferred Subsidiaries ("Company Plans").
(b) MEI has delivered or made available to Investor a true, correct
and complete copy of all plan documents and the current summary plan
descriptions (if any) for each Plan. In addition, with respect to each Company
Plan, MEI has delivered or made available to Investor a true, correct and
complete copy of: (i) the three most recent filed Annual Reports (Form 5500
Series) and accompanying schedules, if any, or any similar filing made with any
foreign authority; (ii) the most recent annual financial report, if any; (iii)
the most recent actuarial report, if any; and (iv) the most recent determination
letter from the IRS, if any.
(c) No Company Plan is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code. The IRS has issued a favorable
determination letter with respect to the Micron Electronics, Inc. Retirement at
Micron Plan ("MEI's 401(k) Plan") which letter has not been revoked, and except
as disclosed in Schedule 2.13(c), to MEI's knowledge there are no existing
circumstances nor any events that have occurred that could reasonably be
expected to adversely affect the qualified status of MEI's 401(k) Plan or the
related trust. Except as disclosed in Schedule
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2.13(c), MEI and its Affiliates have substantially complied with all provisions
of ERISA, the Code and all other laws and regulations applicable to the Plans.
(d) No Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. Without limiting the generality of the
foregoing, no Plan that is subject to ERISA is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA. Neither MEI nor the Company maintains or
has any obligation to contribute to (or any other liability with respect to) any
plan or arrangement whether or not terminated, which provides medical, health,
life insurance or other welfare-type benefits for current or future retired or
terminated Company Employees (except for limited continued medical benefit
coverage required to be provided under Section 4980B of the IRC or as required
under applicable state law or any applicable termination or severance
agreements). There does not now exist, nor do any circumstances now exist that
could reasonably be expected to result in, any Controlled Group Liability that
would be a Liability of the Company or any Transferred Subsidiary following the
Closing.
(e) All contributions required to be made to any Plan by applicable
law or regulation or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any Plan,
before the date hereof have been timely made or paid in full.
Section 2.14. Tax Returns.
(a) Except as disclosed in Schedule 2.14, all material Returns
required to be filed prior to Closing for taxable periods ending on or prior to
the Closing Date by, or with respect to any activities of, the Company and the
Transferred Subsidiaries have been or will be filed in accordance with all
applicable laws, and all Taxes shown to be due on such Returns have been or will
be paid prior to Closing. All such Returns have been or will be correct in all
material respects. Except as set forth on Schedule 2.14 attached hereto, there
is no action, suit, taxing authority proceeding or audit with respect to Taxes
that is or could likely be material in amount now in progress, pending or
threatened in writing against or with respect to the Company and the Transferred
Subsidiaries. Each of the Company and the Transferred Subsidiaries has withheld
and paid over to the applicable Taxing Authority all Taxes that are or would
likely be material in amount and that are due and owing with respect to any
amount paid to any independent contractor, employee, shareholder, creditor or
other party.
(b) Except as set forth on Schedule 2.14, none of the Company or any
Transferred Subsidiary has currently in effect any waiver of any statute of
limitations or granted any extension of time in which any material Tax may be
assessed. Except as set forth on Schedule 2.14, none of the Company or any
Transferred Subsidiary is currently the beneficiary of any extension for filing
a Return.
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(c) Except as set forth on Schedule 2.14, none of the Company or any
Transferred Subsidiary is a party to any agreement which could obligate the
Company or any Transferred Subsidiary to pay any amount that would not be
deductible under Code ss.280G.
(d) No claim has been made in the last five years by any Taxing
Authority in any jurisdiction where any of the Company or any Transferred
Subsidiaries do not file Returns that such entity is or may be subject to
taxation by that jurisdiction.
(e) The Company is not, and has not been within the previous five
years, a "United States real property holding company" within the meaning of
Code ss.897(c).
(f) The reserve for Taxes accrued on the balance sheet of the
Company as of August 28, 1997 has been established in accordance with GAAP and
the unpaid Taxes of the Company and the Transferred Subsidiaries will not, as of
the Closing Date, exceed such reserve, adjusted for results of operations,
changes in the rate of Tax and the passage of time in accordance with the
Company's past practice.
Section 2.15. Brokers, Finders, etc. Neither the Company nor MEI has
employed any broker, finder, consultant or other intermediary in connection with
the transactions contemplated hereby who would have a valid claim for a fee or
commission in connection with such transactions, except for Deutsche ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Inc. ("DMG"). MEI is solely responsible for any payment, fee or
commission that may be due to DMG in connection with the transactions
contemplated hereby.
Section 2.16. Customers and Suppliers. Schedule 2.16 lists, as of
November 27, 1997, each of the ten largest suppliers and the ten largest
customers of the Company and the Transferred Subsidiaries taken as a whole based
on prior twelve month purchases and sales, respectively. Except as listed on
Schedule 2.16 to the knowledge of MEI or the Company, no supplier or third-party
contractor has taken any action that is reasonably likely to have a material
adverse effect on the quality of the goods that it supplies to the Company or
the Transferred Subsidiaries.
Section 2.17. Real Property.
(a) Schedule 2.17 identifies by street address all real estate
leased, subleased or otherwise occupied pursuant to an agreement (the "Leases")
by the Company or any of the Transferred Subsidiaries (the "Leased Premises") or
owned by the Company or any of the Transferred Subsidiaries ("Owned Property",
and collectively with the Leased Premises, the "Real Property"). The Leased
Premises are leased to the Company or a Transferred Subsidiary pursuant to
written leases, copies of which have been made available to Investor prior to
the date hereof. With respect to each Lease: (i) the Company or the applicable
Transferred Subsidiary has a good and valid leasehold interest in and to all of
the Leased Premises, subject to no Encumbrances, except for Permitted
Encumbrances or as disclosed on Schedule 2.17; (ii) each Lease is in full force
and effect
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and is enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity, and, except for Permitted Encumbrances or as disclosed on
Schedule 2.17, none of the Company or any Transferred Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in
such Lease; and (iii) there exists no declared default or to the knowledge of
the Company or MEI any condition which, with the giving of notice, the passage
of time or both, could become a default under any Lease. There are no
outstanding options or rights of first refusal to purchase the Owned Property or
any portion thereof or interest therein except for Permitted Encumbrances. The
Company or a Transferred Subsidiary has good and insurable title in and to the
Owned Property, free and clear of any Encumbrances other than Permitted
Encumbrances.
(b) The Real Property constitutes all of the real property owned,
leased, or otherwise utilized in connection with the Business. Other than the
Company and the Transferred Subsidiaries, there are no parties in possession or
parties having any current or future right to occupy any of the Real Property,
except (x) tenants under any leases disclosed on Schedule 2.17 who are in
possession of space to which they lease or (y) under or pursuant to Permitted
Encumbrances. There exists no violation of any material covenant, condition,
restriction, easement, agreement or order affecting any portion of the Real
Property. All improvements located on the Real Property have direct access to a
public road adjoining such Real Property, either directly or through a valid
easement or other valid rights. Except as set forth on Schedule 2.17, no such
improvements or access ways encroach on land not included in the Real Property
except pursuant to a valid easement or other valid right and no such improvement
is dependent for its access, current operation or utility in the Business on any
land, building or other improvement not included in the Real Property except
pursuant to valid easement or other valid right. All facilities located on the
Real Property are supplied with adequate utilities and other services necessary
for the operation of such facilities as currently operated. There is no pending
or, to the knowledge of MEI and the Company, any threatened condemnation
proceeding, or material lawsuit or administrative action affecting any portion
of the Real Property.
Section 2.18. Material Agreements. Set forth on Schedule 2.18 is a
list of each agreement, arrangement, or understanding to which the Company or
any of the Transferred Subsidiaries is a party or by which the Company or any of
the Transferred Subsidiaries is bound (collectively, the "Material Agreements"):
(1) for the lease of personal property from or to third
parties providing for annual lease payments to any single lessor or from any
single lessee in excess of $500,000;
(2) for the purchase, distribution or sale of supplies,
products or other personal property or for the furnishing or receipt of
information or services, in each case, calling for performance over a period of
more than six months or involving more than $1,000,000;
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(3) relating to the acquisition by the Company or any of the
Transferred Subsidiaries of any legal entity or all or substantially all of the
assets of any Person;
(4) under which it has created, incurred or assumed
indebtedness involving more than $500,000 or pursuant to which an Encumbrance is
imposed on any of its tangible or intangible assets;
(5) for the license of Intellectual Property material to the
Business or the payment of royalties (whether as licensee or licensor or payor
or payee) or any other agreement material to the Business providing in whole or
in part for the use of, or limiting the use of, any Intellectual Property;
(6) purporting to limit the right of the Company or any of the
Transferred Subsidiaries to compete in any line of business, with any Person or
in any geographic area or containing any covenant providing for an exclusive
relationship between the Company or any Transferred Subsidiary and any Person;
(7) with any director, officer or employee of the Company or
any Transferred Subsidiary (including any involving employment or severance);
(8) the consequences of a default or termination of which is
reasonably likely to have a material adverse effect on the Business Condition;
(9) containing any guarantee or power of attorney granted by
the Company or any Transferred Subsidiary;
(10) relating to any partnership or joint venture;
(11) otherwise involving the receipt or expenditure of more
than $250,000 or not entered into in the ordinary course of business consistent
with past practice; and
(12) otherwise material to the Business.
Each of the Material Agreements are in full force and effect and are enforceable
in accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights and
remedies of creditors generally and to general principles of equity. Except as
set forth on Schedule 2.18, the Company or the applicable Transferred
Subsidiary, as the case may be, has complied with the material provisions of
each of the Material Agreements, is not in default under any of the terms
thereof, and no event has occurred that with the passage of time or the giving
of notice or both would constitute a default by the Company or the applicable
Transferred Subsidiary, as the case may be, under any provision thereof. Except
as set forth on Schedule 2.18, to MEI's and the Company's knowledge, all parties
other than the Company or any of the Transferred Subsidiaries have complied with
the material provisions of the Material
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Agreements; are not in default under any of the terms thereof; and no event has
occurred that with the passage of time or the giving of notice or both would
constitute a default by any such party under any provision thereof. Neither the
Company nor any of the Transferred Subsidiaries have received any written notice
of termination with respect to any of the Material Agreements. Neither the
Company nor any of the Transferred Subsidiaries has assigned any of its rights
or obligations under any of the Material Agreements other than to each other.
Neither the Company nor any of the Transferred Subsidiaries have waived any of
its rights in writing under any of the Material Agreements. True and complete
copies of all written Material Agreements and summaries of any oral Material
Agreements have been made available to Investor prior to the date hereof.
Section 2.19. Transactions with Affiliates. Except as set forth on
Schedule 2.19, (a) neither the Company nor any Transferred Subsidiary is a party
to any executory contract with any of its Affiliates, and (b) no Affiliate of
the Company or any Transferred Subsidiary (other than the Company and the
Transferred Subsidiaries) owns any asset, property, or right, tangible or
intangible, that is used in the Business.
Section 2.20. Insurance. Set forth on Schedule 2.20 is a list and
summary description of all policies (including scope, duration and amount of
coverage) of fire, liability, product liability, worker's compensation and other
forms of liability and casualty insurance currently in effect with respect to
the Company, each of the Transferred Subsidiaries, and their respective
businesses and assets. Neither the Company nor any of the Transferred
Subsidiaries is in default with respect to its material obligations under any
insurance policy maintained by it, and neither the Company nor any of the
Transferred Subsidiaries has been denied insurance coverage. The insurance
coverage of the Company and the Transferred Subsidiaries covers risks of such
types and in such amounts as are customary for corporations of similar size
engaged in similar lines of business. Except as set forth on Schedule 2.20, the
Company and the Transferred Subsidiaries do not have any self-insurance or
co-insurance programs, and the reserves set forth on the Financial Statements
are adequate to cover all reasonably anticipated liabilities with respect to any
such self-insurance or co-insurance programs.
Section 2.21. Computer Systems. Except as set forth on Schedule
2.21, neither the Company nor any Transferred Subsidiary plan or anticipate any
material expenditure in relation to the hardware or software or communications
systems used or planned to be used in connection with the Business. Except as
set forth on Schedule 2.21, all computer systems used by the Company and the
Transferred Subsidiaries recognize the advent of the year 2000 and can correctly
recognize and manipulate date information relating to dates on or after January
1, 2000 and the operation and functionality of such computer systems will not be
adversely affected by the advent of the year 2000 or any manipulation of data
featuring date information relating to dates before, on or after January 1,
2000.
Section 2.22. Products and Services Liability. Except as disclosed
on Schedule 2.22 hereto, to MEI's and the Company's knowledge, there are not
any:
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(a) outstanding liabilities of the Company or any Transferred
Subsidiary, fixed or contingent, asserted or unasserted, in the aggregate in
excess of $50,000 with respect to any products liability or any similar claim
that relates to any product manufactured or sold by the Company or any
Transferred Subsidiary to any Person,
(b) outstanding liabilities of the Company or any Transferred
Subsidiary, fixed or contingent, asserted or unasserted, in the aggregate in
excess of $50,000 with respect to any claim for the breach of any express or
implied product warranty or any other similar claim with respect to any product
manufactured or sold by the Company or any Transferred Subsidiary to any Person
other than standard warranty obligations (to replace or repair) made by either
the Company or any Transferred Subsidiaries in the ordinary course of business
to purchasers of its product provided that any liability for returned materials
authorizations (in amounts consistent with past practice) shall not be
considered a liability for purposes of this Section 2.22, and
(c) outstanding liabilities of the Company or any Transferred
Subsidiary, fixed or contingent, asserted or unasserted, in the aggregate in
excess of $50,000 with respect to any claim for the breach of any express or
implied warranty or any other similar claim with respect to any service rendered
by the Company or any Transferred Subsidiary to any Person other than standard
warranty obligations made by either the Company or any Transferred Subsidiaries
in the ordinary course of business to users of its services.
A copy of each type of warranty given to customers of the Company or any
Transferred Subsidiary are attached hereto as Schedule 2.22. Set forth on
Schedule 2.22 hereto is a description of each claim in excess of $25,000 that
has been asserted against the Company or any Transferred Subsidiary since
December 31, 1995 based upon any product or service liability or similar claim,
or on the breach or alleged breach of any express or implied product or service
warranty or any other similar claim with respect to any product manufactured or
sold by or any service rendered by the Company or any Transferred Subsidiary to
any Person, including information regarding (i) the amount of the claim, (ii)
the basis of the claim, (iii) whether the claim was covered by insurance, (iv)
how the claim was resolved, and (v) the amount paid by the Company or any
Transferred Subsidiary in relation to the claim.
Section 2.23. Predecessor Businesses; Former Facilities. Neither the
Company nor any Transferred Subsidiary has ever conducted any business other
than the Business and the component recovery business. Except as disclosed on
Schedule 2.23 hereto, other than the Real Property, neither the Company nor any
Transferred Subsidiary has ever owned, leased or occupied any real property.
Section 2.24. Disclosure. No representation or warranty by MEI or
the Company in this Agreement, and no exhibit, document, statement, certificate
or schedule furnished or to be furnished to Investor pursuant hereto, or in
connection with the transactions contemplated hereby, in any event taken
together, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained herein or
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therein not misleading in light of the circumstances in which they are made in
any material respect with respect to the Business Condition.
Section 2.25. No Representations Regarding Projections. It is
understood that any cost estimates, projections or other predictions contained
or referred to in the Schedules hereto and any cost estimates, projections or
other predictions contained or referred to in other materials that have been or
may hereafter be provided to Investor or any of its Affiliates, agents or
representatives are not and shall not be deemed to be representations or
warranties of MEI or the Company.
Section 2.26. Construction of Certain Provisions. It is understood
and agreed that neither the specification of any dollar amount in the
representations, warranties or covenants con tained in this Agreement nor the
inclusion of any specific item in the Schedules or Exhibits is intended to imply
that such amounts or higher or lower amounts, or the items so included or other
items, are or are not material, and neither party shall use the fact of the
setting of such amounts or the fact of the inclusion of any such item in the
Schedules or Exhibits in any dispute or controversy between the parties as to
whether any obligation, item or matter is or is not material for purposes of
this Agreement.
ARTICLE III
Representations and Warranties of Investor
Investor hereby represents and warrants to MEI as follows:
Section 3.1. Incorporation; Authorization; No Conflicts; etc.
(a) Investor is a legal entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization.
Investor has full corporate, partnership or limited liability company, as the
case may be, power to execute and deliver this Agreement and to perform its
obligations hereunder, and Investor has full corporate, partnership or limited
liability company, as the case may be, power to consummate the transactions
contemplated hereby. All corporate, partnership or limited liability company, as
the case may be, acts and other proceedings required to be taken by Investor to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and prop
erly taken. This Agreement has been duly executed and delivered by Investor and,
assuming the due execution and delivery hereof by the other parties hereto, this
Agreement constitutes the legal, valid and binding obligation of Investor,
enforceable against Investor in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity.
(b) The execution, delivery and performance of this Agreement by
Investor and the consummation by Investor of the transactions contemplated
hereby will not (1) violate any
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provision of the organizational documents or limited partnership agreement of
Investor, (2) violate any provision of, or constitute a default (with or without
notice or lapse of time) under, or give rise to a right of termination,
cancellation or acceleration of (or entitle any party to accelerate whether
after the giving of notice or lapse of time or both) any obligation under, or
result in the imposition of any lien upon or the creation of a security interest
in any of Investor's assets or properties pursuant to, any note, bond, debt
instrument, mortgage, indenture, lien, lease, agreement or other instrument, or
any judgment, injunction, order or decree to which Investor is a party or by
which any of them is bound, or (3) violate or conflict with any Law applicable
to Investor or by which any of its proper ties or assets is bound, except, in
the case of clauses (2) and (3), for any such violations, defaults, rights or
restrictions that would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on (A) the business, financial
condition, assets or liabilities of Investor or (B) the ability of Investor to
consummate the Stock Purchase or the other transactions contemplated by this
Agreement.
Section 3.2. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc. Schedule 3.2 lists all consents, approvals, registrations,
filings, applications, notices, orders, authorizations, qualifications or
waivers required to be made, filed, given or obtained by Investor with, to or
from any persons or Governmental Authorities in connection with the consummation
of the Recapitalization and the other transactions contemplated by this
Agreement, except for those (a) that become applicable solely as a result of the
specific regulatory status of MEI, the Company or the Transferred Subsidiaries
or (b) the failure to make, file, give or obtain which would not reasonably be
expected, individually or in the aggregate, either to have a material adverse
effect on the Business Condition of Investor or to prevent the consummation of
the Stock Purchase or the other transactions contemplated by this Agreement.
Section 3.3. Brokers, Finders, etc. Investor has not employed any
broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who would have a valid claim for a
fee or commission in connection with such transactions.
Section 3.4. Financing. Investor has received, and has furnished to
MEI a copy of a commitment letter from BT Alex. ▇▇▇▇▇ Incorporated ("BTAB"),
dated December 18, 1997 (the "BTAB Commitment Letter"), pursuant to which BTAB
has committed to provide up to $215 million in financing for the transactions
contemplated hereby. Investor has the financial ability, subject only to the
conditions set forth in Article VI hereof, to provide up to $61.2 million toward
the Stock Purchase. Each of the BTAB Commitment Letter and a letter from Bankers
Trust Company ("BT") relating to the Credit Facility (the "BT Letter") have been
duly accepted by Investor. All fees required to be paid by Investor or any of
its Affiliates on or prior to the date hereof in respect of the BTAB Commitment
Letter and the BT Letter have been paid by Investor or its Affiliates, as
applicable. As of the date hereof neither BTAB nor BT have advised Investor of
any reason why the BTAB Commitment Letter or the BT Letter will not be fulfilled
in accordance with their terms.
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Section 3.5. Investment. Investor (a) has been informed by the
Company that the Purchase Shares have not been and will not be registered under
the Securities Act of 1933, as amended (the "Securities Act"), or under any
state securities laws and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (b) is
an experienced and sophisticated investor and has such knowledge and experience
in financial and business matters as are necessary to evaluate the merits and
risks of an investment in the Purchase Shares, (c) confirms that it has been
given the opportunity to ask questions of the officers and management employees
of MEI, the Company and the Transferred Subsidiaries and to acquire additional
information about the Business and the Business Condition and (d) is an
"Accredited Investor" as defined in Regulation D under the Securities Act.
ARTICLE IV
Covenants
Section 4.1. Investigation of Business; Access to Properties and
Records; Records Retention.
(a) Subject to existing confidentiality arrangements, after the date
hereof and prior to Closing, MEI shall cause the Company and each of the
Transferred Subsidiaries to afford to representatives of Investor reasonable
access to its offices, properties, books and records, officers, counsel,
accountants, contracts and Other Persons (as defined below) during normal
business hours, in order that Investor may have an opportunity to make such
investigations as it desires of the affairs of the Company, the Transferred
Subsidiaries and the Business; provided, however, that such investigation shall
be upon reasonable prior notice and shall not unreasonably disrupt the personnel
and operations of MEI, the Company or any Transferred Subsidiary. All requests
for access to the Company or any Transferred Subsidiary and the offices,
properties, books, records and contracts re lating thereto shall be made to such
representatives of MEI as MEI shall designate in writing, who shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. It is further understood and agreed that neither Investor nor its
representatives shall contact any of the employees, customers, suppliers, joint
venture partners, or other associates or Affiliates of MEI or the Company
(collectively, "Other Persons"), in connection with the transactions
contemplated by this Agreement, whether in person or by telephone, mail or other
means of communication, without the specific prior notification of such
representatives of MEI as MEI shall designate in writing. If, as of the date
hereof or at any time hereafter Investor is aware of or discovers any breach of
any representation or warranty contained in this Agreement or any circumstance
or condition that upon Closing would constitute such a breach, Investor shall
use reasonable best efforts to promptly so inform MEI in writing; provided, that
Investor's awareness or discovery of any such breach, circumstance or condition
shall in no way affect any of Investor's rights or remedies under this Agreement
including any rights pursuant to Article XII.
(b) Prior to Closing, any information provided to Investor or its
representatives pursuant to this Agreement shall be held by Investor and its
representatives in accordance with, and
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shall be subject to the terms of, the Confidentiality Agreement dated September
23, 1997 by and between MEI and Cornerstone Equity Investors, L.L.C. (the
"Confidentiality Agreement").
(c) Subject to Section 9.5(c), the Company agrees (i) to hold all of
the books and records of the Company and Transferred Subsidiaries existing on
the Closing Date and not to destroy or dispose of any thereof for a period of 5
years from the Closing Date or such longer time as may be required by Law or by
any Order, and thereafter, if it proposes to destroy or dispose of any of such
books and records, to offer first in writing, at least 60 days prior to such
proposed destruction or disposition to surrender them to MEI, and (ii) for a
period of 5 years from the Closing Date to afford MEI (or MEI's successors or
assigns), their accountants, counsel and other representatives, during normal
business hours, upon reasonable request, at any time, full access to such books,
records and other data and to the employees of the Company and any of its
Subsidiaries to the extent that such access may be requested for any legitimate
purpose at no cost to MEI (other than for reasonable out-of-pocket expenses);
provided, however, that nothing herein shall limit any of MEI's rights of
discovery.
(d) MEI agrees and shall use its reasonable best efforts to cause
each Continuing Affiliate and MTI (i) to hold all of the books, records,
documents, files and other data held by any such Person as of immediately after
the Closing which relates in any way to the Business of the Company (including
all books, record documents, files and other data relating to any Intellectual
Property held by any such Person as of immediately after the Closing which
relates to or is used in the Business of the Company) and not to destroy or
dispose of any thereof for a period of 5 years from the Closing Date or such
longer time as may be required by Law or by any Order, and thereaf ter, if any
of them proposes to destroy or dispose of any of such books, records, documents,
files or other data to offer first in writing, at least 60 days prior to such
proposed destruction or disposition to surrender them to the Company, and (ii)
for a period of 5 years from the Closing Date to afford the Company (or the
Company's successors or assigns), their accountants, counsel and other
representatives, during normal business hours, upon reasonable request, at any
time, full access to such books, records, documents, files and other data and to
the employees of MEI, each Continuing Affiliate and MTI to the extent that such
access may be requested for any legitimate purpose at no cost to the Company
(other than for reasonable out-of-pocket expenses); provided, however, that
nothing herein shall limit any of the Company's rights of discovery.
(e) Notwithstanding anything contained herein to the contrary, MEI
and the Company acknowledges that Investor may cause a Rule 144A placement
memorandum (the "Placement Memorandum") to be prepared and used in connection
with the consummation of the Company's financing of the transactions
contemplated hereby and agrees to use reasonable efforts to furnish Investor
with access to, and to cause the cooperation of, all records and personnel
necessary for Investor to cause the consummation such financing; provided that
no director or officer of MEI, in such capacity, shall be required to execute a
registration statement or purchase agreement in connection with such financing.
In addition, the Company shall request its accountants to consent to the
inclusion of their report or reports in, and to issue a comfort letter in
connection with, any offering memoranda or filings required by such financing.
The Company agrees to
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indemnify MEI against all damages caused by any untrue statement of material
fact contained in the Placement Memorandum or any omission or alleged omission
of material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as MEI has provided
information containing such material misstatement or material omission to the
Investor or the Company in writing including in any representation and warranty
contained in this Agreement.
Section 4.2. Efforts; Obtaining Consents. Subject to the terms and
conditions herein provided, MEI and Investor each agrees to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated hereby and to cooperate
with the other in connection with the foregoing, including using all reasonable
efforts (1) to obtain all necessary waivers, consents and approvals from other
parties to material loan agreements, leases and other contracts, (2) to obtain
the consents, approvals and authorizations that are required to be obtained from
any Governmental Authority, (3) to prevent the entry of, or to lift or rescind,
any Order adversely affecting the ability of the parties hereto to consummate
the transactions contemplated hereby, (4) to effect all necessary registrations
and filings including, but not limited to, filings under the HSR Act and
submissions of information requested by Governmental Authori ties and (5) to
fulfill all conditions to this Agreement.
Section 4.3. Further Assurances. MEI and Investor agree that, from
time to time, whether before, at or after the Closing Date, each of them will,
and will use their reasonable best efforts to cause their respective Affiliates
to, execute and deliver such further instruments of conveyance and transfer and
take such other action as may be necessary to carry out the purposes and intents
of this Agreement.
Section 4.4. Conduct of Business. From the date hereof to the
Closing, except as disclosed on Schedule 4.4 or otherwise provided for in, or
contemplated by, this Agreement, and, except as consented to or approved by
Investor, MEI and the Company covenant and agree that:
(a) the Company and the Transferred Subsidiaries shall operate their
respective businesses in the ordinary course in all material respects;
(b) none of the Company or any of the Transferred Subsidiaries shall
amend its certificate of incorporation or by-laws;
(c) except for the Stock Purchase, the Stock Redemption and in
connection with the BTAB Financing, none of the Company or any of the
Transferred Subsidiaries shall issue, sell, agree to issue or sell or redeem or
otherwise acquire (1) any shares of its capital stock or (2) any securities
convertible into, or options with respect to, or warrants to purchase or rights
to subscribe for, any shares of its capital stock or evidences of indebtedness
or other securities;
(d) except in the ordinary course of business, none of the Company
or any of the Transferred Subsidiaries shall (1) create, incur or assume any
indebtedness for Borrowed Money;
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(2) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any Person,
if such assumption, guarantee, endorse ment or other liability is in any such
case material to the Company; or (3) make any material loans, advances or
capital contributions to or investments in, any Person (except for customary
loans or advances to employees);
(e) except in the ordinary course of business or as required by any
Law or contractual obligations or other understandings or arrangements existing
on the date hereof which are disclosed in Schedule 4.4, none of the Company or
any of the Transferred Subsidiaries shall (1) increase in any manner the base
compensation of, or enter into or amend any employment, bonus, incentive,
severance, consulting, or other compensation agreement with, any existing
director or officer; or (2) commit itself to any additional pension,
profit-sharing, deferred compensation, group insurance, severance pay,
retirement or other employee benefit plan, fund or similar arrangement or amend
or commit itself to amend any of such plans, funds or similar arrangements in
existence on the date hereof so as to increase benefits thereunder;
(f) except in the ordinary course of business or as required by any
Law or contractual obligations existing on the date hereof which are disclosed
in Schedule 4.4 or as provided for in or expressly contemplated by this
Agreement or Schedule 4.4, none of the Company or any of the Transferred
Subsidiaries shall (1) sell, transfer or otherwise dispose of any of its
material assets, (2) create any new material Encumbrance, other than a Permitted
Encumbrance, on its properties or assets, (3) enter into any material joint
venture or partnership or (4) purchase any material amount of assets or
securities of any Person;
(g) none of the Company or any of the Transferred Subsidiaries shall
enter into any transaction or other arrangement which would have to be listed on
Schedule 2.7; and
(h) none of the Company or any of the Transferred Subsidiaries shall
agree to take any action prohibited by this Section 4.4.
Section 4.5. Preservation of Business. Subject to the terms and
conditions of this Agreement, MEI shall, and shall cause the Company and the
Transferred Subsidiaries to, use reasonable efforts to preserve the Business
intact, to keep available to the Company and the Transferred Subsidiaries the
services of persons employed by the Company and the Transferred Subsidiaries and
to preserve the goodwill of customers and others having business relations with
the Company and the Transferred Subsidiaries but shall not be required to incur
material expense to do so.
Section 4.6. Public Announcements. From and after the date hereof
until the Closing, MEI and Investor will, before issuing, or permitting any
agent or Affiliate to issue, any press releases or otherwise making or
permitting any agent or Affiliate to make, any public state ments with respect
to this Agreement and the transactions contemplated hereby, mutually agree in
good faith upon the content of such press release or statement, except in the
event, and only to the
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extent, that disclosure is required by law; provided, that in such
instances the disclosing party will consult with the other party prior to making
such disclosure.
Section 4.7. Intercompany Accounts.
(a) Notwithstanding the provisions of Section 4.4 hereof, nothing in
this Agreement shall be construed or interpreted to prevent the Company from
engaging in any transaction incident to the cash management procedures of
Continuing Affiliates, the Company and the Transferred Subsidiaries in a manner
consistent with past practice, including, without limitation, short-term
investments in bank deposits, money market instruments, time deposits,
certificates of deposit and bankers' acceptances, incurrence or payment of bank
overdrafts and borrowings for working capital purposes and for purposes of
providing additional funds to the Company and the Transferred Subsidiaries in
the ordinary course of business consistent with past practice; provided,
however, that notwithstanding the foregoing, between the date hereof and the
Closing, the Company shall not declare, set aside, or pay any dividend or
distribution with respect to its capital stock and, except for the Stock
Purchase and the Stock Redemption, shall not redeem, purchase or otherwise
acquire any of its capital stock.
(b) Immediately prior to the Closing, MEI shall settle on an
arms-length basis all intercompany receivables, payables and loans then existing
between MTI and the Continuing Affiliates, on the one hand, and the Company and
the Transferred Subsidiaries, on the other hand other than (i) receivables,
payables and loans relating to ongoing business between MTI and the Continuing
Affiliates, on the one hand and the Company and the Transferred Subsidiaries, on
the other hand and (ii) trade payables and receivables.
Section 4.8. Notice of Breach. If, as of the date hereof or at any
time hereafter MEI or the Company is aware of or discovers any breach of any
representation or warranty contained in this Agreement or any circumstance or
condition that upon Closing would constitute such a breach, MEI or the Company,
as the case may be, shall promptly so inform Investor in writing.
Section 4.9. Acquisition Proposals. MEI and the Company shall not,
and the Company shall cause the Transferred Subsidiaries not to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any inquiries,
discussions or proposals or offers from any Person relating to a possible
disposition of any capital stock or any material portion of the assets of the
Company or any Transferred Subsidiary, (ii) continue, propose, solicit,
initiate, encourage or enter into negotiations or discussions relating to a
possible disposition of any capital stock or any material portion of the assets
of the Company or any Transferred Subsidiary, (iii) enter into or consummate any
agreement or understanding providing for the disposition of any capital stock or
any material portion of the assets of the Company or any Transferred Subsidiary,
or (iv) assist, participate in or encourage any effort or attempt by any other
Person to do or seek any of the foregoing. MEI or the Company shall promptly
notify Investor of, and communicate to Investor the terms of, any such inquiry,
proposal or request for information received by, or negotiations or discussions
sought with, MEI, the Company or any Transferred Subsidiary.
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Section 4.10. Noncompetition; Nonsolicitation.
(a) For a period of two (2) years from and after the Closing (the
"Two Year Term"), no Continuing Affiliate shall and each Continuing Affiliate
shall use its reasonable best efforts to cause its officers and directors to not
directly or indirectly, (i) own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
director, employee, stockholder, partner or any other similar capacity with any
business which is in competition with the business of design, assembly and
testing of custom complex printed circuit boards for third party electronics
original equipment manufacturers ("OEM's") and the business of design, assembly
and testing of system level assemblies when acting solely and strictly in the
capacity of a subcontractor of an OEM (a "Competitive Business"), or (ii)
solicit, interfere with or attempt to entice away (other than through
advertisements or general solicitations) from the Company, any of the
Transferred Subsidiaries or any successor to any of the foregoing, any
individual who is, has agreed to be or within six months of such solicitation,
interference or enticement has been, employed or retained by the Company, any of
the Transferred Subsidiaries or any successor to any of the foregoing. Ownership
of not more than 5% of the outstanding stock of any publicly traded company
shall not, in and of itself, be a violation of this Section 4.10. The
restrictive covenant contained in this Section 4.10 is a covenant independent of
any other provision of this Agreement, and the existence of any claim which MEI
may allege against Investor, the Company, or any of their Affiliates, whether
based on this Agreement or otherwise, shall not prevent the enforcement of this
covenant. MEI agrees that a breach of this Section 4.10 shall cause irreparable
harm to Investor, the Company and their respective Affiliates, that Investor's
and the Company's remedies at law for any breach or threat of breach of the
provisions of this Section 4.10 shall be inadequate, and that Investor and/or
the Company shall be entitled to an injunction or injunctions to prevent
breaches of this Section 4.10 and to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which Investor and/or the
Company may be entitled at law or in equity. The Two Year Period shall be tolled
during any period of violation of this Section 4.10 after which MEI is provided
notice and during any other period required for litigation during which Investor
and/or the Company seeks to enforce this covenant. In the event that this
Section 4.10 shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographical area or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the longest period of
time for which it may be enforceable, and/or over the largest geographical area
as to which it may be enforceable and/or to the maximum extent in all other
aspects as to which it may be enforceable, all as determined by such court in
such action.
(b) Notwithstanding the foregoing, MEI may acquire any business or
entity which has a component which is a Competitive Business (an "Acquired
Business") during the Two Year Term, provided that (i) not more than 10% of the
revenues of the Acquired Business during the 12 calendar months immediately
preceding such acquisition are derived from the business which is competitive
with the Business and (ii) MEI uses its best efforts to dispose of the portion
of the Acquired Business which is a Competitive Business as soon as commercially
practicable.
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(c) Nothing contained in this Section 4.10 shall prohibit or in any
way infringe upon the activities (including conducting the business) of MEI's
advanced engineering group consistent with the activities conducted as of the
date hereof.
Section 4.11. Confidentiality.
(a) From and after the Closing, MEI shall, and shall use its
reasonable best efforts to cause its Affiliates and representatives to, keep
confidential and not disclose to any other Person or use for its own benefit or
the benefit of any other Person any trade secrets or other confidential
proprietary information in its or their possession or control regarding the
Company, any of the Transferred Subsidiaries or the Business. The obligation of
MEI under this Section 4.11(a) shall not apply to information which (i) is or
becomes generally available to the public without breach of the commitment
provided for in this Section 4.11(a); or (ii) is required to be disclosed by
law, order or regulation of a court or tribunal or governmental authority;
provided, however, that, in any such case, the Person subject to such
requirement shall notify Investor and the Company as early as reasonably
practicable prior to disclosure to allow Investor and the Company to take
appropriate measures to preserve the confidentiality of such information.
(b) From and after the Closing, the Company shall, and shall cause
its Affiliates and representatives to, keep confidential and not disclose to any
other Person or use for its own benefit or the benefit of any other Person any
trade secrets or other confidential proprietary information in its or their
possession or control regarding the Continuing Affiliates or their respective
businesses. The obligation of the Company under this Section 4.11(b) shall not
apply to information which (i) is or becomes generally available to the public
without breach of the commitment provided for in this Section 4.11(b); or (ii)
is required to be disclosed by law, order or regulation of a court or tribunal
or governmental authority; provided, however, that, in any such case, the Person
subject to such requirement shall notify MEI as early as reasonably practicable
prior to disclosure to allow MEI to take appropriate measures to preserve the
confidentiality of such information.
Section 4.12. Nonsolicitation by the Company. For a period of two
(2) years from and after the Closing, neither the Company nor any of its
Affiliates shall, directly or indirectly, solicit, interfere with or attempt to
entice away (other than through advertisements or general solicitations) from
any Continuing Affiliate or any successor to any of the foregoing, any
individual who is, has agreed to be or within six (6) months of such
solicitation, interference or enticement has been, employed or retained by any
of the Continuing Affiliates or any successor other than the individuals listed
on Schedule 4.12 hereto.
Section 4.13. Alternative Financing. In the event the financing
described in the BTAB Commitment Letter will not be available at Closing,
Investor shall use commercially reasonable efforts to pursue financing,
reasonably acceptable to Investor, on terms in the aggregate not materially
worse to Investor or the Company than the terms contained in the BTAB Commitment
Letter; provided, that if Investor is unable to obtain any such alternative
financing, Investor shall
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have no obligation to consummate the Stock Purchase, the Recapitalization or any
other transaction contemplated hereby.
Section 4.14. License Agreements. The parties hereto acknowledge
that the Company currently enjoys certain rights under various agreements listed
on Schedule 4.14 hereto to which either MTI or MEI is a party (the "Master
Agreements"). MEI and the Company shall use their commercially reasonable
efforts to obtain for the Company a replacement license or other agreement
(which the Company shall be a party to), on terms reasonably satisfactory to the
Company and Investor, with each of the third parties listed on Schedule 4.14 as
a replacement for each of the Master Agreements.
Section 4.15. Use of Micron Name. It is understood and agreed
between the parties hereto that after the Closing, neither the Company nor any
of the Transferred Subsidiaries shall have an interest in or right to use,
either alone or in combination with other words or phrases, the name "Micron" or
the stylized "M" currently used by the Company and the Transferred Subsidiaries.
No later than the Closing, MEI shall cause the name of the Company to be changed
to "MCMS, Inc." and within three (3) months after Closing will change the font
currently used by the Company in the name "MCMS." The Company shall have a
transition period of 3 months after the Closing to take all steps within its
control to change the name of each Transferred Subsidiary, as necessary, so as
to remove the name "Micron" therefrom. MEI acknowledges and agrees that the
Company and the Transferred Subsidiaries will have in inventory after the
Closing a quantity of work-in-process, preprinted stationery, invoices,
receipts, forms, advertising and promotional materials, training and source
literature, packaging material and other supplies which bear the "Micron" name
and the stylized "M" (collectively, "Supplies"). Notwithstanding anything in
this Section 4.15 to the contrary, MEI hereby grants to the Company and the
Transferred Subsidiaries a paid-up, royalty-free right and license, to remain in
effect until exhaustion of the Supplies (but in no event more than 3 months
after Closing) in the ordinary course of business, to use any trademarks, trade
names, trade dress, copyright or other proprietary rights of MEI associated with
such Supplies, including but not limited to the "Micron" name and the Stylized
"M." MEI agrees that the Company shall be permitted to continue to use its
current logo and MEI expressly disclaims any rights thereto.
Section 4.16. Schedule Supplements. Investor and MEI agree that
during the period between the date hereof and the Closing Date, the schedules to
this Agreement relating to Article II may be supplemented in order for MEI and
the Company to bring down the representations and warranties contained in
Article II to the Closing Date (but not to change any representations and
warranties made by MEI and the Company as of the date hereof). Notwithstanding
the foregoing, no such schedule shall be so amended without the review and
approval of Investor, which review and approval shall not be arbitrarily
withheld.
Section 4.17. Capital Expenditures. Neither the Company nor any
Transferred Subsidiary shall make any capital expenditures or commitments, or
series thereof, involving more than $6,500,000 in the aggregate for the Company
and the Transferred Subsidiaries during the fiscal
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quarter ending February 28, 1998 or more than $6,000,000 in the aggregate for
the Company and the Transferred Subsidiaries during the fiscal quarter ending
May 31, 1998;
ARTICLE V
Employee Benefits
Section 5.1. Provision of Benefits. Any Company Plan other than
plans maintained for the benefit of Company Employees located in Belgium and
Malaysia shall terminate no later than as of the Closing Date. Except as
specifically provided in this Article V, MEI shall be responsible for (x) all
liabilities and obligations under the Company Plans terminated pursuant to the
preceding sentence, (other than Liabilities that are accrued on the Company
Financial Statements), (y) the $1,009,672.60 amount with respect to potential
bonuses that is listed at Schedule 2.4, and (z) all liabilities and obligations
under any Plan that is not a Company Plan. As of the Closing Date or as soon as
practicable thereafter, the Company shall establish for the benefit of its
employees and employees of the Transferred Subsidiaries on and after the Closing
Date such Employee Benefit Plans as are reasonably deemed appropriate by the
president of the Company and the Investor. The Company agrees, for all purposes
under all Employee Benefit Plans applicable to employees of the Company and the
Transferred Subsidiaries to treat all service by Company Employees with MEI or
any of its Affiliates before the Closing as service with the Company and the
Transferred Subsidiaries, except to the extent such treatment would result in
duplication of benefits.
Section 5.2. Savings Plan. As soon as reasonably practicable after
the Closing Date, the Company shall establish one or more defined contribution
plans (the "Successor 401(k) Plan") qualified under Section 401 of the Code, and
one or more related trusts (the "Successor 401(k) Trust") exempt from taxation
under Section 501 of the Code, in which Company Employees will be eligible to
participate. The account balances in MEI's 401(k) Plan of all Company Employees
shall be transferred to the Successor 401(k) Trust in cash or in kind, as agreed
by MEI and the Company. Such transfer shall take place as soon as practicable
after the Closing Date, but no earlier than the date on which the Company
delivers to MEI either (x) a copy of a favorable determination letter or letters
from the IRS that the Successor 401(k) Plan is qualified under Section 401 of
the Code and the Successor 401(k) Trust is exempt from taxation under Section
501 of the Code, or (y) an opinion of counsel to the Company, reasonably
satisfactory to MEI, that the Successor 401(k) Plan is qualified under Section
401 of the Code and the Successor 401(k) Trust is exempt from taxation under
Section 501 of the Code. Following the Closing Date, Company Employees shall
continue to vest in the unvested portion of their account balances in MEI's
401(k) Plan as transferred to the Successor 401(k) Plan, based upon continued
employment with the Company and the Affiliates of the Company, and otherwise on
the same terms and conditions as applied under MEI's 401(k) Plan. The Company
and MEI agree to cooperate in making all appropriate filings and taking all
appropriate actions required to implement the provisions of this Section 5.2.
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Section 5.3. Welfare Benefits. (a) MEI shall be responsible for (i)
continuing to provide Company Employees and Former Company Employees and their
respective beneficiaries and dependents with welfare benefits, including without
limitation life insurance, accidental death and dismemberment insurance,
medical, dental, vision, short-term and long-term disability benefits (such
benefits, collectively, "Welfare Benefits"), for claims incurred before the
Closing Date; and (ii) providing Company Employees, Former Company Employees and
their respective current and former dependents and beneficiaries with all
required continuation coverage under Section 601 et seq. of ERISA and Section
4980B of the Code for "qualifying events" (as defined in Section 603 of ERISA
and the regulations pertaining thereto) occurring on or prior to the Closing
Date.. The Company and the Transferred Subsidiaries shall be solely responsible
for providing Company Employees and their beneficiaries and dependents with the
Welfare Benefits that are provided under plans to be established by the Company
for claims incurred after the Closing Date; provided, that if as a result of the
level of benefits provided by the Company after the Closing Date any employee
experiences a "qualifying event" (as defined above) merely as a result of
ceasing to participate in the Plans and starting to participate in such plans
established by the Company, the Buyer shall compensate MEI for its costs and
expenses in providing continuation coverage to such employees. For purposes of
this Section 5.3(a), a claim for a medical, dental or other similar benefit
shall be considered to be incurred when the services that are the subject of the
claim are performed; a claim for life insurance or other death-related benefits
shall be considered to be incurred when the death of the covered individual
occurs; and a claim for disability benefits or other income-replacement benefits
shall be considered incurred as and when such benefits are payable.
(b) The Welfare Benefits provided by the Company to Company
Employees and their beneficiaries and dependents after the Closing shall be
provided without evidence of insur ability and without the application of any
pre-existing physical or mental condition restrictions, except to the extent
such restrictions applied to any particular individual immediately before the
Closing Date. To the extent any such individual has, before the Closing Date,
satisfied in whole or in part any annual deductible or paid any out-of-pocket or
co-payment expenses under the applicable plan of MEI and its Affiliates, such
individual shall be credited therefor under the corresponding provisions of the
corresponding plan of the Company and the Transferred Subsidiaries in which such
individual participates after the Closing Date.
Section 5.4. Intercompany Charges. Nothing contained herein shall be
deemed to prevent the Company from paying monthly charges accrued for
pre-Closing periods for employee benefits, in a manner consistent with past
practice (including such charges for any period of less than a month ending
immediately on the Closing Date).
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ARTICLE VI
Conditions of Investor's Obligation to Close
Investor's obligation to consummate the Recapitalization shall be
subject to the satisfaction on or prior to the Closing Date, or waiver by
Investor, of all of the following conditions:
Section 6.1. Representations, Warranties and Covenants of MEI and
the Company. The covenants and agreements of MEI and the Company to be performed
on or before the Closing Date in accordance with this Agreement shall have been
duly performed in all respects (except for such failures to be performed which
could not reasonably be expected in the aggregate to have a material adverse
effect on the Company's Business Condition) and the representations and
warranties of MEI and the Company contained in this Agreement shall be true and
correct in all respects (except for such failure to be true and correct which
could not reasonably be expected in the aggregate to have a material adverse
effect on the Company's Business Condition) as of the date hereof and on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, except for such representations
and warranties that speak as of a specific date or time other than the Closing
Date (which need only be true and correct in all respects as of such other date
or time (except for such failures to be true and correct which could not
reasonably be expected in the aggregate to have a material adverse effect on the
Company's Business Condition), and Investor shall have received a certificate to
such effect signed by an executive officer of MEI and the Company.
Section 6.2. Filings; Consents; Waiting Periods. The material
registrations, filings, applications, notices, consents, approvals, orders,
qualifications and waivers which are set forth on Schedule 6.2 (the "Material
Consents") shall have been filed, made or obtained, in each case in a form
reasonably acceptable to Investor, and all waiting periods applicable under the
HSR Act shall have expired or been terminated.
Section 6.3. No Injunction. At the Closing Date, there shall be no
Order of any nature of any Governmental Authority of competent jurisdiction that
is in effect that restrains, enjoins or prohibits the consummation of the
Recapitalization or the other transactions contemplated hereby.
Section 6.4. Transitional Services Agreement. MEI and MTI shall have
duly delivered authorized and executed counterparts of each of the Transitional
Services Agreements containing the terms set forth in the term sheet annexed
hereto as Exhibit A.
Section 6.5. Stockholders Agreement and Registration Rights
Agreement. MEI and the Company shall have delivered duly authorized and executed
counterparts to a stockholders agreement (the "Stockholders Agreement") and a
registration rights agreement (the "Registration Rights Agreement"), in each
case, containing the terms set forth in the term sheet annexed hereto as Exhibit
C.
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Section 6.6. Financing. The Company shall have received the
financing described in the BTAB Commitment Letter consistent with the terms
therein or otherwise obtained financing sufficient to consummate the
transactions contemplated hereby on terms reasonably satisfactory to Investor.
Section 6.7. Indebtedness. All outstanding indebtedness for Borrowed
Money of the Company and the Transferred Subsidiaries ("Indebtedness") shall be
paid in full; any outstanding letters of credit shall be terminated; and the
Company shall have obtained (x) the release of all Encumbrances on the capital
stock of the Company and each of the Transferred Subsidiaries and all assets
securing such Indebtedness and (y) the release of all guarantees with respect to
such Indebtedness. At the Closing, the Company shall provide or arrange to be
provided to Investor evidence demonstrating the payment in full of such
Indebtedness, the termination of such letters of credit and the release of such
Encumbrances and guarantees.
Section 6.8. Material Adverse Effect. Since August 28, 1997, no
event shall have occurred which has or which could reasonably be expected to
have a material adverse effect on the Business or the financial condition of the
Company and the Transferred Subsidiaries taken as a whole except for any change
resulting from (i) any change or any development in worldwide, foreign or
national economic, financial or market conditions, (ii) war, insurrection or
other political changes or instability or (iii) the announcement of the
transactions contemplated hereby.
Section 6.9. Opinion of Counsel. MEI and the Company shall have
delivered to Investor an opinion of counsel to MEI and the Company (which
counsel shall be reasonably acceptable to Investor) with respect to items and in
a form, in each case, reasonably acceptable to Investor.
Section 6.10. Resignation of Directors. MEI and the Company shall
have delivered to Investor the written resignations or evidence of removal of
each of the directors of the Company or any of the Transferred Subsidiaries as
Investor shall have requested at least two business days prior to the Closing.
Section 6.11. Other Closing Documents. The Company shall have
obtained title insurance and surveys for each parcel of Owned Real Property
located within the United States and Leased Real Property in the United States
(to the extent required by the providers of the BTAB Financing), in each case,
which is in customary form and does not disclose matters other than (i)
Permitted Encumbrances or (ii) matters which do not have a material adverse
effect on the current use of such parcel of Real Property. With respect to each
leased parcel of Real Property, the Company shall have delivered to Investor (to
the extent required by the providers of the BTAB Financing) a consent and waiver
and an estoppel letter executed by the landlord, lessor, landlord and/or
licensor of such leased Real Property, in each case, in form and substance
reasonably acceptable to Investor and the providers of the BTAB Financing. The
Company shall have delivered to Investor all other customary closing documents,
each in form and substance reasonably acceptable to Investor.
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Section 6.12. Articles of Incorporation. The Company's Articles of
Incorporation shall have been amended and restated to be in a form as provided
by Investor to MEI and the Company at least five (5) business days prior to the
Closing (the "Amended Charter"). The Amended Charter shall have been filed with
the Secretary of State of Idaho, shall be in full force and effect under the
laws of the State of Idaho as of the Closing, and no further amendments or
modifications shall have been made to the Company's Articles of Incorporation.
Section 6.13. Bylaws. The Company's Bylaws shall have been amended
and restated to be in a form as provided by Investor to MEI and the Company
prior to the Closing (the "Amended Bylaws"). The Amended Bylaws shall be in full
force and effect as of the Closing and shall not have been further amended or
modified.
Section 6.14. Booster Pump and Power Substation. MEI and the Company
shall have entered into an arrangement, reasonably satisfactory to Investor and
MEI, pursuant to which the Company shall be granted (i) access to the booster
pump located on MEI's real property in Nampa, Idaho and (ii) the ability to draw
power from the power substation located on MEI's real property in Nampa, Idaho.
Section 6.15. Patent Agreement. MEI shall have duly delivered an
authorized and executed counterpart of a patent and invention disclosure
assignment and license agreement substantially in the form attached hereto as
Exhibit D (the "Patent Agreement").
Section 6.16. Know-How Agreement. MEI shall have duly delivered an
authorized counterpart of a know-how license agreement substantially in the form
attached hereto as Exhibit E (the "Know-How Agreement").
Section 6.17. MTI License Agreement. MTI shall have duly delivered
an authorized and executed counterpart of a covenant not to ▇▇▇ agreement
substantially in the form attached hereto as Exhibit F (the "MTI Agreement").
ARTICLE VII
Conditions to MEI's and the Company's Obligation to Close
MEI's and the Company's obligation to consummate the
Recapitalization is subject to the satisfaction on or prior to the Closing Date,
or waiver by MEI and the Company, of all of the following conditions:
Section 7.1. Representations, Warranties and Covenants of Investor.
(a) The covenants and agreements of Investor to be performed on or before the
Closing Date in accordance with the Recapitalization Agreement have been duly
performed in all material respects and (b) the representations and warranties of
Investor contained in this Recapitalization Agreement are true and correct in
all material respects
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as of the date hereof and on and as of the Closing Date with the same effect as
though such rep resentations and warranties had been made on and as of such
date, except for representations and warranties that speak as of a specific date
or time other than the Closing Date.
Section 7.2. Filings; Consents; Waiting Periods. The Material
Consents shall have been filed, made or obtained, and all applicable waiting
periods under the HSR Act shall have expired or been terminated.
Section 7.3. No Injunction. At the Closing Date, there shall be no
Order of any nature of any Governmental Authority of competent jurisdiction that
is in effect that restrains, enjoins or prohibits the consummation of the
Recapitalization or the other transactions contemplated hereby.
Section 7.4. Transitional Services Agreements. The Company shall
have delivered duly authorized and executed counterparts of each of the
Transitional Services Agreements.
Section 7.5. Stockholders Agreement and Registration Rights
Agreement. Investor and the Company shall have delivered duly authorized and
executed counterparts to the Stockholders Agreement and the Registration Rights
Agreement.
Section 7.6. Patent Agreement. The Company shall have duly delivered
an authorized and executed counterpart of the Patent Agreement.
Section 7.7. Know-How Agreement. The Company shall have duly
delivered an authorized and executed counterpart of the Know-How Agreement.
Section 7.8. MTI Agreement. The Company shall have duly delivered an
authorized and executed counterpart of the MTI Agreement.
ARTICLE VIII
The Recapitalization; Closing
Section 8.1. Authorization. Prior to the Closing Date, the Company
shall have authorized (i) the issuance and sale of the Purchase Shares to the
Investor and (ii) the other transactions comprising the Recapitalization,
including the Stock Redemption and the BTAB Financing.
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Section 8.2. Stock Purchase. Subject to the terms and conditions of
this Agreement, at the Closing, the Company shall issue to the Investor the
Purchase Shares in exchange for the Purchase Price.
Section 8.3. Stock Redemption. Pursuant to the authorization
contemplated by Section 8.1 hereof and subject to the terms and conditions set
forth in this Agreement, the parties hereto agree that MEI shall offer for
redemption, and the Company shall redeem the Redemption Shares. In consideration
for the Redemption Shares, at the Closing, MEI will receive $264,200,000 (the
"Redemption Price") from the Company.
Section 8.4. Closing.
(a) Time and Place of Closing. The Closing shall take place on the
Closing Date at 10:00 A.M., New York City time, at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other place at the
parties shall mutually agree.
(b) Deliveries and Proceedings at the Closing. At the Closing,
(1) Deliveries by the Company to Investor. The Company shall
deliver to Investor certificate(s) representing the Purchase Shares.
(2) Deliveries by Investor to the Company. Investor shall pay
to the Company the Purchase Price by wire transfer of immediately available
funds to one or more accounts as designated by the Company.
(3) Deliveries by MEI to the Company. MEI shall surrender to
the Company certificate(s) representing the Redemption Shares, free and clear of
all Encumbrances, duly endorsed in blank or accompanied by stock powers or any
other proper instrument of assignment duly endorsed in blank in proper form for
transfer, with appropriate transfer stamps, if any, affixed, whereupon the
Company shall cancel such Redemption Shares, which shall thereafter cease to be
issued and outstanding.
(4) Deliveries by the Company to MEI. The Company shall pay to
MEI the Redemption Price by wire transfer of immediately available funds to one
or more accounts as designated by MEI.
(5) Other Deliveries. The closing certificates, opinion of
counsel and other documents and agreements required to be delivered pursuant to
this Agreement with respect to the Closing will be exchanged.
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ARTICLE IX
Tax Matters
Section 9.1. Tax Indemnification by MEI. MEI shall be liable for,
and shall hold the Company and any successor corporations thereto or affiliates
thereof harmless from and against the following Taxes with respect to the
Company or any Transferred Subsidiary:
(a) any and all Taxes for any taxable period or portion thereof
ending on or before the Closing Date due or payable by the Company or any
Transferred Subsidiary (whether or not accrued or reserved for on the books and
records of the Company and/or any of the Transferred Subsidiaries), except to
the extent provided in Sections 9.2(b) and 9.2(c); and
(b) any several liability of the Company under Treasury Regulations
Section 1.1502-6 or under any comparable or similar provision under state, local
or foreign laws for tax periods or portions thereof ending on or prior to the
Closing Date and for tax periods of MEI and any other member of MEI's
consolidated tax group (other than the Company and the Transferred Subsidiaries
with respect to periods after the Closing) ending after the Closing Date and
including the Closing Date.
Section 9.2. Tax Indemnification by the Company. The Company shall
be liable for, and shall hold MEI harmless from and against, the following Taxes
with respect to the Company or any Transferred Subsidiary: (a) any and all Taxes
for any taxable period or portion thereof be ginning after the Closing Date, due
or payable by the Company or any Transferred Subsidiary; (b) any and all Taxes
resulting from transactions, acts or omissions not in the ordinary course of
business after the Closing on the Closing Date; and (c) Taxes payable with
respect to the business or operations of the Company or the Transferred
Subsidiaries during the period from the date hereof through the Closing. For
purposes of clause (c) of this Section 9.2, the Company shall compute, or cause
to be computed, the Taxes payable (which computation shall be reduced by the
amount of any estimated Taxes paid by the Company during such period) within 90
days of the Closing Date and shall pay to MEI such amount.
Section 9.3. Filing Responsibility. (a) MEI shall prepare and file
or shall cause the Company to prepare and file the following Returns with
respect to the Company:
(1) all Income Tax Returns required to be filed for any
taxable period ending on or before the Closing Date;
(2) all other Returns with respect to Taxes other than Income
Taxes required to be filed (taking into account extensions) prior to the Closing
Date; and
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(b) The Company shall, subject to the provisions of Section 9.3(c),
file or cause to be filed all Returns for which MEI does not have filing
responsibility pursuant to Section 9.3(a) with respect to the Company.
(c) With respect to any Tax Return of the Company and/or the
Transferred Subsidiaries for taxable periods beginning before the Closing Date
and ending after the Closing Date, the Company shall consult with MEI concerning
such Return and report all items with respect to the portion of the period
ending on the Closing Date in accordance with the instructions of MEI, unless
otherwise agreed by MEI and Investor and unless, in the written opinion of
nationally recognized tax counsel to the Investor, complying with MEI's
instructions could subject Investor or the Company to any criminal or civil
penalties under Sections 6662 through 6664 of the Code or similar provisions of
applicable state, local or foreign laws.
(d) The Company and MEI shall report all transactions not in the
ordinary course of business occurring on the Closing Date after the Closing on
the Company's federal income tax return to the extent permitted by Reg.
ss.1.1502-76(b)(1)(B).
Section 9.4. Refunds. (a) Except to the extent that an asset
representing a Tax refund is recorded on the audited balance sheet of the
Company as of August 28, 1997, MEI shall be entitled to any refunds or credits
of Taxes attributable to or arising in taxable periods or portions thereof
ending on or before the Closing Date (plus any interest received with respect
thereto).
(b) The Company shall be entitled to any refunds or credits of Taxes
paid in and attributable to taxable periods beginning on or after the Closing
Date (plus any interest received with respect thereto).
(c) The Company shall promptly forward to MEI or reimburse MEI for
any refunds or credits due MEI (pursuant to the terms of this Article IX) after
receipt thereof, and MEI shall promptly forward to the Company (pursuant to the
terms of this Article IX) or reimburse the Company for any refunds or credits
due the Company after receipt thereof.
(d) MEI, Investor and the Company agree that the Company shall not
elect to carry back any item of loss, deduction or credit which arises in any
taxable period ending after the Closing Date into any taxable period ending on
or before the Closing Date.
(e) Except as contemplated by this Agreement, all Tax sharing
agreements and arrangements of whatever kind with respect to the Company shall
be terminated as of the Closing Date without obligation to the Company, and the
Company will not have any current or potential contractual obligation to
indemnify any other person with respect to Taxes as of or after the Closing
Date.
Section 9.5. Cooperation and Exchange of Information. (a) Investor
and MEI and their respective affiliates shall cooperate in the preparation of
all Returns relating in whole or in part
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to taxable periods ending on or before or including the Closing Date that are
required to be filed after such date. Such cooperation shall include, but not be
limited to, furnishing prior years' Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the preparation of such Returns, furnishing such other information
within such party's possession requested by the party filing such Returns as is
relevant to their preparation and making available such knowledgeable employees
of the Company or MEI, as the case may be, as may be reasonably requested. In
the case of any state, local or foreign joint, consolidated, combined, unitary
or group relief system Returns, such cooperation shall also relate to any other
taxable periods in which one party could reasonably require the assistance of
the other party in obtaining any necessary information.
(b) MEI shall have the right, at its own expense, to control any
audit or examination by any Taxing Authority ("Tax Audit"), initiate any claim
for refund, contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any and all
Taxes for any taxable period ending on or before the Closing Date with respect
to the Company provided that, with respect to any state and local Income Taxes
for any taxable period beginning before the Closing Date and ending after the
Closing Date, MEI shall consult with Investor and the Company with respect to
the resolution of any issue that would have a material effect on Investor and/or
the Company, and not settle any such issue, or file any amended return relating
to any such issue, without the consent of Investor, which consent shall not
unreason ably be withheld. In the event Investor withholds its consent to any
proposed settlement, MEI's liability for Taxes with respect to such proposed
settlement shall be limited to the amount of Taxes that the Company would have
paid (including as the result of any adjustments to the basis or a changed
method of accounting) under the terms of such proposed settlement. Investor
shall have the right, at its own expense, to control any proceeding which MEI
has declined to control, and any other Tax Audit, initiate any other claim for
refund, and contest, resolve and defend against any other assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any and all
Taxes for any taxable period beginning on or after the Closing Date with respect
to the Company provided that, with respect to any state and local Income Taxes
for any taxable period beginning before the Closing Date and ending after the
Closing Date, Investor shall consult with MEI with respect to the resolution of
any issue that would affect MEI, and not settle any such issue, or file any
amended return relating to any such issue, without the consent of MEI, which
consent shall not unreasonably be withheld. Where consent to a settlement is
withheld by the other party pursuant to this Section, such other party may
continue or initiate any further proceedings at its own expense, provided that
the liability of the first party, after giving effect to this Agreement, shall
not exceed the liability that would have resulted from the settlement or amended
return.
(c) For a period of seven (7) years after the Closing Date, the
Company shall retain all Returns, books and records (including computer files)
of, or with respect to the activities of, the Company and the Transferred
Subsidiaries for all taxable periods ending on or prior to the Closing Date.
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(d) If any party hereto or an Affiliate thereof fails to provide any
information required to be provided hereunder and requested by the other party
hereto in the time specified herein, or if no time is specified pursuant to this
Section 9.5, within a reasonable period, or otherwise fails to do any act
required of it under this Section 9.5, then the first party shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify the other
party and shall so indemnify the other party and hold the other party harmless
from and against any and all costs, claims or damages, including, without
limitation, all Taxes or deficiencies thereof, to the extent payable solely as a
result of such failure.
Section 9.6. Allocation of Certain Taxes. Any Income Taxes for a
taxable period beginning before the Closing Date and ending after the Closing
Date (a "Straddle Period") shall be apportioned between the portion of such
Straddle Period ending on the Closing Date and the portion of such Straddle
Period beginning on the day following the Closing Date based on the actual
operations of the Company during each such portion of the Straddle Period and
for purposes of the provisions of Sections 9.1, 9.2 and 9.5, each portion of
such period shall be deemed to be a taxable period (whether or not it is in fact
a taxable period). All Taxes other than Income Taxes relating to a Straddle
Period shall be apportioned between the portion of such Straddle Period ending
on the Closing Date and the portion of such Straddle Period beginning on the day
following the Closing Date based on the number of days of the assessment period
occurring on and before the Closing Date and the number of days during such
period occurring after the Closing Date, and for purposes of Sections 9.1, 9.2,
and 9.5 each portion of such period shall be deemed to be a taxable period
(whether or not it is in fact a taxable period). To the extent estimated Taxes
have been paid prior to the Closing Date with respect to a Straddle Period,
MEI's liability with respect thereto shall be reduced by that amount.
Section 9.7. Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by MEI when
due, and MEI will, at its own expense, file all necessary Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, the
Company will, and will cause its affiliates to, join in the execution of any
such Return and other documentation.
ARTICLE X
Termination
Section 10.1. Termination. This Agreement may be terminated at any
time prior to the Closing by:
(a) The mutual consent of each of the parties hereto;
(b) Either MEI, the Company or Investor by written notice to all
other parties hereto if the Closing has not occurred by the close of business on
April 30, 1998 and if the failure
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to consummate the Recapitalization on or before such date did not result from
the failure by the party seeking termination of this Agreement to fulfill any
undertaking or commitment provided for herein that is required to be fulfilled
prior to Closing and such party is not otherwise in breach of this Agreement;
(c) By Investor, at any time prior to the Closing, following written
notice by Investor to MEI and the Company of a material breach of any material
representation, warranty or covenant of MEI or the Company contained in this
Agreement, if such breach is not cured within thirty (30) days after receiving
notice thereof; or
(d) By MEI, at any time prior to the Closing, following written
notice by MEI to Investor of a material breach of any material representation,
warranty or covenant of Investor contained in this Agreement, if such breach is
not cured within thirty (30) days after receiving notice thereof.
Section 10.2. Procedure and Effect of Termination. In the event of
termination of this Agreement by any party or parties hereto pursuant to Section
10.1, this Agreement shall thereupon terminate and become void and have no
effect, and the transactions contemplated hereby shall be abandoned without
further action by the parties hereto, except that the provisions of Sections
4.1(b) and 11.5 shall survive the termination of this Agreement; provided,
however, that such termination shall not relieve any party hereto of any
liability for any breach of this Agreement. If this Agreement is terminated as
provided herein all filings, applications and other submissions made to any
Governmental Authority pursuant to this Agreement shall, to the extent
practicable, be withdrawn from the agency or other persons to which they were
made.
ARTICLE XI
Miscellaneous
Section 11.1. Entire Agreement; Beneficiaries. This Agreement
(including the Schedules and Exhibits attached hereto) and the Confidentiality
Agreement contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the parties relating to the matters set
forth herein other than those set forth or referred to herein or therein. This
Agreement is not intended to confer upon any person not a party hereto (and
their successors and assigns permitted by Section 11.7) any rights or remedies
hereunder.
Section 11.2. Survival of Representations and Warranties and
Covenants of Investor. All representations and warranties and covenants of
Investor set forth in this Agreement or in any certificate, document or other
instrument delivered in connection herewith shall terminate at the ear lier of
(a) one year after the Closing Date and (b) termination of this Agreement in
accordance with Article X hereof.
-41-
48
Section 11.3. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section 11.3, provided receipt of copies of such counterparts is confirmed.
Section 11.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the choice of law principles thereof.
Section 11.5. Expenses. MEI shall pay and hold the Company, the
Transferred Subsidiaries and Investor harmless against liability for the payment
of all Company Expenses. In the event any Company Expenses have been paid by the
Company or any Transferred Subsidiaries prior to the Closing without being
reimbursed by a Continuing Affiliate, such amount paid (and not reimbursed)
shall be a valid and enforceable receivable of the Company owed from MEI to the
Company as of the Closing. Except as provided in this Section 11.5 or as
otherwise set forth in this Agreement, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
Notwithstanding the foregoing, if the transactions contemplated hereby are
consummated, then the Company shall pay all Investor's and Investor's Affiliates
(other than the Company and the Transferred Subsidiaries) fees and expenses in
connection with the transactions contemplated hereby, including, any and all
commitment fees and reasonable legal, accounting and consulting fees.
Section 11.6. Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery service or, to
the extent receipt is confirmed, telecopy, telefax or other electronic
transmission service to the appropriate address or number as set forth below.
Notices to MEI shall be addressed to:
Micron Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
-▇▇-
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as MEI may
designate by written notice to the other parties hereto. Notices to Investor
shall be addressed to:
Cornerstone Equity Investors IV, L.P.
c/o Cornerstone Equity Investors, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as Investor
may designate by written notice to the other parties hereto. Notices to the
Company prior to the Closing shall be addressed to:
Micron Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
-▇▇-
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
and notices to the Company after the Closing shall be addressed to:
MCMS, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cornerstone Equity Investors, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as the
Company may designate by written notice to the other parties hereto.
Section 11.7. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party hereto will assign its
rights or delegate its obligations under this Agreement without the express
prior written consent of each other party hereto; provided, further, that,
notwithstanding the foregoing, Investor may assign its rights and obligations
hereunder in whole or in part to any Affiliate of Investor; Investor may assign
its rights and obligations to purchase up to 49.9% of the Purchase Shares to any
Person provided that any such assignment shall not release Investor of its
purchase obligations hereunder and provided further that the representations and
-44-
51
warranties contained in Article III hereof (other than Section 3.4) shall be
true and correct with respect to any such assigns; and the Company may assign
its rights and obligations hereunder as collateral security to any bona fide
financial institution or underwriter providing financing to the Company in
connection herewith, in each case, without the consent of any party hereto.
Section 11.8. Headings; Definitions. The Section and Article
headings contained in this Agreement are inserted for convenience of reference
only and will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
Section 11.9. Consent to Jurisdiction. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any federal court
located in the State of New York or any New York state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of New York or a New York state court.
Section 11.10. Waivers and Amendments. No modification of or
amendment to this Agreement shall be valid unless in a writing signed by the
parties hereto referring specifically to this Agreement and stating the parties'
intention to modify or amend the same. Any waiver of any term or condition of
this Agreement must be in a writing signed by the party hereto sought to be
charged with such waiver referring specifically to the term or condition to be
waived, and no such waiver shall be deemed to constitute the waiver of any other
breach of the same or of any other term or condition of this Agreement.
Section 11.11. Severability. Any provision of this Agreement which
is invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
ARTICLE XII
INDEMNIFICATION
The parties hereto agree as follows:
Section 12.1. General Indemnification Obligations. MEI hereby agrees
to indemnify, defend and hold Investor and its respective officers, directors
and Affiliates (including, after the Closing, the Company and the Transferred
Subsidiaries) (the "Investor Indemnitees") harmless from and against and to
reimburse the Investor Indemnitees with respect to any one or more of the
-45-
52
following: (i) any and all Damages arising out of or resulting from a
misrepresentation or breach of warranty of MEI or the Company contained in this
Agreement or in any exhibit or schedule hereto, (ii) any and all Damages arising
out of or resulting from any breach of any covenant or obligation of MEI
contained in this Agreement, whether requiring performance before or after the
Closing Date, (iii) any and all Damages arising out of or resulting from any
breach of any covenant or obligation of the Company contained in this Agreement
requiring performance before the Closing Date, and (iv) any and all Damages
arising out of or resulting from the matter described on Schedule 2.13(c).
Notwithstanding any provision to the contrary contained herein, MEI agrees that
it will not make any claim for indemnification or contribution against the
Company and it will cause its Continuing Affiliates and each of their respective
directors, officers and employees not to make any claim for indemnification or
contribution against the Company, by reason of the fact that MEI or any such
Affiliate, director, officer or employee was a stockholder, director, officer,
employee, or agent of the Company, with respect to or in connection with (a) any
action, suit, proceeding, complaint, claim, or demand brought by the Company or
the Investor against MEI or such Affiliate, director, officer or employee
(whether such action, suit, proceeding, complaint, claim, or demand is pursuant
to this Agreement, applicable law, or otherwise) or (b) any action, suit,
proceeding, complaint, claim or demand arising out of or in connection with the
Stock Redemption, the Recapitalization or the other transactions contemplated by
this Agreement.
Section 12.2. General Indemnification Procedures.
(a) All of the parties hereto shall cooperate in the defense or
prosecution of any claim, action, suit or proceeding by a Person other than a
party hereto or an Affiliate of any party hereto in respect of which indemnity
may be sought hereunder (a "Third Party Claim") and shall furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals, as may be reasonably requested in connection
therewith.
(b) No action or claim for Damages under Section 12.1(i) arising out
of or resulting from a breach of representations and warranties contained herein
shall be brought or made after the date which is one year after the Closing
Date; provided, however, that the foregoing time limitations shall not apply to:
(1) any of the representations and warranties contained in Sections 2.1 (other
than subsection 2.1(c)(2)), 2.2 (other than subsection 2.2(a)(3)) and 2.6, each
of which shall survive until the date which is three years after the Closing
Date; (2) any of the representations and warranties contained in Section 2.14
which shall survive until the expiration of the applicable statute of
limitations or (3) any such actions or claims which have been the subject of a
good faith written notice from any Investor Indemnitee to MEI prior to either
such applicable period, which notice specifies in reasonable detail the nature
and basis for such action or claim (which shall survive until the final
resolution of such actions or claims).
(c) Notwithstanding anything to the contrary in this Article 12, no
limitation or condition of liability provided in this Article 12 shall apply to
the breach of any representations and warranties if such breach was made
wilfully or with the intent to deceive.
-46-
53
Section 12.3. Indemnification Basket. MEI shall not be obligated to
indemnify the Investor Indemnitees pursuant to this Article 12 for any Damages
resulting from any breaches of representations and warranties in this Agreement
(which breaches and resulting Damages shall be determined, solely for the
purposes of this Section 12.3 as though any materiality limitations in such
representations and warranties did not exist), unless (i) the Damages arising
from any such breach or series of related breaches and incurred by the Investor
Indemnitees exceeds $35,000 only in which such case shall such Damages be
counted towards the Threshold, and (ii) the aggregate of all such Damages
counted towards the Threshold and incurred by the Investor Indemnitees exceeds
$1,000,000 (the "Threshold"), in which event MEI shall be liable for all Damages
in excess of the Threshold claimed by the Investor Indemnitees; provided,
however, that Damages recoverable by the Investor Indemnitees for breaches of
the representations and warranties contained in Sections 2.1 (other than
subsection 2.1(c)(2)), 2.2 (other than subsection 2.2(a)(3)), 2.6 and 2.14 shall
not be subject to the Threshold and shall be paid by MEI in their entirety.
Notwithstanding the foregoing, the Threshold shall not be available for any
wilful breach of any representation or warranty.
Section 12.4. Indemnification Cap. In no event shall MEI be required
to indemnify the Investor Indemnitees for Damages pursuant to Section 12.1(i) in
excess of $13,550,000 (the "Cap"); provided, however, that Damages recoverable
by the Investor Indemnitees for breaches of the representations and warranties
contained in Sections 2.1(other than subsection 2.1(c)(2)), 2.2 (other than
subsection 2.2(a)(3)), 2.6 and 2.14 shall not be subject to the provisions of
this Section 12.4 and shall be paid by MEI in their entirety. Notwithstanding
the foregoing, the Cap shall not be available for any wilful breach of any
representation or warranty.
Section 12.5. Indemnity Exclusive Remedy. In the absence of fraud,
the indemnification pursuant to this Article XII shall be the exclusive remedy
for any breach or misrepresentation of warranty of MEI or the Company contained
in this Agreement or in any exhibit or schedule hereto, any breach of any
covenant or obligation of MEI contained in this Agreement, whether requiring
performance before or after the Closing Date, and any breach of any covenant or
obligation of the Company contained in this Agreement requiring performance
prior to the Closing Date.
-47-
54
IN WITNESS WHEREOF, this Recapitalization Agreement has been signed
by or on behalf of each of the parties as of the day first above written.
MICRON CUSTOM MANUFACTURING
SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President, Chairman & CEO
MICRON ELECTRONICS, INC.
By:
-------------------------------
Name:
Title:
CORNERSTONE EQUITY INVESTORS IV, L.P.
By: Cornerstone IV, L.L.C.,
as General Partner
By:
-------------------------------
Name:
Title:
-48-
55
IN WITNESS WHEREOF, this Recapitalization Agreement has been signed
by or on behalf of each of the parties as of the day first above written.
MICRON CUSTOM MANUFACTURING
SERVICES, INC.
By:
-------------------------------
Name:
Title:
MICRON ELECTRONICS, INC.
By:
-------------------------------
Name:
Title:
CORNERSTONE EQUITY INVESTORS IV, L.P.
By: Cornerstone IV, L.L.C.,
as General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
56
IN WITNESS WHEREOF, this Recapitalization Agreement has been signed
by or on behalf of each of the parties as of the day first above written.
MICRON CUSTOM MANUFACTURING
SERVICES, INC.
By:
-------------------------------
Name:
Title:
MICRON ELECTRONICS, INC. REVIEWED
MEI LEGAL
By: /s/ [ILLEGIBLE] REM
------------------------------- -------
Name:
Title:
CORNERSTONE EQUITY INVESTORS IV, L.P.
By: Cornerstone IV, L.L.C.,
as General Partner
By:
-------------------------------
Name:
Title:
57
SCHEDULES
58
Schedule 2.1(c)
1. The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Term WCMA Loan Agreement, dated April 15, 1997, requires
the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ before Micron Custom
Manufacturing Services, Inc. ("Company") is a party to any merger and
before, among other things, there is a material change in the controlling
ownership of Company.
2. The Revolving Credit Facility, dated as of March 17, 1997, between Company
and Micron Electronics, Inc. ("Seller"), requires Company to obtain
Seller's written consent prior to selling Company common stock the result
of which would be Seller owning less than 51% of the common stock of
Company.
3. Lease regarding ▇▇▇▇ ▇▇▇▇▇ ▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
59
Schedule 2.2(a)
None
60
Schedule 2.2(c)
Place of
Subsidiary Incorporation Authorized Capital Issued Capital Owner
---------- ------------- ------------------ -------------- -----
Micron Custom British Virgin 50,000 shares, par value 1 share The Company
Manufacturing Services Islands US$1.00 per ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
("MCMSI")
M.C.M.S. Sdn. Bhd. Malaysia 100,000 shares, par value 2 shares MCMSI
RM1.00 per share
M.C.M.S. Asia Pacific Singapore 100,000 shares, par value 2 shares MCMSI
Pte Ltd S$1.00 per share
M.C.M.S. Belgium S.A. Belgium 2,500 shares, no par value 2,499 shares The Company
(the Company)
1 share (▇▇▇
▇▇▇▇▇)
61
Schedule 2.4
1. See attached schedule of executive bonus obligations under the Micron
Electronics, Inc. Executive Bonus Plan for certain Company executives
2. Creditor Balance as of 11/27/97
-------- ----------------------
Baan U.S.A., Inc. $796,928.00
Oracle Corporation $656,290.00
Northern Telecom $9,598.00
3. Liabilities and obligations of the Company and Transferred Subsidiaries
for borrowed money:
Creditor Balance as of 11/27/97
-------- ----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ $583,333.35
4. Freegate prepaid $203,425 for future product and in respect thereof the
Company has given Freegate a promissory note in such amount.
5. MEI takes the position that the allocable portion of the Idaho Power
Substation improvement to MCMS is as much as $712,725 (it being understood
that MCMS considers unresolved the appropriate allocation, if any). This
amount represents MCMS' portion of the total cost provided that MCMS
continues to use power from this substation.
62
MICRON ELECTRONICS, INC.
SUMMARY OF EXECUTIVE BONUS PROGRAMS
AWARDS
CMS MEI
------------------------ ---------------------------------------------------- GRAND
EXECUTIVE 1994 1995 1995 1996 1997 1998 TOTAL
================================================== ==================================================== ============
AMOUNT AWARDED
▇▇▇▇▇, ▇▇▇ 45,933.25 52,817.70 123,615.34 213,994.57 402,163.46 838,524.32
ASLA, JESS 45,933.25 52,817.70 77,259.59 178,328.81 287,259.61 641,598.96
▇▇▇▇▇▇▇▇, ▇▇▇▇ 172,355.77 172,355.77
------------------------ ---------------------------------------------------- ------------
91,866.50 105,635.40 200,874.93 392,323.38 861,778.84 -- 1,652,479.05
======================== ==================================================== ============
AMOUNT REMAINING 20% 40% 40% 60% 80%
AMOUNT UNEARNED AND
UNPAID
▇▇▇▇▇, ▇▇▇ 9,186.65 21,127.08 49,446.14 128,396.74 321,730.77 529,887.38
ASLA, JESS 9,186.65 21,127.08 30,903.84 106,997.29 299,807.69 398,022.54
▇▇▇▇▇▇▇▇, ▇▇▇▇ -- -- -- -- 137,884.62 137,884.62
------------------------ ---------------------------------------------------- ------------
18,373.30 42,254.16 80,349.97 235,394.03 689,423.07 1,065,794.53
======================== ==================================================== ============
AMOUNT ACCRUED 3,119.99 3,587.62 6,822.17 13,324.19 29,267.96 56,121.93
======================== ==================================================== ============
UNEARNED BALANCE NOT ACCRUED 1,009,672.60
============
Notes:
Data for 1998 is not available at this time
▇▇▇▇▇ ▇▇▇▇▇ became an executive in fiscall 1998
63
Schedule 2.5
Lien Holder Encumbered Property
----------- -------------------
NTFC Capital Telecommunications equipment in
Durham, North Carolina
▇▇▇▇▇▇▇ ▇▇▇▇▇ The Company's Nampa, Idaho real
property located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ and the fixtures thereon
COECO - Business Credit Leasing Office Equipment
64
Schedule 2.6
1. In September and October, 1997, the Company's environmental safety
personnel and consultants requested that Technicians wear personal air
samplers while performing preventative maintenance on a Wave Solder
Machine at the Company's Nampa, Idaho facility and the Company's Durham,
NC facility in December, 1997. The monitoring results for certain of the
employees indicated a time weighted average exposure level above the
OSHA-designated permissible exposure limits ("PEL") concerning airborne
lead. With respect to the September 1997 testing, Technicians were not
notified of the results within 5 days. Prior to November 1997, the Company
did not have a formal lead control or air respirator program in place.
2. See attached.
3. See Schedule 2.10(a).
4. The Company's Durham, NC facility may be required to obtain a general
stormwater discharge permit from the North Carolina environmental
regulatory agency. The Company is in the process of applying for the
permit.
65
SCHEDULE NO. 8
(Page 9 of 13)
[Letterhead of MCMS]
June 11, 1996
▇▇. ▇▇▇▇ ▇▇▇▇▇
Deputy Attorney General
Idaho Division of Environmental Quality
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇▇▇
Environmental Hydro Geologist
Idaho Division of Environmental Quality
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Micron Custom Manufacturing Services, Inc. Request Under Policy PM95-4
Dear ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇:
Micron Custom Manufacturing Services, (MCMS), a wholly owned subsidiary of
Micron Electronics, Inc., (MEI) recently acquired 29 acres of undeveloped
agricultural property and 2.5 acres of residential property in Nampa, Idaho (the
Property) to accommodate the relocation and expansion of the MCMS operation. The
Property is located adjacent to and east of MEI's property in Nampa. MEI's
property is the subject of the attached letter dated January 22, 1996 from ▇▇▇▇
▇▇▇▇▇ to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
In connection with the acquisition of the Property, MEI and MCMS retained
the consulting firm of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ to perform a Phase I Site Assessment. (A
copy of the report is enclosed for your review.) The Phase I Site Assessment
identified evidence that the groundwater beneath the Property may be
contaminated by a local plume.(1) Based upon the Phase I Site Assessment and
environmental reports generated for MEI with respect to the purchase of
surrounding property, MCMS believes that the plume from the nearby industrial
complex may have migrated beneath the Property. Because the Property is adjacent
to and east of the existing MEI property covered in the attached January 22,
1996 letter, it is conceivably within the migration path of the local plume.
----------
(1) This assessment is supported by the information generated in connection with
the acquisition of 40 acres by MEI in 1995. Phase I and II Site Assessment
reports prepared at that time revealed the existence of a groundwater plume
allegedly originating from a nearby industrial complex occupied by the Great
Western Chemical Company, ▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc., and others. Contamination
was detected beneath the MEI property (attached letter dated January 22, 1996)
and can reasonably be expected to exist below the Property discussed in this
letter.
66
SCHEDULE NO. 8
(Page 10 of 13)
▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇▇▇
Idaho Division of Environmental Quality
June 11, 1996
Page 2
This letter is presented to the Idaho Division of Environmental Quality
(IDEQ) for the following reasons: (1) to provide a copy of the Phase I Site
Assessment; (2) to establish that neither MCMS nor MEI have caused, contributed
to, or exacerbated the groundwater contamination in the area; (3) to summarize
MCMS' future plans for the Property and associated groundwater; and (4) to
request a site specific covenant not to ▇▇▇, consistent with IDEQ's Policy
Memoranda PM95-4, Policy Toward Owners of Property Containing Contamination.
Phase I Site Assessment
The enclosed Phase I Site Assessment confirms that there are no past or
present adverse environmental conditions on the Property. Specifically, the
report states that the Property has been used primarily for agricultural and
residential purposes and that, based upon a thorough investigation, including
conversations with prior owners, there is no evidence that contaminants of the
nature known to be impacting the groundwater (i.e. PCE) were ever used on or
near the Property. In addition, the Phase I Site Assessment did not reveal any
areas of contamination on-site or irregular pathways that could present a threat
to the quality of groundwater in the area. MEI and MCMS are currently taking
steps to prevent the use and presence of PCE containing materials during
construction and operation of the new MCMS facility.
Anticipated Groundwater Use
MCMS requires clean water for irrigation and process related activities.
MCMS is concerned about the quality of groundwater available in the area at this
time. In addition, MCMS is committed to ensuring that none of its activities
contribute to or exacerbate the contamination or extent of the plume. Therefore,
upon commencement of operation on the Property this fall, MCMS plans to purchase
municipal water.
Nonetheless, MCMS anticipates the availability of and reserves its right
to access uncontaminated groundwater in the future, should MCMS chose to
exercise the groundwater rights acquired upon purchase of the Property. MCMS
encourages IDEQ's efforts to develop a comprehensive corrective action plan with
the responsible parties to address the plume.
67
SCHEDULE NO. 8
(Page 11 of 13)
▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇▇▇
Idaho Division of Environmental Quality
June 11, 1996
Page 3
Conclusion
The information presented in this letter, the attached Phase I Site
Assessment, and the Phase I and II reports submitted to IDEQ last fall to
support the attached January 22, 1996 letter from ▇▇▇▇ ▇▇▇▇▇ suggest that the
groundwater beneath the Property may be contaminated by a local plume. Moreover,
this information confirms that both MEI and MCMS are eligible for protection
under policy PM95-4. Specifically, (1) neither MEI, nor MCMS, has caused,
contributed to, or exacerbated the contamination; (2) both MEI and MCMS have and
will continue to cooperate with IDEQ; (3) there is no alternative basis for
liability against MEI or MCMS, and (4) an independent source for the pollution
does not exist on the Property. Therefore, MEI and MCMS comply with the
prerequisites and under policy PM95-4 are innocent landowners of additional
property beneath which may flow groundwater contamination.
MEI and MCMS request a written covenant not to ▇▇▇ from IDEQ, based upon
the information presented, in connection with the Property. At your request,
representatives of MEI and MCMS will be available to meet with you to provide
any additional information you require. If you have any questions, please call
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Environmental Manager for MEI at 368-2725 or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an
attorney with Stoel Rives at 387-4239.
Sincerely,
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
President
RS/jkf
cc: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
(w/o encs.)
68
SCHEDULE NO. 8
(Page 12 of 13)
[LETTERHEAD OF STATE OF IDAHO OFFICE OF THE ATTORNEY GENERAL]
August 21, 1996
▇▇▇▇▇▇ ▇▇▇▇▇
President
Micron Custom Manufacturing Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
RE: Nampa PCE Contamination
Dear ▇▇. ▇▇▇▇▇:
I am writing to you on behalf of the Idaho Department of Health and
Welfare, Division of Environmental Quality (DEQ) in response to your letter
dated June 11, 1996. In the June 11, 1996 letter, Micron Custom Manufacturing
Services, Inc. (MCMS) and Micron Electronics, Inc. (MEI) request a determination
from DEQ with respect to the liability of these companies in connection with
property located in Nampa, Idaho recently acquired to accommodate the relocation
and expansion of the MCMS operation. The property is generally downgradient from
PCE contamination in the ground water in the area. The results of a Phase I site
assessment was sent with the June 11, 1996 letter.
DEQ has adopted policy PM95-4 that provides, if four conditions listed in
the policy are met, DEQ will not pursue enforcement under laws administered by
DEQ against those landowners who, through no fault of their own, come to have a
pollutant on their property which has migrated from outside their property.
Based upon the information you have presented, it is DEQ's position that the
policy is applicable to MCMS and MEI with respect to the recently acquired
property described in the June 11, 1996 letter and the PCE contamination.
The application of the policy is contingent upon the reasonable
cooperation of the property owner. DEQ, therefore, will expect MEI's and MCMS's
continued cooperation in DEQ's efforts to investigate and remediate the
contamination. DEQ may request access to the property for itself and any
responsible party.
69
SCHEDULE ▇▇. ▇
(▇▇▇▇ ▇▇ ▇▇ ▇▇)
▇▇▇▇▇▇ ▇▇▇▇▇
Page 2
August 21, 1996
If you have any further questions or comments, please give me a call.
Yours very truly,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Deputy Attorney General
DMC/lvh
cc: ▇▇▇ ▇▇▇▇▇▇▇, DEQ-SWIRO
▇▇▇▇ ▇▇▇▇▇▇▇, DEQ
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
70
[Letterhead of Micron Technology, Inc.]
November 18, 1991
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Deputy Attorney General
Division of Environmental Quality
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇:
This letter is in response to your written request dated October 28, 1991
concerning the property owned and operated by Micron Technology located at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇. Based on your letter and a subsequent conversation
between yourself and ▇▇▇▇ Day, it is our understanding that your inquiry is
primarily concerned with solvents. Although other chemicals may be used in
limited quantities, they are of secondary importance and may be addressed later,
if deemed appropriate. The following list represents our answer to your
questions in the order asked:
1. Micron Technology Inc., is engaged in two (2) types of business at the
above referenced location; (1) the assembly of printed circuit boards, and (2)
tool & die operations to support Micron's other operations. These two operations
have been at this location since May of 1990.
2. We are still operating at the same location as stated above.
3. The solvent chemicals that are, or were, used at our site are
documented on exhibit 1. The term "solvent" has broad application. For the sake
of this response, we have included all chemicals used at this site that are
light, organic based products with properties similar to those found in
Tetrachloroethylene and Ethylbenzene.
4. All solvent materials at the site were/are used in cleaning and
preparing circuit boards for assembly. Additionally, some solvents were used in
the Tool & Die operation as part of the cleaning and maintenance of equipment
used in that operation. All materials not listed as in inventory have been fully
consumed in the production processes. Any chemicals not consumed in production,
production preparation, or clean up from production are shown as in inventory,
or they have been returned to the main Micron facility. There have been no
chemicals disposed of at this site.
5. All solvents at the above stated site are stored in chemical cabinets
which are fireproof and meet or exceed the OSHA regulations. Only minimal
operating quantities are stored. All major supplies or quantities are stored at
Micron's main facility, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
71
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
November 18, 1991
Page 2
6. There are no underground storage tanks.
7. There were no spills, leaks, or other improper releases of chemicals or
solvents during the period of time that we have occupied the premises.
8. Micron Technology, Inc. purchased the property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ from:
M & J Investment Company
▇▇▇▇ ▇. ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
This purchase was effective December 29, 1989.
Prior to purchase, and as a condition of the sale, Micron conducted an
extensive environmental assessment on the existing ground water. This test
comprised three exploratory boring's and completion as monitoring ▇▇▇▇▇ and
analysis of soil samples. The results of the test concluded that
Tetrachloroethane was not present and that there was no indication of any
hazardous waste or petroleum compounds on site. These tests were conducted under
the direction of Chen-Northern, Inc of Boise, Idaho.
Occupancy for the facility, after necessary leasehold improvements were
made, was granted April 26, 1990. Actual operations began in May, 1990.
9. Attached as Exhibit 2 are copies of the Material Safety Data Sheets
supplied to Micron by the vendors of the products used and listed on exhibit 1.
There were no spills, leaks, or improper releases of chemicals at the site.
10. Managers who have knowledge of operations are;
▇▇▇ ▇▇▇▇▇▇▇, Manager of MAG and Partial Operations
▇▇▇ ▇▇▇▇▇, Manufacturing Manager
11. Micron has no specific knowledge of chemicals used by other companies
in the vicinity of the Boise Town Square Mall.
Sincerely,
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Manager of Plant Operations
mkc
Attachments
cc: ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
72
Chemicals Used, Purchased from May 1990 to September 1991.
--------------------------------------------------------------------------------
Chemical Quantity Quantity Quantity
Purchase On Hand Used
--------------------------------------------------------------------------------
ACETONE 11.7 GAL 4 GAL 7.7 GAL
--------------------------------------------------------------------------------
ALPHA 611F FLUX 110 GAL 40 GAL 70 GAL
--------------------------------------------------------------------------------
ALPHA K75-1 OMEGA SOL. 121 GAL 10 GAL 111 GAL
--------------------------------------------------------------------------------
ELECTRO WASH 1920 OZ 336 OZ 1584 OZ
--------------------------------------------------------------------------------
ELECTROCLEAN SOLUTION 1 OZ. 1 OZ. 0
--------------------------------------------------------------------------------
FREON SMT 1045 GAL 0 1045 GAL
--------------------------------------------------------------------------------
FREON TMS 110 GAL 55 GAL 55 GAL
--------------------------------------------------------------------------------
ISOPROPYL IPA 28 GAL 5 GAL 23 GAL
--------------------------------------------------------------------------------
▇▇▇▇▇▇ 2224 FLUX 6 GAL 3 GAL 3 GAL
--------------------------------------------------------------------------------
▇▇▇▇▇▇ 4662 THINNER 5 GAL 5 GAL 0
--------------------------------------------------------------------------------
LACQUER THINNER 12 GAL 1.5 GAL 10.5 GAL
--------------------------------------------------------------------------------
MINERAL SPIRITS 55 GAL 50 GAL 5 GAL
--------------------------------------------------------------------------------
TAK PAK X-NMS SOLVENT .81 OZ .54 OZ .27 OZ
--------------------------------------------------------------------------------
TAP MATIC #1 5 GAL 2 GAL 3 GAL
--------------------------------------------------------------------------------
TAP MATIC #2 5 GAL 2 GAL 3 GAL
--------------------------------------------------------------------------------
Exhibit 1
73
[SEAL OF STATE OF IDAHO]
[Letterhead of Attorney General ▇▇▇▇▇ ▇▇▇▇▇▇▇▇]
October 28, 1991
Micron Technology, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: West Boise Contamination
Dear Sir or Madam:
I am one of the Deputy Attorneys General representing the Idaho Department
of Health and Welfare, Division of Environmental Quality (Department). The
Department is currently investigating groundwater contamination in west Boise.
Based upon information the Department presently has, tetrachloroethylene (PERC)
and ethylbenzene contamination has been found in groundwater in the vicinity of
the Boise Towne Square Mall and to the north and west of the Boise Towne Square
Mall. The contamination has impacted drinking water supplies.
The Department is collecting information regarding businesses presently
located, or that were located, in the vicinity of the Boise Towne Square Mall
property. Micron Technology, Inc. apparently operates a business located at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇. The Department, through the Attorney General's
Office, requests that you supply the following information:
1. The nature of the business conducted by your company in the vicinity of the
Boise Towne Square Mall;
2. If you no longer operate in the vicinity of the Boise Towne Square Mall,
indicate the dates in which you so operated;
3. What chemicals, including solvents of any kind, were stored, used, disposed
of or transported to or from the site of your business;
4. If solvents were used at the site in question, please explain how they were
used, the company that supplied the solvents, the
74
Micron Technology, Inc.
Page 2
October 28, 1991
quantity of solvents used, and during what time period they were used;
5. If solvents were stored on site, explain how and where they were stored, the
quantity that was stored, and during what time period;
6. Indicate whether underground storage tanks of any sort were in place in
connection with the site in question and whether the underground storage tanks
were used. If the underground storage tanks were removed, please explain when
and why they were removed;
7. Were there any spills, leaks or other releases of chemicals, including
solvents, at the site, and if so, indicate the amount released, the nature of
the release, what response was made to the release, when they were released and
what chemicals were released;
8. Describe the ownership history, past and present, of the property at which
the business was conducted;
9. Provide any written documents of any kind regarding the chemicals used,
stored, transported or dosposed of and any spills, leaks or releases of
chemicals at the site in question;
10. Provide the names of any employees or managers who may have information
regarding the business conducted at the site.
11. Provide the names and addresses of any other companies that, to your
knowledge, used, stored or disposed of solvents in the vicinity of the Boise
Towne Square Mall. In addition, indicate whether you are aware of any spills,
leaks or disposal of chemicals in the vicinity of the Boise Towne Square Mall by
unknown parties, and if so, indicate when the release or disposal occurred, and
what chemicals were released or disposed of.
75
Micron Technology, Inc.
Page 3
October 28, 1991
Please provide this information by November 15, 1991. In the meantime, if
you have any questions or comments, please call me, (▇▇▇) ▇▇▇-▇▇▇▇, or ▇▇▇▇▇
▇▇▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇, at the Department.
Yours very truly,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Deputy Attorney General
DMC/lvh
cc: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
76
Schedule 2.7
1. The Company has incurred liabilities and obligations in connection with
its licensing of software from Baan USA, Inc., Oracle Corporation, and
Industrial Computer Corporation.
2. In November, 1997, the Company promoted ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to Chief
Financial Officer of the Company. Employment and Non-Compete Agreement,
dated October 27, 1997, with ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
3. On November 18, 1997, the Company consummated the acquisition of assets
relating to Alcatel ▇▇▇▇'▇ Colfontaine, Belgium operation for US$4.5
million and executed and delivered various documents in connection
therewith.
4. Since August 28, 1997, the Company and the Transferred Subsidiaries have
engaged in a number of transactions and arrangements with each other
including, without limitation, in connection with the formation of
M.C.M.S. Belgium S.A. and M.C.M.S. Netherlands B.V., the sharing of
certain intellectual property, and the investment of monies and incurrence
of debt.
5. See Schedules 2.4, 2.6, 2.8 and 4.4.
77
Schedule 2.8
See Schedule 2.9
See attached
78
--------------------------------------------------------------------------------
CHARGE OF DISCRIMINATION AGENCY CHARGE NUMBER
This Form is affected by the Privacy Act of |x| FGPA
1974; See Privacy Act Statement before |_| EEOC
completing this form. 141980127
--------------------------------------------------------------------------------
_____________________________________________________ and EEOC
State or local Agency, if any
--------------------------------------------------------------------------------
NAME (Indicate Mr., Ms., Mrs.) HOME TELEPHONE (Include Area Code)
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇ CODE DATE OF BIRTH
▇▇▇▇-▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ 06/08 68
--------------------------------------------------------------------------------
NAMED IS THE EMPLOYER, LABOR ORGANIZATION, EMPLOYMENT AGENCY APPRENTICESHIP
COMMITTEE, STATE OR LOCAL GOVERNMENT AGENCY WHO DISCRIMINATED AGAINST ME (If
more than one list below.)
--------------------------------------------------------------------------------
NAME NUMBER OF EMPLOYEES, MEMBERS TELEPHONE (Include Area Code)
X Micron CMS 300+ (▇▇▇) ▇▇▇-▇▇▇▇ (HR)
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ Durnham
--------------------------------------------------------------------------------
NAME TELEPHONE (Include Area Code)
--------------------------------------------------------------------------------
STREET ADDRESS CITY, STATE AND ZIP CODE COUNTY
--------------------------------------------------------------------------------
CAUSE OF DISCRIMINATION BASED ON DATE DISCRIMINATION TOOK PLACE
(Check appropriate box(es) EARLIEST LATEST
|_| RACE |_| COLOR |_|SEX |_|RELIGION 9/10/96 Present
/ /
|X| NATIONAL ORIGIN |_| RETALIATION |_| AGE
|xx| CONTINUING ACTION
|_| DISABILITY |_| OTHER (Specify)
--------------------------------------------------------------------------------
THE PARTICULARS ARE (If additional space is needed, attach with sheet(s)),
SEE ATTACHED HERETO.
[SEAL OMITTED]
--------------------------------------------------------------------------------
|_| I want this charge filed with NOTARY (then necessary for [ILLEGIBLE])
both the EEOC and the State or
local Agency, if any. I will advise
the agencies if I change my address /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or telephone number and cooperate ---------------------------------------
fully with them in the processing I swear or affirm that I have read the
of my charge in accordance with above charge and that it is true to
their procedures. the best of my knowledge, information
and belief.
--------------------------------------------------------------------------------
I declare under penalty of perjury SIGNATURE OF COMPLAINANT
that the foregoing is true and correct.
SUBSCRIBED AND SWORN TO BEFORE ME
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ THIS DATE.
(Day, month, year)
Date 11/11/97 Charging Party (Signature) Nov. 11, 1997
--------------------------------------------------------------------------------
EEOC FORMS (Rev. 06182)
My Comm. Exp: FEPA COPY
[ILLEGIBLE]
79
--------------------------------------------------------------------------------
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION PERSON FILING CHARGE
Lavani, Rajesh H
------------------------------------
THIS PERSON (check one)
Ms. ▇▇▇▇▇▇▇▇ ▇▇▇▇
Director of Human Resources |x| CLAIMS TO BE AGGREIVED
Micron CMS |_| IS FILING ON BEHALF OF ANOTHER
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ------------------------------------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE OF ALLEGED VIOLATION
Earliest Most Recent
09/10/96 11/11/97
------------------------------------
PLACE OF ALLEGED VIOLATION
Durham, N.C.
------------------------------------
CHARGE NUMBER
141980127
--------------------------------------------------------------------------------
NOTICE OF CHARGE OF DISCRIMINATION
(See EEOC "Rules and Regulations" before completing this part)
You are hereby notified that a charge of employment discrimination has been
filed against your organization under:
|X| TITLE VII OF THE CIVIL RIGHTS ACT OF 1964
|_| THE AGE DISCRIMINATION IN EMPLOYMENT ▇▇▇ ▇▇▇▇
|_| THE AMERICANS WITH DISABILITIES ACT
|_| THE EQUAL PAY ACT (29 U.S.C. SECT. 206(d)) investigation will be
conducted concurrently with our investigation of this charge.
The boxes checked below apply to your organization:
1.|_| No action is required on your part at this time.
2.|X| Please submit by 12/18/97 a statement of your position with respect to the
allegation(s) contained in this charge, with copies of any supporting
documentation. This material will be made a part of the file and will be
considered at the time that we investigate this charge. Your prompt
response to this request will make it easier to conduct and conclude our
investigation of this charge.
3.|X| Please respond fully by 12/08/97 to the attached request for information
which pertains to the allegations contained in this charge. Such
information will be made a part of the file and will be considered by the
Commission during the course of its investigation of the charge.
For further inquiry on this matter, please use the charge number shown above.
Your position statement, your response to our request for information, or any
inquiry you may have should be directed to:
Raleigh Area ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Investigator
--------------------------------------
(Commission Representative)
(▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------
(Telephone Number)
|X| Enclosure: Copy of charge
--------------------------------------------------------------------------------
BASIS OF DISCRIMINATION
|X| RACE |_| COLOR |_| SEX |_| RELIGION |X| NAT. ORIGIN |_|AGE
|_| DISABILITY |_| RETALIATION |_| OTHER
--------------------------------------------------------------------------------
CIRCUMSTANCES OF ALLEGED VIOLATION
See enclosed Form 5, Charge of Discrimination.
--------------------------------------------------------------------------------
Date TYPED NAME/TITLE OF AUTHORIZED EEOC OFFICIAL SIGNATURE
11/24/97 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------------------------------------------
EEOC Form 151 (Rev. 06/82) RESPONDENTS'S COPY
80
--------------------------------------------------------------------------------
Equal Employment Opportunity Commission
REQUEST FOR INFORMATION
--------------------------------------------------------------------------------
Chg. Party: Lavani, Rajesh H
Respondent: Micron CMS
Charge No.: 141980127
1. Give the correct name and address of the facility named in the charge.
2. State the total number of persons who were employed by your organization
during the relevant period. Include both full and part-time employees. How
many employees are employed by your organization at the present time?
3. Supply an organizational chart, statement, or documents which describe
your structure, indicating, if any, the relationship between it and
superior and subordinate establishments within the organization.
4. Supply a statement or documents which identify the principal product or
service of the named facility.
5. State the legal statue of your organization, i.e, corporation,
partnership, tax-exempt non-profit, etc. If incorporated, identify the
state of incorporation.
6. State whether your organization has a contract with any agency of the
federal government or is a subcontractor on a project which receives
federal funding. Is your organization covered by the provisions of
Executive Order 11246? If your answer is yes, has your organization been
the subject of a compliance review by the OFCCP at any time during the
past two years?
7. Submit a written position statement on each of the allegations of the
charge, accompanied by documentary evidence and/or written statements,
where appropriate. Also include any additional information and explanation
you deem relevant to the charge.
8. Submit copies of all written rules, policies and procedures relating to
the issue(s) raised in the charge. If such does not exist in written form,
explain the rules, policies and procedures.
81
ATTACHMENT TO
CHARGE OF DISCRIMINATION
OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
I began working for Micron, CMS on September 10, 1996. Micron CMS is an
electronic assembly plant. I am a test technician. Since I began employment,
they have discriminated against me based on my national origin, Indian. My
supervisor has discriminated against me in the following ways:
1. I was denied training provided to other employees. In my annual review,
they told me that I was doing good work. However, I needed additional training.
Target dates were set for the training. When they held the training courses,
other employees were allowed to attend and I was not notified of the training
programs.
2. My job performance was rated as "exceeds expectations". However,
Caucasian employees who hold the same position and have been in that position
for a shorter time received higher bonuses than I.
3. The company exceeded performance goals and treated the employees in my
department to dinner. They did not include me. I questioned my supervisor, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇. I wanted to know if my exclusion was a "major oversight". He told
me that it was not an oversight.
82
INFORMATION SHEET ON CHARGES OF DISCRIMINATION
EEOC RULES AND REGULATIONS
Section 1601.15 of EEOC's Procedural Regulations provides that persons
charged with employment discrimination, such as yourself, may submit a statement
of position or evidence with respect to the allegations contained in this
charge.
EEOC's Recordkeeping and Reporting Requirements are set forth at Title 29,
Code of Federal Regulations (CFR), Part 1602 (see particularly Section 1602.14
below) for Title VII and the ADA; 29 CFR Part 1620 for the EPA; and 29 CFR Part
1627, for the ADEA. These regulations generally require respondents to preserve
payroll and personnel records relevant to a charge of discrimination until
disposition of the charge or litigation relating to the charge (for ADEA
charges, this notice constitutes the written request set out in Part 1627 for
respondents to preserve records relevant to the charge -- the records to be
retained are as described in Section 1602.14, as cited below; and should be kept
for the periods described in that section). Parts 1602, 1620 and 1627 also
prescribe record retention periods -- generally, three years for basic payroll
records and one year for personnel records. Questions regarding retention
periods and the types of records to be retained should be resolved by reference
to the regulations.
Section 1602.14 Preservation of records made or kept. ...Where a charge of
discrimination has been filed, or an action brought by the Commission or the
Attorney General, against an employer under Title VII or the ADA, the employer
shall preserve all personnel records relevant to the charge or the action. The
term "personnel records relevant to the charge," for example, would include
personnel or employment records relating to the aggrieved person and to all
other aggrieved employees holding positions similar to that held or sought by
the aggrieved person and application forms or test papers completed by an
unsuccessful applicant and by all other candidates for the same position as that
for which the aggrieved person applied and was rejected. The date of "final
disposition of the charge or the action" means the date of expiration of the
statutory period within which the aggrieved person may bring an action in a U.S.
District Court or, where an action is brought against an employer either by the
aggrieved person, the Commission, or by the Attorney General, the date on which
such litigation is terminated.
NOTICE OF NON-RETALIATION REQUIREMENTS
Section 704(a) of Title VII, Section 4(d) of the ADEA, and Section 503(a)
of the ADA provide that it shall be an unlawful employment practice for an
employer to discriminate against any of his/her employees or applicants for
employment, for an employment agency to discriminate against any individual, or
for a labor organization to discriminate against any member thereof or applicant
for membership, because s/he has opposed any act or practice made unlawful by
these statutes; or because s/he has made a charge, testified, assisted, or
participated in any manner in an investigation, proceeding, or hearing under
these statutes. The Equal Pay Act of 1963 contains similar provisions.
Additionally, Section 503(b) of the ADA prohibits coercion, intimidation,
threats, or interference with any person because s/he has exercised or enjoyed,
or aided or encouraged others in their exercise or enjoyment, of rights under
the Act.
Persons filing charges of discrimination are advised of these
Non-Retaliation Requirements and are instructed to notify EEOC if any attempt at
retaliation is made. Note that the Civil Rights Act of 1991 provides substantial
additional monetary provisions to remedy instances of retaliation or other
discrimination, including, for example, to remedy the emotional harm caused by
on-the-job harassment.
NOTICE REGARDING REPRESENTATION BY ATTORNEYS
Although it is not necessary that you be represented by an attorney while
we handle this charge, you have a right, and may wish to retain an attorney to
represent you. If you are represented by an attorney we request that you provide
the Commission with your attorney's name, address, and telephone number, and
that you ask your attorney to write to the Commission confirming such
representation.
(reverse side of EEOC Form 131/131 A)
83
Schedule 2.9
1. Except as set forth in Section 4.15 of the Recapitalization Agreement, no
rights are granted in the name "Micron" or the stylized "M" of the
Company's logo.
2. The Company's patents and patent applications are nonexclusively licensed
to various companies pursuant to cross-license agreements between MTI
and/or MEI and such companies.
3. MEI cannot represent and warrant that the Company owns or has a license to
or as of the Closing will own or have a license to use third party
software that is not proprietary to either MEI or MTI, including any
software licenses listed in Schedule 2.18 and the following:
a) Oracle
b) Payroll Data Systems
c) Ross Systems
d) Sun
e) Digital
f) Microsoft
g) Corbis
h) PBX
i) Cincom
4. Hakan Lans has asserted Patent # 4,303,986 against Sequent Computer
Systems, Inc. ("Sequent"), a customer of the Company, with respect to
which Sequent sought indemnification from the Company. The Company agreed
to indemnify and hold harmless Sequent from any loss arising out of any
such alleged infringement.
5. Patent numbers 4,884,674 and 4,306,292 (the Head patents) were asserted by
Texas Instruments against Seller in 1996 as applied to the Fuji pick and
place equipment used by the Company. Seller and TI entered into a patent
cross license agreement in August 1996. However, the license agreement is
specific to the manufacture and sale of personal computers and peripheral
products.
6. See Exhibits A, B, and C to the "Patent and Invention Disclosure
Assignment and License Agreement" regarding information called for in
Section 2.9(b).
7. Any rights associated with the circuit design used in association with the
MCMS logo are granted to the Company.
84
Schedule 2.10(a)
M.C.M.S. Sdn. Bhd. hs applied for, but has not yet received, a Malaysian
environmental permit.
See Schedule 2.6
85
Schedule 2.10(c)
1. The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Term WCMA Loan Agreement, dated April 15, 1997, requires
the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ before Micron Custom
Manufacturing Services, Inc. ("Company") is a party to any merger and
before, among other things, there is a material change in the controlling
ownership of Company.
2. The Revolving Credit Facility, dated as of March 17, 1997, between Company
and Micron Electronics, Inc. ("Seller"), requires Company to obtain
Seller's written consent prior to selling Company common stock the result
of which would be Seller owning less than 51% of the common stock of
Company.
3. Lease regarding ▇▇▇▇ ▇▇▇▇▇ ▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
86
Schedule 2.11
1. In November, 1997, in connection with the establishment of the Company's
Belgium operation, M.C.M.S. Belgium S.A. entered into two union
agreements.
2. See Schedule 2.8
87
Schedule 2.12
See Schedules 2.6, 2.8, 2.9, 2.10(a) and 2.11
M.C.M.S. Belgium S.A. does not have all necessary Licenses.
88
Schedule 2.13(a)
1. Plans.
Micron Electronics, Inc. Retirement at Micron Plan (401(k) plan)
Micron Electronics, Inc. 1995 Employee Stock Purchase Plan
Zeos International, Ltd. 1991 Stock Incentive Plan
Micron Technology, Inc. Nonstatutory Stock Option Plan
Micron Electronics, Inc. 1995 Stock Option Plan
Restricted Stock Purchase Agreements
Micron Electronics, Inc. Profit Distribution Plan
Micron Electronics, Inc. Pay for Performance Plan
Micron Electronics, Inc. Executive Bonus Plan
Micron Electronics, Inc. Dependent Care Flexible Spending Account
Plan
Micron Electronics, Inc. Health Care Flexible Spending Account Plan
Micron Electronics, Inc. Flexible Benefits Plan
Micron Technology, Inc. Medical Plan
Micron Technology, Inc. Dental Plan
Micron Technology, Inc. Vision Plan
Micron Technology, Inc. Long Term Disability Plan
Micron Technology, Inc. Short Term Disability Plan
Micron Technology, Inc. Basic Group Life and Accidental Death and
Dismemberment Insurance Plan
Micron Technology, Inc. Supplemental Life and Accidental Death and
Dismemberment Insurance Plan
Micron Technology, Inc. Dependent Life Insurance Plan
Micron Technology, Inc. Health Services Personal Medical Care Plan
Time Off Plan
Education Assistance
PC Purchase
Severance Agreement between Seller and ▇▇▇▇▇▇ ▇▇▇▇▇
Severance Agreement between Seller and Jess Asla
See "Company Plans" below
See also agreements listed on Schedule 2.18 under heading
"Personnel"
2. "Company Plans":
a. Micron CMS Publication Program
89
b. M.C.M.S. Sdn. Bhd. Profit Sharing and Year End Bonus Plan - Malaysia
c. M.C.M.S. Sdn. Bhd. Personal Accident Plan
d. M.C.M.S. Sdn. Bhd. Group Life Plan
e. M.C.M.S. Sdn. Bhd. Hospitalization Plan
f. Benefit and Process for Belgium
g. Workers Compensation and Supplemental Life and Medical Insurance for
Belgium
90
Schedule 2.13(c)
MEI's 401(k) plan provides that part-time employees are not eligible for
employer contributions. In an IRS audit of the 401(k) plan of Micron Technology,
Inc., which contains a similar provision, the IRS has questioned whether this
exclusion is permissible. If the IRS should determine that it is not, MEI will
amend MEI's 401(k) plan as appropriate and take all appropriate actions to make
the affected participants (including those who are employed by the Company)
whole
91
Schedule 2.14
1. The Company owes MEI for federal and state income tax liabilities relating
to taxable income generated during the fiscal year 1998 prior to closing.
The liability for these taxes will be accrued by the Company prior to
closing. In addition, the Company owes income tax in the country of
Malaysia for income earned prior to closing. The liability has been
accrued by the Company.
2. Audits pending.
3. Waiver of any statute of limitations or granting of any extension of time
in which any material tax may be assessed:
a. The Company has executed an "Extension of Limitation on Assessment
and Collection of sales, Use, Withholding and/or Miscellaneous
Taxes" in favor of the Idaho State Tax Commission for the audit
period of September 1, 1993 through August 31, 1996.
4. The Company is currently the beneficiary of the following extension for
filing income tax returns:
a. 1997 Federal Income tax returns:
b. 1997 State Income tax returns: Idaho; California; Utah; Oregon; New
Hampshire; Minnesota; North Carolina
Federal Income Tax
The Company is being audited as part of the Micron Technology, Inc. consolidated
income tax returns for the years ending Aug-93 and Aug-94.
Sales and Use Tax
The Company is being audited by the Idaho State Tax Commission for periods
beginning 9-1-94 and ending 8-31-96. In addition, the Company is being audited
by the California State Board of Equalization for periods beginning 10-93 and
ending 12-96.
92
Schedule 2.16
1. Ten largest Customers and Suppliers.
Ten Largest Customers as of 11/27/97
------------------------------------
Cisco Systems
Fore Systems
Tandem
Apple Computers
Boston Technology
Tektronix
Electronics for Imaging
Micron Technology
Sequent Computer Systems
Schlaumberger
Ten Largest Suppliers as of 11/27/97
------------------------------------
Micron Semiconductor Products, Inc.
Cisco Systems
Samsung Semiconductor
Intel Corporation
Fore Systems
Arrow Electronics
Sterling Electronics
▇▇▇▇▇▇▇▇ Hallmark
Toppan West, Inc.
Apple Computers
93
Schedule 2.17
1. Real Property.
Real Property Owned or Leased?
------------- ----------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ Owned
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Avenue ▇▇. ▇. ▇▇▇▇▇▇▇▇▇▇ Owned
B-7340 Colfontaine
Belgium
▇▇▇▇ ▇▇▇▇▇ ▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Plots 12 and 13 Leased
Free Trade ▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Properties, L.P. Leased (lease of warehouse space)
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Leased (premises is owned by Micron
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Technology, Inc. and the Company has an
employee on the premises)
501G-16-2 Emerald Tower Leased (lease of residential property)
Diamond ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
2. Seller currently occupies a portion of the premises located at ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ pursuant to the Office Lease, dated as
of November 1, 1996, between Seller and Company.
3. See the matters set forth in the attached Exhibit 2.17A.
94
Exhibit 2.17A
Property:
---------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇
COMMITMENT FOR TITLE INSURANCE
SCHEDULE B - SECTION 2
ORDER NUMBER: 97014481
Schedule B of the policy or policies to be issued will contain exceptions to the
following matters unless the same are disposed of to the satisfaction of the
Company.
A. Defects, liens, encumbrances, adverse claims or other matters, if any,
created, first appearing in the public records, or attaching subsequent to
the effective date hereof but prior to the date the proposed Insured
acquires of record for value the estate or interest or mortgage thereon
covered by this Commitment.
B. Exceptions:
1. Rights or claims of parties in possession not shown by the public records.
2. Encroachments, overlaps, boundary line disputes, and any other matters
which would be disclosed by an accurate survey or inspection of the
premises including, but not limited to, insufficient or impaired access or
matters contradictory to any survey plat shown by the public records.
3. Easements, or claims of easements, not shown by the public records.
4. Any lien, or right to a lien, for services, labor, or material heretofore
or hereafter furnished, imposed by law and not shown by the public
records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or
in Acts authorizing the issuance thereof; (c) water rights, claims or
title to water, whether or not the matters excepted under (a), (b), or (c)
are shown by the public records.
6. Taxes or special assessments which are not shown as existing liens by the
records of any taxing authority that levies taxes or assessments on real
property or by the public records. Proceedings by a public agency which
may result in taxes or assessments, or notices of such proceedings,
whether or not shown by the records of such agency or by the public
records.
7. General Taxes for the year 1997, a Lien but not yet due and payable.
8. General Taxes for the year 1996, a Lien, the first half is paid and the
second half is now due and payable.
-1-
95
Order No.: AT- 97014481
Parcel No.: R 31016
In the original amount of $255.56.
(AS TO PARCEL I)
9. General Taxes for the year 1996, a Lien, are now due and payable.
Parcel No.: L 31016
In the original amount of (to be determined).
(AS TO PARCEL I)
10. General Taxes for the year 1996, a Lien, the first half is paid and the
second half is now due and payable.
Parcel No.: R 31017
In the original amount of $740.00.
(AS TO PARCEL II)
11. The Land described herein is located within the boundaries of the CITY of
NAMPA and is subject to any Assessments levied thereby.
12. The Land described herein is located within the boundaries of the NAMPA
MUNICIPAL Irrigation District (465-2207) and is subject to any Assessments
levied thereby.
13. Ditch, Road and Public Utility Easements as the same may exist over said
premises.
14. Right-of-way for ▇▇▇▇▇ Creek Drain and the Rights of Access thereto for
Maintenance of said Drain.
15. Right of Way for Franklin Road and Birch Lane.
16. Easement, and the Terms and Conditions thereof:
In Favor of City of Nampa
Purpose sewer easement
Recorded November 9, 1994
Instrument No. 9433864
17. Covenants, Condition and Restrictions and the Obligations thereof as set
forth in an Ordinance and Development Agreement between City of Nampa and
Micron Custom Manufacturing Services, Inc., recorded April 8, 1996 as
Instrument No. 9612928, Official Records.
18. A Deed of Trust, and the terms and conditions thereof:
Stated Amount $20,000.00
Grantor ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇▇ ▇.
-2-
Commitment Schedule B - Section 2 - Continued
96
Order No.: AT- 97014481
▇▇▇▇▇▇▇
Trustee Pioneer Title Company of Canyon County
Beneficiary Idaho First National Bank
Dated December 16, 1987
Recorded December 24, 1987
Instrument No. 8726545
(AS TO PARCEL II)
19. Matters which may be disclosed by an inspection or by a survey of said
land that is satisfactory to this Company, or by inquiry of the parties in
possession thereof.
END OF SCHEDULE B-SECTION 2
-3-
97
EXCEPTIONS FROM COVERAGE
File No: PN 38553
SCHEDULE B
This policy does not insure against loss or damage (and the Company will not pay
costs, attorney's fees or expenses) which arise by reason of:
GENERAL EXCEPTIONS
1. Rights or claims of parties in possession not shown by the public records.
2. Encroachments, overlaps, boundary line disputes, and any other matters
which would be disclosed by an accurate survey and inspection of the
premises including, but not limited to, insufficient or impaired access
and matters contradictory to any survey plat shown by the public records.
3. Easements, or claims of easements, not shown by the public records.
4. Any lien, or right to a lien, for services, labor, or material heretofore
or hereafter furnished, imposed by law and not shown by the public
records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or
in Acts authorizing the issuance thereof; (c) water rights, claims or
title to water, whether or not the matters excepted under (a), (b), or (c)
are shown by the public records.
6. Taxes or special assessments which are not shown as existing liens by the
records of any taxing authority that levies taxes or assessments on real
property or by the public records. Proceedings by a public agency which
may result in taxes or assessments, or notices of such proceedings,
whether or not shown by the records of such agency or by the public
records.
SPECIAL EXCEPTIONS:
1. General taxes for the year 1996, which are a lien, payable on or before
December 20 of said year and not delinquent until after said date.
2. General taxes which may be assessed and extended on any subsequent roll
for the tax year 1996 with respect to new improvements and the first
occupancy thereof during 1996, which may not be included on the regular
assessment roll and which are a lien not yet due or payable.
3. Liens and assessments of Pioneer Irrigation District, and the rights and
powers of said district as by law provided. Paid Current.
4. Right of Way for Franklin Road along the East 33 feet.
"NOTHING FURTHER"
98
STANDARD EXCEPTIONS FOR OWNER'S POLICY
The owner's policy will be subject to the mortgage, if any, noted under item one
of Section 1 of Schedule B hereof and to the following exceptions: (1) rights or
claims of parties in possession not shown by the public records; (2)
encroachments, overlaps, boundary line disputes, and any matters which would be
disclosed by an accurate survey and inspection of the premises; (3) easements,
or claims of easements, not shown by the public records; (4) any lien, or right
to a lien, for services, labor, or material heretofore or hereafter furnished,
imposed by law and not shown by the public records; (5) taxes or special
assessments which are not shown as existing liens by the public records.
CONDITIONS AND STIPULATIONS
1. The term "mortgage," when used herein, shall include deed of trust, trust
deed, or other security instrument.
2. If the proposed Insured has or acquires actual knowledge of any defect,
lien, encumbrance, adverse claim or other matter affecting the estate or
interest or mortgage thereon covered by this Commitment other than those
shown in Schedule B hereof, and shall fail to disclose such knowledge to
the Company in writing, the Company shall be relieved from liability for
any loss or damage resulting from any act of reliance hereon to the extent
the Company is prejudiced by failure to so disclose such knowledge. If the
proposed Insured shall disclose such knowledge to the Company, or if the
Company otherwise acquires actual knowledge of any such defect, lien,
encumbrance, adverse claim or other matter, the Company at its option may
amend Schedule B of this Commitment accordingly, but such amendment shall
not relieve the Company from liability previously incurred pursuant to
paragraph 3 of these Conditions and Stipulations.
3. Liability of the Company under this Commitment shall be only to the named
proposed Insured and such parties included under the definition of Insured
in the form of policy or policies committed for and only for actual loss
incurred in reliance hereon in undertaking in good faith (a) to comply
with the requirements hereof, or (b) to eliminate exceptions shown in
Schedule B, or (c) to acquire or create the estate or interest or mortgage
thereon covered by this Commitment. In no event shall such liability
exceed the amount stated in Schedule A for the policy or policies
committed for and such liability is subject to the insuring provisions,
the Exclusions from Coverage and the Conditions and Stipulations of the
form of policy or policies committed for in favor of the proposed Insured
which are hereby incorporated by reference and are made a part of this
Commitment except as expressly modified herein.
4. Any action or actions or rights of action that the proposed Insured may
have or may bring against the Company arising out of the status of the
title to the estate or interest or the status of the mortgage thereon
covered by this Commitment must be based on and are subject to the
provisions of this Commitment.
99
--------------------------------------------------------------------------------
WARRANTY DEED
(CORPORATE FORM)
AIR STORAGE INC., a corporation organized and existing under the laws of
the State of Idaho, with its principal office at BOISE of County of ADA grantor,
hereby CONVEYS or GRANTS and WARRANTS TO MICRON CUSTOM MANUFACTURING SERVICES,
INC., an Idaho corporation grantee of 8455 Westpark; ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ for the sum
of TEN AND OTHER GOOD AND VALUABLE CONSIDERATION DOLLARS, the following
described tract(s) of land in CANYON County, State of Idaho:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE.
Location of above described property
The officers who sign this deed hereby certify that this deed and the
transfer represented thereby was duly authorized under a resolution duly adopted
by the board of directors of the grantor at a lawful meeting duly held and
attended by a quorum.
In witness whereof, the grantor has caused its corporate name and seal to
be hereunto affixed by its duly authorized officers this April 10, 1996.
AIR STORAGE INC.
BY /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
ITS PRESIDENT
STATE OF IDAHO
COUNTY OF CANYON
On this 11th day of April, 1996, before me,
a notary public appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇ who being by
me duly sworn did say, each for him/herself, that he/she,
the said ▇▇▇▇▇ ▇. ▇▇▇▇▇ is the president of AIR
STORAGE INC., a corporation, and that the within and
foregoing instrument was signed on behalf of said
corporation by authority of a resolution of its board of
directors and said ▇▇▇▇▇ ▇. ▇▇▇▇▇ did duly acknowledge
to me that said corporation executed the same and that the
seal affixed is the seal of said corporation.
/s/ [ILLEGIBLE]
-----------------------------------------------
Notary Public
Residing at Boise, Idaho
My commission expires: 11/14/97
[SEAL]
PIONEER TITLE COMPANY
OF CANYON COUNTY
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
100
EXHIBIT "A"
A parcel of land being a portion of the Northeast Quarter of the Southeast
Quarter of Section 10, Township 3 North, Range 2 West of the Boise Meridian,
Canyon County, Idaho, and more particularly described as follows:
Beginning at a Brass Cap marking the Southeast corner of the Southeast Quarter
of Section 10, Township 3 North, Range 2 West of the Boise Meridian, Canyon
County, Idaho; thence along the Easterly boundary of the said Southeast Quarter
of Section 10, which is also the centerline of Franklin Road,
North 00(degrees) 09' 45" West [ILLEGIBLE] feet to a P.K. Nail and Washer,
said P.K. Nail and Washer also being the REAL POINT OF BEGINNING; thence
continuing along said Easterly boundary and centerline
North 00(degrees) 09' 45" West 684.62 feet to a P.K. Nail and Washer;
leaving said Easterly boundary and centerline,
South 89(degrees) 59' 48" West 331.50 feet to an iron pin; thence
North 00(degrees) 09' 45" West 193.00 feet to an iron pin; thence
North 89(degrees) 59' 48" East 331.50 feet to a P.K. Nail and Washer on
the said Easterly boundary of the Southeast Quarter of Section 10, said Easterly
boundary also being the centerline of Franklin Road; thence along said Easterly
boundary and centerline
North 00(degrees) 09' 45" West 137.00 feet to a 3/4" iron pipe marking the
Northeast corner of the said Southeast Quarter of Section 10; thence leaving
said Easterly boundary and centerline and along the Northerly boundary of said
Southeast Quarter,
South 89(degrees) 59' 48" West 1324.00 feet to an iron pin marking the
Northwest Quarter of the said Northeast Quarter of the Southeast Quarter of
Section 10; thence leaving said Northerly boundary and along the Westerly
boundary of the said Northeast Quarter of the Southeast Quarter of Section 10;
South 00(degrees) 08' 50" East 994.03 feet to and iron pin; thence leaving
said Westerly boundary
South 89(degrees) 58' 41" East 1324.27 feet to the POINT OF BEGINNING.
COMMITMENT
Schedule A - Ticor Title
101
--------------------------------------------------------------------------------
WARRANTY DEED
FOR VALUE RECEIVED ▇▇▇▇▇ ▇. ▇▇▇▇ AND ▇▇▇▇ ▇. ▇▇▇▇, husband and wife
the Grantors, do hereby grant, bargain, sell and convey unto MICRON CUSTOM
MANUFACTURING SERVICES, INC.
the Grantee, whose address is ▇▇▇▇ ▇▇▇▇▇▇▇▇; Boise, ID; 83704
the following described premises, to-wit:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE.
TO HAVE AND TO HOLD the said premises, with their appurtenances unto the
said Grantee, its heirs and assigns forever. And the said Grantors to hereby
covenant to and with the said Grantee, that they are the owners in fee simple of
said premises; that said premises are free from all encumbrances; except for
general taxes and assessments for the year 1996 and subsequent years, covenants,
conditions, restrictions and easements of record; and that they will warrant and
defend the same from all lawful claims whatsoever.
DATED: April 10, 1996
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------------------------------------------
STATE OF IDAHO
COUNTY OF CANYON
On this 10th day of April, 1996, before me a
notary public, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇ AND
▇▇▇▇ ▇. ▇▇▇▇, known or identified to me to be the
person(s) who(se) name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they have
executed the same.
/s/ [ILLEGIBLE]
-----------------------------------------------
Notary Public
Residing at NAMPA, Idaho
My commission expires: 3-9-2000
[SEAL]
PIONEER TITLE COMPANY
OF CANYON COUNTY
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102
EXHIBIT "A"
A parcel of land being a portion of the Northeast Quarter of the Southeast
Quarter of Section 10, Township 3 North, Range 2 West of the Boise Meridian,
Canyon County, Idaho, and more particularly described as follows:
Beginning at a Brass Cap marking the Southeast corner of the Southeast Quarter
of Section 10, Township 3 North, Range 2 West of the Boise Meridian, Canyon
County, Idaho; thence along the Easterly boundary of the said Southeast Quarter
of Section 10, which is also the centerline of Franklin Road,
North 00(degrees) 09' 45" West [ILLEGIBLE] feet to a P.K. Nail and Washer,
said P.K. Nail and Washer also being the REAL POINT OF BEGINNING; thence
continuing along said Easterly boundary and centerline
North 00(degrees) 09' 45" West 684.62 feet to a P.K. Nail and Washer;
thence leaving said Easterly boundary and centerline,
South 89(degrees) 59' 48" West 331.50 feet to an iron pin; thence
North 00(degrees) 09' 45" West 193.00 feet to an iron pin; thence
North 89(degrees) 59' 48" East 331.50 feet to a P.K. Nail and Washer on
the said Easterly boundary of the Southeast Quarter of Section 10, said Easterly
boundary also being the centerline of Franklin Road; thence along said Easterly
boundary and centerline
North 00(degrees) 09' 45" West 137.00 feet to a 3/4" iron pipe marking the
Northeast corner of the said Southeast Quarter of Section 10; thence leaving
said Easterly boundary and centerline and along the Northerly boundary of said
Southeast Quarter,
South 89(degrees) 59' 48" West 1324.00 feet to an iron pin marking the
Northwest corner of the said Northeast Quarter of the Southeast Quarter of
Section 10; thence leaving said Northerly boundary and along the Westerly
boundary of the said Northeast Quarter of the Southeast Quarter of Section 10;
South 00(degrees) 08' 50" East 994.03 feet to and iron pin; thence leaving
said Westerly boundary
South 89(degrees) 58' 41" East 1324.27 feet to the POINT OF BEGINNING.
103
Schedule 2.18
COMPANY OTHER PARTY AGREEMENT DATED
MCMS FreeGate Corporation Promissory Note 8/15/97
MCMS ▇▇▇▇▇▇▇ ▇▇▇▇▇ Line of Credit 2/7/97
MCMS NTFC Capital Corp Capital Lease 5/22/96
MCMS Sterling Commerce Software License 5/30/97
MCMS PolyDyne Development Corporation Software License 11/8/96
MCMS Cincom Systems, Inc. Client Services 4/29/96
MCMS Cincom Systems, Inc. Software License 2/23/90
MCMS Baan U.S.A., Inc. Software License & Service 7/23/97
MCMS Oracle Corporation Software License & Service 4/21/94
MCMS Tri-Center South Limited Partnership Lease (N.C.) 12/1/94
MCMS Sequent Computer Systems, Inc. Equipment Loan 1/1/97
MCMS Applied Innovation, Inc. Manufacturing Services 11/26/97
MCMS Sdn Bhd Samsung Asia Pte Ltd. Module Manufacturing 11/27/97
MCMS FreeGate Corporation Manufacturing Services 7/18/97
MCMS Natural Micro-Systems Manufacturing Services 5/22/97
MCMS Sequent Computer Systems, Inc. Purchase 12/13/96
MCMS Boston Technology, Inc. Purchase and License 3/25/96
MCMS Apple Computer Limited Memory Hub 1/31/97
MCMS Anthem Electronic, Inc. Consignment 10/2/96
MCMS Arrow/▇▇▇▇▇▇▇▇ Electronic/Capstone Consignment ▇▇/▇/▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Master In-Plant Store 1/1/97
MCMS ▇▇▇▇▇▇ Electronics ▇▇▇▇▇▇▇▇ 4/9/97
MCMS ▇▇▇▇▇ Electronics Consignment Inventory 9/12/97
MCMS All-West Components & Fasteners Consignment Inventory 3/19/97
MCMS Wyle Electronics Consignment 2/25/97
MCMS The Bureau Electronics Group Consignment 11/19/96
MCMS Milgray/Utah, Inc. Consignment 9/18/96
MCMS All American Semiconductor of Utah Consignment 3/11/97
MCMS Kent Electronics Corporation Consignment 6/17/97
MCMS Jaco Electronics, Inc. Automated Inventory 2/26/97
Replenishment
MCMS Sterling Electronics Corporation Consignment 10/11/96
MCMS Belgium Alcatel ▇▇▇▇ N.V. Transition 11/18/97
MCMS Belgium Alcatel ▇▇▇▇ N.V. Frame Manufacturing 11/18/97
MCMS Belgium Alcatel ▇▇▇▇ N.V. Asset Purchase and Sale 11/4/97
MCMS ▇▇▇▇▇▇▇ Properties, L.P. Lease
MCMS Industrial Computer Corp. License 9/15/97
MCMS Preco Purchase/sale of real 3/21/96
property
MCMS sdn Bhd Lease 1/28/97
Intercompany
MCMS Micron Semiconductor, Inc. Services 9/4/93
MCMS Micron Electronics, Inc. Office Lease 11/1/96
MCMS Micron Europe Limited Services 6/4/93
MCMS Sdn Bhd MCMS International Revolving Credit Facility 10/30/96
MCMS Micron Electronics Inc. Revolving Credit Facility 3/17/97
MCMS Micron Semiconductor Asia Pacific Representative 9/1/95
MCMS Micron Electronics Inc/Boston Tech Development 3/25/96
▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Indemnification 11/25/96
MCMS Asla, Jess Indemnification 11/25/96
MCMS ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. indemnification 10/22/96
MCMS ▇▇▇▇▇, ▇▇▇▇▇ Indemnification 4/28/97
MCMS ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. Indemnification 4/28/97
MCMS ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Indemnification 4/28/97
MCMS Oaas, T. ▇▇▇▇ Indemnification 4/28/97
MCMS Davies, ▇. ▇▇▇▇ Indemnification 4/28/97
MCMS ▇▇▇▇, ▇▇▇ Indemnification 4/28/97
MCMS ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Termination 5/22/95
MCMS Asla, Jess Termination 5/22/95
MCMS ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. Termination 10/22/96
MCMS ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. Termination 5/22/95
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 1/30/96
MEI Asla, Jess Employment 2/22/96
MCMS ▇▇▇▇▇, ▇▇▇▇▇ Employment and Non- 10/27/97
Compete
See Schedule 2.9
With respect to certain licenses and other agreements relating to Intellectual
Property, there may be disputes among the parties thereto relating to compliance
with the terms thereof and defaults thereunder.
105
Schedule 2.19
1. Reference is made to the contracts listed under the heading "Intercompany"
and "Personnel" in Schedule 2.18.
2. Assets, property, or rights, tangible or intangible, owned by Affiliates
and used in Company's business:
a. Reference is made to Schedule 2.9. Certain Seller or MTI proprietary
software or other intellectual property rights.
b. Company leases space at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
from Micron Technology, Inc.
c. Company has access to a booster pump located on Seller's property
which would be used in the event of a fire on Company's premises.
d. Company draws power from a power substation located on Seller's
property with respect to which Seller has contracted with Idaho
Power.
e. Company is entitled to rights under various agreements to which
either Micron Technology, Inc. or Seller is a party, the material
agreements of which are the following:
1. Oracle (license agreement)
2. Microsoft (support agreement)
3. Ross Systems (license agreement)
4. Payroll Data Systems (license agreement)
5. Corbis (license agreement)
6. Digital Equipment (maintenance agreement)
7. Sun (maintenance agreement)
8. MCI/AT&T/US West (telecommunications agreements)
9. Federal Express/United Parcel Service (transportation
agreements)
f. Penang, Malaysia and Durham, North Carolina wide area network
located at Seller.
g. Insurance policies with respect to the insurance set forth in
Schedule 2.20.
h. Benefit Plans with respect to the benefits set forth in Schedule
2.13(a).
i. MEI's internet and intranet servers.
j. PBX network located at MEI.
k. The VAX system located at MTI
l. All assets, properties or rights, tangible or intangible, owned by
Affiliates and used in the Company's business in connection with
intercompany services.
106
Schedule 2.20
See attached.
107
1998 Corporate Insurance Summary
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Coverage Description Deductible Limit Allocated Premium
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PROPERTY
Property Damage and Business All Risk (excluding flood and STBD
Interruption: $100,000 earthquake): $1,500,000,000
Service Interruption: 8 hours Earthquake: TBD Allocation Basis
and $100,000. Flood: TBD ----------------
Actual Cost
------------------------------------------------------------------------------------------------------------------------------------
FOREIGN PROPERTY/SMALL DOMESTIC LOCATIONS
Property Damage and Business Foreign Property: $10,000,000 STBD
Interruption: $1,000 Domestic Property: $3,000,000
Earthquake: $25,000 Allocation Basis
Flood: $25,000 ----------------
Computer Breakdown: $10,000 Actual Cost
------------------------------------------------------------------------------------------------------------------------------------
TRANSIT
Capital Equipment: $10,000 Any one vessel, Aircraft, or
Other: $5,000 Connecting Conveyances: STBD
$20,000,000
Land Conveyance: $15,000 000 Allocation Basis
Scheduled Location: $6,000,000 ----------------
Unnamed Location: $2,000,000 Underwriter Assigned
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CRIME/EMPLOYEE DISHONESTY
Each Loss: $200,000 Primary Crime: $35,000,000
Excess Crime: $15,000,000 STBD
Allocation Basis
----------------
Underwriter Assigned
------------------------------------------------------------------------------------------------------------------------------------
WORLDWIDE PACKAGE
See Applicable Deductible See Applicable Limit Section Included in General
Section Liability and Foreign
Property premiums
Allocation Basis
----------------
Underwriter Assigned
------------------------------------------------------------------------------------------------------------------------------------
Policies are in effect 9/1/97 - 9/1/98 unless otherwise indicated.
Policies and limits are shared with all Micron companies unless otherwise
indicated.
Revision Date: 11/04/97
Page 1
108
1998 Corporate Insurance Summary
------------------------------------------------------------------------------------------------------------------------------------
Coverage Description Deductible Limit Allocated Premium
------------------------------------------------------------------------------------------------------------------------------------
GENERAL LIABILITY
Each Event: $500,000 Each Occurrence: $1,000,000 STBD
Aggregate: $1,500,000 (applies General Aggregate: $2,000,000
to General Liability, Product Aggregate: $2,000,000 Allocation Basis
Technology E&O and Damage Pers. & Adv. Injury: $1,000,000 ----------------
To Your Electronic Products Medical Expense: $5,000 Underwriter Assigned
Liability) Fire legal Liability: $1,000,000
------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY ERRORS & OMISSIONS
Each Event: $500,000 Aggregate: $2,000,000 Included in General
Aggregate: $1,500,000 (applies Each Claim: $1,000,000 Liability premium above
to General Liability,
Technology E&O and Damage Allocation Basis
To Your Electronic Products ----------------
Liability) Underwriter Assigned
------------------------------------------------------------------------------------------------------------------------------------
DAMAGE TO YOUR ELECTRONIC
PRODUCTS LIABILITY
Each Event: $500,000 Aggregate: $2,000,000 Included in General
Aggregate: $1,500,000 (applies Each Claim: $1,000,000 Liability premium above
to General Liability,
Technology E&O and Damage Allocation Basis
To Your Electronic Products ----------------
Liability) Underwriter Assigned
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE
Physical Damage: Physical Damage(1) STBD
Collision: $500 Collision: ACV
Comprehensive: $250 Comprehensive: ACV Allocation Basis
Rental Vehicles: $500 Rental Vehicles: ACV ----------------
Liability: None Liability: Actual Cost /
Each Accident: $1,000,000 Vehicle Ownership
combined single limit
------------------------------------------------------------------------------------------------------------------------------------
----------
(1) Autos are insured on an Actual Cash Value (ACV) method or the "Blue Book"
value.
Policies are in effect 9/1/97 - 9/1/98 unless otherwise indicated.
Policies and limits are shared with all Micron companies unless otherwise
indicated.
Revision Date: 11/04/97
Page 2
109
1998 Corporate Insurance Summary
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Coverage Description Deductible Limit Allocated Premium
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FOREIGN AUTOMOBILE LIABILITY DIC
Physical Damage: Not Covered Included in General
None Liability: Liability premium above
Each Accident: $1,000,000
combined single limit Allocation Basis
----------------
Actual Cost /
Vehicle Ownership
------------------------------------------------------------------------------------------------------------------------------------
UMBRELLA / EXCESS LIABILITY
Applies excess of the underlying Each Occurrence: $75,000,000
policy. No additional retention Annual Aggregate: $75,000,000 STBD
or deductible. Allocation Basis
----------------
Actual Cost
------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS AND OFFICERS LIABILITY
Coverage A: none Coverage A: $45,000,000 STBD
Coverage B: $500,000 Coverage B: $45,000,000
Coverage C: $5,000,000 Coverage C: $50,000,000 Allocation Basis
----------------
Actual Cost
------------------------------------------------------------------------------------------------------------------------------------
WORKERS' COMPENSATION
Workers' Compensation:
None Statutory - State of Hire Based Payrolls
Employers Liability: Allocation Basis
Bodily Injury by Accident: ----------------
$100,000 Actual Cost
Bodily Injury by Disease:
$500,000
Each Employee Bodily Injury by
Disease: $100,000
------------------------------------------------------------------------------------------------------------------------------------
Policies are in effect 9/1/97 - 9/1/98 unless otherwise indicated.
Policies and limits are shared with all Micron companies unless otherwise
indicated.
Revision Date: 11/04/97
Page 3
110
1998 Corporate Insurance Summary
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Coverage Description Deductible Limit Allocated Premium
------------------------------------------------------------------------------------------------------------------------------------
FOREIGN VOLUNTARY WORKERS' COMPENSATION
Workers' Compensation: Included in General
None Statutory - State of Hire Liability premium above
Employers Liability:
Bodily Injury by Accident: Allocation Basis
$1,000,000 ----------------
Bodily Injury by Disease: Underwriter Assigned
$1,000,000
Each Employee Bodily Injury by
Disease: $1,000,000
Transportation Expenses per
Employee: $25,000
------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE BENEFITS LIBILITY
Each Claim: $1,000 Each Claim: $1,000,000 Included in General
Annual Aggregate: $3,000,000 Liability premium above
Allocation Basis
----------------
Underwriter Assigned
------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LIABILITY
None Each Occurrence: $2,000,000 STBD
Annual Aggregate: $2,000,000
Allocation Basis
----------------
9/1/96 Net Sales
------------------------------------------------------------------------------------------------------------------------------------
NONOWNED AVIATION LIABILITY
None Each Occurrence: $5,000,000 STBD
combined single limit (BI & PD)
Allocation Basis
----------------
Actual
------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PROFESSIONAL LIABILITY
None Individual:
Each Person: $5,000,000 STBD
Total Limit: $5,000,000
Facility: Allocation Basis
Each Person: $10,000,000 ----------------
Total Limit: $10,000,000 Actual
------------------------------------------------------------------------------------------------------------------------------------
Policies are in effect 9/1/97 - 9/1/98 unless otherwise indicated.
Policies and limits are shared with all Micron companies unless otherwise
indicated.
Revision Date: 11/04/97
Page 4
111
1998 Corporate Insurance Summary
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Coverage Description Deductible Limit Allocated Premium
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POLLUTION LEGAL LIABILITY
$1,000,000 Coverage Parts E, F, H, I, J: STBD
Each Incident: $20,000,000
Aggregate: $20,000,000 Allocation Basis
----------------
Coverage Part B: Actual Cost
Each Incident: $5,000,000
Aggregate: $5,000,000
Total Policy:
Aggregate: $20,000,000
------------------------------------------------------------------------------------------------------------------------------------
NOTARY BOND (Errors and Omissions)
None Each Incident: $10,000 STBD
Allocation Basis
----------------
Actual
------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE FEES
N/A N/A STBD
Allocation Basis
----------------
Pro Rata (Premiums)
------------------------------------------------------------------------------------------------------------------------------------
FINANCE CHARGE
N/A N/A STBD
Allocation Basis
----------------
Pro Rata (Premiums)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL: STBD
Policies are in effect 9/1/97 - 9/1/98 unless otherwise indicated.
Policies and limits are shared with all Micron companies unless otherwise
indicated.
Revision Date: 11/04/97
Page 5
112
Schedule 2.21
The Company currently believes, but in no way represents or warrants, that the
following approximate material expenditures* which it currently plans to make or
anticipates making with respect to hardware, software or communications systems
will enable (i) the computer systems used by the Company and the Transferred
Subsidiaries to recognize the advent of the year 2000 and correctly manipulate
date information relating to dates on or after January 1, 2000 and (ii) the
operation and functionality of such computer systems to not be adversely
affected by the advent of the year 2000 or any manipulation of data featuring
date information relating to dates on or after January 1, 2000:
Item Expenditure
---- -----------
Personal computers and work stations approx. $200,000
Baan Software System Implementation $7,804,975
Telephone (PBX) $150,000
Wide Area Network $75,000
Internet Server $75,000
Payroll Data Systems software replacement $1,000,000
▇▇▇▇ Systems software license $80,000
* The foregoing amounts, with the exception of Baan, reflect incremental
material expenditures anticipated to be necessary in the event of a change of
control of Company.
113
Schedule 2.22
1. The Company's standard warranty for its manufacturing services is one
year.
2. Boston Technology and Sequent Computer Systems have two and three year
warranties, respectively.
114
14. Payment Terms: Customer shall pay all Micron CMS invoices within thirty
(30) days of the date thereof. Invoice date will be the date of shipment
of product. Product shall not be shipped any earlier than 10 days prior to
the requested date on the purchase order. Payment shall be made when
Customer's check is mailed or electronic fund transfer (EFT) is initiated.
15. F.O.B. Point: All Product(s) shall be shipped to Customer F.O.B. Micron
CMS' dock.
16. Warranty: Micron CMS warrants for a period of fifteen (15) months (except
for disc drives which will be warranted for a period not to exceed the
manufacturers warranty) from the date of the shipment of the Product(s)
that (i) the Product(s) will conform to the Specifications in Exhibit B
applicable to such Product(s) at the time of its manufacture, which are
furnished in writing by Customer; and (ii) such Product(s) will be of good
material and workmanship. In the event that any Product(s) manufactured is
not in conformity with the foregoing warranties, Micron CMS shall, at
Micron CMS's option, either (i) credit Customer against an existing
invoice or provide a cash refund for any such non-conformity the purchase
price paid by Customer for such Product(s), or (ii) at Micron CMS's
expense, replace, repair or correct such non-conforming Product(s):
provided that, if such Product(s) is not repaired, replaced or corrected
within twenty (20) days after Micron CMS is notified of any nonconformity,
Micron CMS shall credit Customer the purchase price paid by Customer for
such non-conforming Product(s). THE FOREGOING CONSTITUTES CUSTOMER'S SOLE
REMEDIES AGAINST MICRON CMS FOR BREACH OF WARRANTY CLAIMS. EXCEPT AS
PROVIDED IN THIS AGREEMENT, MICRON CMS MAKES NO WARRANTIES WITH RESPECT TO
THE PRODUCT(S), EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES
RESPECTING NONINFRIGNEMENT, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM A COURSE OF PERFORMANCE, A
COURSE OF DEALING, OR TRADE USAGE.
17. Indemnification:
a. Each party agrees to indemnify, defend and hold harmless the other
party, including its directors, officers and employees, from and
against any and all claims, losses, demands, costs or liabilities,
including attorneys' fees, resulting from or in connection with such
party's breach of this Agreement, negligence or misconduct.
b. Customer represents and warrants that the manufacture, use, delivery
and sale of any Product(s) manufactured by Micron CMS for Customer
hereunder will not infringe any patent, trademark or other
intellectual property rights of any third party. Customer agrees to
defend at its expense, hold harmless and indemnify Micron CMS,
including its officers, directors, and employees, from and against
any judgments, liabilities, expenses, or costs (including attorneys'
fees) arising from any claim or action brought against Micron CMS
asserting that Micron CMS' manufacture, use or sale of any
Product(s) or part thereof infringes, directly or indirectly, any
intellectual property right, including, without limitation, patent,
trademark, copyright, trade secret, or other proprietary right of
any third party, foreign or domestic.
c. An indemnified party pursuant to this Section 17 shall notify the
indemnifying party promptly upon receiving or learning of any claim
or action pursuant to which indemnity will be sought and shall
provide reasonable assistance to the indemnifying party in the
defense of any such action. This Section 17 shall survive the
termination of this Agreement.
18. Proprietary Rights: The design, development or manufacture by Micron CMS
of Product(s) for Customer shall not be deemed to produce a work made for
hire and shall not give to Customer any copyright interest in the
Product(s). All intellectual property produced or developed by Micron CMS
in connection with the manufacture of the Products for Customer shall be
owned exclusively by Micron. No license, express or implied, with regard
to any trademark of Micron CMS or its affiliated companies is granted to
Customer under this Agreement. The manufacture of the Products for
115
Schedule 2.23
1. The Company formerly owned and occupied real property located at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
116
Schedule 3.2
None
117
Schedule 4.4
1. The Company intends to form M.C.M.S. Netherlands B.V.
2. The Company anticipates selling all of the capital stock owned by it of
M.C.M.S. Belgium S.A. to M.C.M.S. Netherlands B.V., once formed.
3. The Company and the Transferred Subsidiaries may engage in a number of
transactions with each other including, without limitation, in connection
with the sharing of certain intellectual property, the investment of
monies, and incurrence of debt.
4. The Company anticipates incurring liabilities and obligations in
connection with the expenditures set forth in Schedule 2.21 and in
connection with entering into contracts, among other things, with respect
to the items set forth in Schedule 2.19.
5. The Company will use cash to pay Indebtedness pursuant to Section 6.7 of
the Recapitalization Agreement.
118
Schedule 4.12
1. ▇▇▇▇▇ ▇▇▇▇▇▇
2. ▇▇▇▇▇▇ ▇▇▇▇▇
3. ▇▇▇▇▇ ▇▇▇▇▇▇
4. ▇▇▇▇▇▇▇ ▇▇▇▇
5. ▇▇▇▇▇▇▇ ▇▇▇▇
6. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
7. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
8. ▇▇▇ ▇▇▇▇▇▇▇
119
Schedule 4.14
1. Oracle
2. Sun Contract
3. Digital Contract
4. Microsoft Select
5. Corbis
6. PBX
7. Affirmative Action Reporting
8. PDS
9. ▇▇▇▇
120
Schedule 6.2
1. Lease regarding ▇▇▇▇ ▇▇▇▇▇ ▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
