Exhibit 2.3
EXECUTION COPY
AMENDED AND RESTATED
RECAPITALIZATION AGREEMENT
by and among
MICRON ELECTRONICS, INC.,
MICRON CUSTOM MANUFACTURING SERVICES, INC.,
MEI CALIFORNIA, INC.,
and
CORNERSTONE EQUITY INVESTORS IV, L.P.
dated as of
February 1, 1998
RECAPITALIZATION AGREEMENT
INDEX
Page
ARTICLE I Certain Definitions 2
ARTICLE II Representations and Warranties of MEI, Sub 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 12
Section 2.10. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc. 13
Section 2.11. Labor Matters 13
Section 2.12. Compliance with Laws 13
Section 2.13. Employee Benefit Plans 14
Section 2.14. Tax Returns 15
Section 2.15. Brokers, Finders, Lawyers, Accountants, etc. 16
Section 2.16. Customers and Suppliers 17
Section 2.17. Real Property 17
Section 2.18. Material Agreements 18
Section 2.19. Transactions with Affiliates 19
Section 2.20. Insurance 20
Section 2.21. Computer Systems 20
Section 2.22. Products and Services Liability 20
Section 2.23. Predecessor Businesses; Former Facilities 21
Section 2.24. Disclosure 21
Section 2.25. No Representations Regarding Projections 21
Section 2.26. Construction of Certain Provisions 21
ARTICLE III Representations and Warranties of Investor 22
Section 3.1. Incorporation; Authorization; No Conflicts; etc 22
Section 3.2. Licenses, Approvals, Other Authorizations, Consents,
Reports, etc. 23
Section 3.3. Brokers, Finders, etc 23
Section 3.4. Financing 23
Section 3.5. Investment 23
ARTICLE IV Covenants 24
Section 4.1. Investigation of Business; Access to Properties and
Records;
Records Retention. 24
Section 4.2. Efforts; Obtaining Consents 26
Section 4.3. Further Assurances 26
Section 4.4. Conduct of Business 26
Section 4.5. Preservation of Business 27
Section 4.6. Public Announcements 28
Section 4.7. Intercompany Accounts 28
Section 4.8. Notice of Breach 28
Section 4.9. Acquisition Proposals 28
Section 4.10. Noncompetition; Nonsolicitation 29
Section 4.11. Confidentiality 30
Section 4.12. Nonsolicitation by the Company 31
Section 4.13. Alternative Financing 31
Section 4.14. License Agreements 31
Section 4.15. Use of Micron Name 31
Section 4.16. Schedule Supplements 32
Section 4.17. Capital Expenditures 32
Section 4.18. Leased Property 32
ARTICLE V Employee Benefits 33
Section 5.1. Provision of Benefits. 33
Section 5.2. Savings Plan. 33
Section 5.3. Welfare Benefits. 34
Section 5.4. Intercompany Charges. 34
ARTICLE VI Conditions of Investor's Obligation to Close 35
Section 6.1. Representations, Warranties and Covenants of MEI,
Sub and the Company 35
Section 6.2. Filings; Consents; Waiting Periods 35
Section 6.3. No Injunction 35
Section 6.4. Transitional Services Agreement 35
Section 6.5. Stockholders Agreement and Registration Rights
Agreement 35
Section 6.6. Financing 36
Section 6.7. Indebtedness 36
Section 6.8. Material Adverse Effect 36
Section 6.9. Opinion of Counsel 36
Section 6.10. Resignation of Directors 36
Section 6.11. Other Closing Documents 36
Section 6.12. Articles of Incorporation 37
Section 6.13. Bylaws 37
Section 6.14. Booster Pump and Power Substation 37
Section 6.15. Patent Agreement 37
Section 6.16. Know-How Agreement 37
Section 6.17. MTI License Agreement 37
ARTICLE VII Conditions to MEI's, Sub's and the Company's Obligation to
Close 38
Section 7.1. Representations, Warranties and Covenants of
Investor 38
Section 7.2. Filings; Consents; Waiting Periods 38
Section 7.3. No Injunction 38
Section 7.4. Transitional Services Agreements 38
Section 7.5. Stockholders Agreement and Registration Rights
Agreement 38
Section 7.6. Patent Agreement 38
Section 7.7. Know-How Agreement 38
Section 7.8. MTI Agreement 39
ARTICLE VIII The Recapitalization; Closing 39
Section 8.1. Authorization 39
Section 8.2. Stock Purchase 39
Section 8.3. Stock Redemption 39
Section 8.4. Closing 39
ARTICLE IX Tax Matters 40
Section 9.1. Tax Indemnification by MEI and Sub 40
Section 9.2. Tax Indemnification by the Company 40
Section 9.3. Filing Responsibility 41
Section 9.4. Refunds 41
Section 9.5. Cooperation and Exchange of Information 42
Section 9.6. Allocation of Certain Taxes 43
Section 9.7. Certain Taxes 44
ARTICLE X Termination 44
Section 10.1. Termination 44
Section 10.2. Procedure and Effect of Termination 44
ARTICLE XI Miscellaneous 45
Section 11.1. Entire Agreement; Beneficiaries 45
Section 11.2. Survival of Representations and Warranties and
Covenants of Investor 45
Section 11.3. Counterparts 45
Section 11.4. Governing Law 45
Section 11.5. Expenses 45
Section 11.6. Notices 46
Section 11.7. Successors and Assigns 48
Section 11.8. Headings; Definitions 49
Section 11.9. Consent to Jurisdiction 49
Section 11.10. Waivers and Amendments 49
Section 11.11. Severability 49
Section 11.12. Interpretation; Schedules and Exhibits 49
ARTICLE XII INDEMNIFICATION 49
Section 12.1. General Indemnification Obligations 50
Section 12.2. General Indemnification Procedures 50
Section 12.3. Indemnification Basket 51
Section 12.4. Indemnification Cap 51
Section 12.5. Indemnity Exclusive Remedy 51
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
The registrant agrees to furnish supplementally a copy of any
omitted exhibits and schedules to the Commission upon request.
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
THIS AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "Agreement"), dated as of February 1, 1998, is by and among
Micron Electronics, Inc., a Minnesota corporation ("MEI"), MEI
California, Inc., a California corporation and a wholly owned
subsidiary of MEI ("Sub"), Micron Custom Manufacturing Services,
Inc., an Idaho corporation and a wholly-owned subsidiary of Sub
(the "Company") and Cornerstone Equity Investors IV L.P., a
Delaware limited partnership ("Investor").
WHEREAS, certain parties hereto have entered into that
certain Recapitalization Agreement, dated as of December 21, 1997
(the "Original Agreement");
WHEREAS, the parties hereto desire to amend and restate
the Original Agreement in its entirety as set forth below;
WHEREAS, Sub 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, MEI
and Sub have agreed, that the Company arrange through BT Alex.
Xxxxx Incorporated for the issuance by the Company of notes, debt
securities and/or preferred stock in exchange for approximately
$200 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 Sub 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 Sub 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 "Sub Retained Shares") of Company
Common Stock such that immediately after Closing Sub 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.
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
December 21, 1997; 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, employed by the Company or any Transferred
Subsidiary, whether such individual is then actively at 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.
"Continuing Affiliate" shall mean MEI, Sub and any
other 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.
"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 Xxxx-Xxxxx-Xxxxxx 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 re
quired 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 en
titled 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, partner
ship, 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, or property taxes, to
gether with any interest or penalties imposed with respect there
to 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 Au
thority 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, Sub and the Company
MEI, Sub and the Company hereby represent and warrant
to Investor as follows:
Section II.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 Min
nesota. Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
MEI and Sub each has full corporate power to execute and deliver
this Agreement and to perform its respective obligations here
under, and MEI and Sub each has full corporate power to consum
mate the transactions contemplated hereby. All corporate acts
and other proceedings required to be taken by MEI and Sub to au
thorize 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 exe
cuted and delivered by MEI and Sub and, assuming the due execu
tion and delivery hereof by the other parties hereto, this Agree
ment constitutes the legal, valid and binding obligation of MEI
and Sub, enforceable against MEI and Sub, as applicable, in ac
cordance 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 here
under, 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 con
stitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, sub
ject 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.
(c) The execution, delivery and performance of this
Agreement by MEI, Sub and the Company and the consummation by
MEI, Sub and the Company of the transactions contemplated hereby
will not (1) violate any provision of the charter or by-laws of
MEI, Sub, the Company or any Transferred Subsidiary, (2) except
as disclosed in Schedule 2.1(c), violate any provision of, or con
stitute 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 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, Sub,
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, Sub, the Company or any
Transferred Subsidiary or by which any of their properties or
assets is bound.
Section II.2. Incorporation; Capitalization; Struc
ture.
(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 Common Stock. As of
immediately after the Closing, (i) the Purchase Shares which are
Company Common Stock and the Sub Retained Shares shall constitute
all of the issued and outstanding shares of the Company Common
Stock and (ii) the Purchase Shares, the Sub 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. Sub is the record and beneficial owner of, and has valid
title to, the Shares, free and clear of any Encumbrance. Upon de
livery to the Company at the Closing of certificates representing
the Redemption Shares, duly endorsed by Sub for transfer to the
Company, and upon Sub'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.
(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 Sub
sidiaries 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 re
quirements 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 II.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 State
ments"):
(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 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 II.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 obliga
tions 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 II.5. Properties. The Company and/or one or
more of the Transferred Subsidiaries has good title to, or holds
by valid and existing lease or license, free and clear of all
Encumbrances 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 conducted. "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, li
censes, 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 repair (subject to normal wear and tear)
adequate and suitable for the purposes for which such properties
are presently used.
Section II.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, Sub 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, Sub, 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, Sub 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 judicial 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 II.7. Absence of Certain Changes.
(a) Except as disclosed in Schedule 2.7, since
February 1, 1998, 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) Except as disclosed in Schedule 2.7, since August
28, 1997, there has been no physical damage, destruction or loss
to any assets or properties 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) Except as disclosed in Schedule 2.7, since August
28, 1997, neither the Company nor any of the Transferred
Subsidiaries has:
(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;
(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 II.8. Litigation; Orders. Except as disclosed
in Schedule 2.8, there are no Actions pending or, to MEI's, Sub'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 or Sub to perform their respective obligations
hereunder.
Section II.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
transfer of Intellectual Property. Except as set forth on
Schedule 2.9, to the knowledge of MEI, Sub or the Company, 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 in
fringes on or misappropriates any Intellectual Property of a
third party or (3) against the use by the Company or a
Transferred Subsidiary 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, Sub's and the Company's
knowledge, no third party has infringed or misappropriated any of
the material Company Intellectual Property.
Section II.10. Licenses, Approvals, Other Authoriza
tions, 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, xxxx
chises, approvals and other authorizations of any Governmental Au
thority (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, Sub's or the Company's know
ledge, 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, Sub's
or the Company's knowledge, threatened seeking the revocation or
limitation of any such License.
(c) Schedule 2.10(c) lists all consents, approvals,
registrations, filings, applications, notices, orders, authori
zations, qualifications and waivers required to be made, filed,
given or obtained by any of MEI, Sub, the Company or any of the
Transferred Subsidiaries with, to or from any Persons or Govern
mental 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 re
xxxx of the specific regulatory status of Investor or its Af
filiates.
Section II.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, Sub's or the Company's knowledge, threatened
with any labor action, arbitration, lawsuit or administrative pro
ceeding relating to labor matters involving the employees of the
Company or the Transferred Subsidiaries (excluding routine work
ers' compensation claims).
Section II.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 II.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 gen
erality 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 Sec
tion 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 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, Sub 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 II.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.
(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 Section 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 Section 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 II.15. Brokers, Finders, Lawyers, Accountants,
etc.
(a) None of the Company, MEI, Sub or any Transferred
Subsidiary has employed any broker, finder, consultant or other
intermediary in connection with the transactions contemplated
hereby who has or would have a valid claim for a fee or commis
sion in connection with such transactions, except for Deutsche
Xxxxxx Xxxxxxxx Inc. ("DMG").
(b) None of the Company, MEI, Sub or any Transferred
Subsidiary has employed any broker, finder, consultant, other
intermediary, attorney, appraiser, accountant or any other Person
who has been paid by the Company or any of the Transferred
Subsidiaries or who has or will have a valid claim for a fee or
commission or other payment in connection with the auction of the
Company (but not in connection with the negotiation, execution or
delivery of the Original Agreement or this Agreement or in
connection with the consummation of the transactions contemplated
thereby or hereby, including, without limitation, the BTAB
Financing or any other financing proposed by Investor and
arranged by the Company in lieu of the BTAB Financing), except
for DMG; Wachtell, Lipton, Xxxxx & Xxxx ("Xxxxxxxx"); Xxxxxxx &
West ("Fenwick"); and Coopers & Xxxxxxx L.L.P. ("Coopers"). Such
fees, commissions or other payments in connection with the
auction of the Company (but not in connection with the
negotiation, execution or delivery of the Original Agreement or
this Agreement or in connection with the consummation of the
transactions contemplated thereby or hereby, including, without
limitation, the BTAB Financing or any other financing proposed by
Investor and arranged by the Company in lieu of the BTAB
Financing) which have been made or are payable to Coopers shall
hereinafter be referred to as the "Coopers Auction Fees".
(c) None of the Company, MEI, Sub or any Transferred
Subsidiary has employed any outside attorney who has been paid by
the Company or any of the Transferred Subsidiaries or who has or
will have a valid claim for a fee or other payment in connection
with the negotiation, execution and delivery of the Original
Agreement or this Agreement or the consummation of the
transactions contemplated hereby, except for Wachtell and
Fenwick.
(d) Neither the Company nor any Transferred Subsidiary
(i) has made any payments to DMG, Wachtell or Fenwick, or (ii)
has any liability or other obligation to make any payment to DMG,
Wachtell or Fenwick, in each case, in connection with the auction
of the Company, the negotiation, execution and delivery of the
Original Agreement or this Agreement and/or the consummation of
the transactions contemplated hereby.
(e) MEI is solely responsible for (i) the Coopers
Auction Fees and (ii) any payment, fee or commission that may be
due to DMG (the "DMG Fees"), Wachtell (the "Wachtell Fees") or
Fenwick (the "Fenwick Fees") in connection with the auction of
the Company, the negotiation, execution and delivery of the
Original Agreement or this Agreement and/or the consummation of
the transactions contemplated hereby.
Section II.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, Sub 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 II.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 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, Sub 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, Sub and the Company, any threatened
condemnation proceeding, or material lawsuit or administrative
action affecting any portion of the Real Property.
Section II.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;
(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, Sub'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 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 II.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 II.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 II.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 II.22. Products and Services Liability.
Except as disclosed on Schedule 2.22 hereto, to MEI's, Sub's and
the Company's knowledge, there are not any:
(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 II.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 II.24. Disclosure. No representation or
warranty by MEI, Sub 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
therein not misleading in light of the circumstances in which
they are made in any material respect with respect to the
Business Condition.
Section II.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, Sub or the
Company.
Section II.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 and Sub
as follows:
Section III.1. Incorporation; Authorization; No Con
flicts; 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 here
under, 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 pro
ceedings required to be taken by Investor to authorize the ex
ecution, 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 Investor and, assuming the due execution and de
livery hereof by the other parties hereto, this Agreement consti
tutes the legal, valid and binding obligation of Investor, en
forceable 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
provision of the organizational documents or limited partnership
agreement of Investor, (2) violate any provision of, or con
stitute a default (with or without notice or lapse of time)
under, or give rise to a right of termination, cancellation or ac
celeration 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, xxxx
xxxx, 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 con
flict with any Law applicable to Investor or by which any of its
properties 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 III.2. Licenses, Approvals, Other Authoriza
tions, 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, Sub,
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 III.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 III.4. Financing. Investor has received, and
has furnished to MEI a copy of a commitment letter from BT Alex.
Xxxxx 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 a manner sufficient to consummate the
Recapitalization.
Section III.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 IV.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 and Sub 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 af
fairs 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, Sub, 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 relating 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 con
tact any of the employees, customers, suppliers, joint venture
partners, or other associates or Affiliates of MEI, Sub 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 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 Sub (or MEI's or
Sub's successors or assigns), their accountants, counsel and
other representatives, during normal business hours, upon reason
able 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 or Sub (other than for
reasonable out-of-pocket expenses); provided, however, that
nothing herein shall limit any of MEI's or Sub's rights of discov
ery.
(d) MEI and Sub agree and shall use their respective
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
thereafter, 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 accoun
tants, 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 em
ployees 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, Sub 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 or Sub, 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 indemnify MEI and Sub 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 or
Sub, as applicable, 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 IV.2. Efforts; Obtaining Consents. Subject to
the terms and conditions herein provided, MEI, Sub 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 nec
xxxxxx waivers, consents and approvals from other parties to mate
rial 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
Authorities and (5) to fulfill all conditions to this Agreement.
Section IV.3. Further Assurances. MEI, Sub 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 IV.4. Conduct of Business. From December 21,
1997 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, Sub 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 transfer of the Shares from MEI to
Sub (which has been completed prior to the execution of this
Agreement), 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; (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 under
standings 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) pur
chase 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
(provided that, notwithstanding anything contained herein, no
material adverse change in the Business Condition which occurred
prior to February 1, 1998 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 IV.5. Preservation of Business. Subject to
the terms and conditions of this Agreement, MEI and Sub 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 IV.6. Public Announcements. From and after
the date hereof until the Closing, MEI, Sub 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 statements 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 extent, that dis
closure is required by law; provided, that in such instances the
disclosing party will consult with the other party prior to mak
ing such disclosure.
Section IV.7. Intercompany Accounts.
(a) Notwithstanding the provisions of Section 4.4
hereof, nothing in this Agreement shall be construed or in
terpreted 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 limita
tion, short-term investments in bank deposits, money market
instruments, time deposits, certificates of deposit and bankers'
acceptances, incurrence or payment of bank overdrafts and borrow
ings 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
December 21, 1997 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 IV.8. Notice of Breach. If, as of the date
hereof or at any time hereafter MEI, Sub or the Company is aware
of or discovers any breach of any representation or warranty con
tained in this Agreement or any circumstance or condition that
upon Closing would constitute such a breach, MEI, Sub or the
Company, as the case may be, shall promptly so inform Investor in
writing.
Section IV.9. Acquisition Proposals. MEI, Sub 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, Sub 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, Sub, the Company or any Transferred Subsidiary.
Section IV.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 or Sub
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 and Sub agree
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.
(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 December 21, 1997.
Section IV.11. Confidentiality.
(a) From and after the Closing, MEI and Sub shall, and
shall use their respective reasonable best efforts to cause their
respective Affiliates and representatives to, keep confidential
and not disclose to any other Person or use for their own
respective benefit or the benefit of any other Person any trade
secrets or other confidential proprietary information in their
possession or control regarding the Company, any of the
Transferred Subsidiaries or the Business. The obligation of MEI
and Sub 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 IV.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 IV.13. Alternative Financing. In the event
the financing described in the BTAB Commitment Letter will not be
available at Closing in a manner sufficient to consummate the
Recapitalization, 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
(taking into account the BTAB Financing as contemplated as of the
date hereof); provided, that if Investor is unable to obtain any
such alternative financing, Investor shall have no obligation to
consummate the Stock Purchase, the Recapitalization or any other
transaction contemplated hereby.
Section IV.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 IV.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 IV.16. Schedule Supplements. Investor, Sub
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, Sub 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, Sub 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 IV.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 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.
Section IV.18. Leased Property. The parties hereto
agree that, prior to Closing, MEI and the Company shall amend the
lease (the "MCMS Lease"), dated as of November 1, 1996, by and
between MEI and the Company, to provide, notwithstanding any
other provision of the MCMS Lease other than Section 13 thereof
including, without limitation, any change of control provision,
that (1) MEI shall have the right to occupy the premises covered
by the MCMS Lease until December 31, 1998, at the rental rates
effective on the date hereof, and the Company shall have no right
to terminate the MCMS Lease at any time prior to December 31,
1998; provided that MEI will vacate the space it currently
occupies in the bullpen area of the Company's accounting area
(approximately 3,625 square feet) upon 90 days' advanced written
notice by the Company; (2) MEI shall have the right to terminate
the MCMS Lease at anytime upon 30 days' written notice to the
Company; (3) at any time after March 31, 1998, the Company shall
be entitled to occupy (upon the execution of a sublease agreement
with customary terms and conditions consistent with the terms and
conditions of the lease agreement covering the Shilo Property (as
herein defined)) approximately 24,000 square feet of space
currently leased by MEI at 0000 Xxxxx Xxxxx, Xxxxx, Xxxxx (the
"Shilo Property") (with respect to which MEI warrants its ability
to sublease to the Company); provided that the Company give 60
days' advanced written notice of its intent to so occupy and 30
days' advanced written notice of its intent to vacate the Shilo
Property; (4) the Company shall pay all fees, expenses and rent
associated with its occupancy of the Shilo Property (which fees,
expenses and rent shall be no greater than the amounts MEI
currently is obligated to pay under its lease of the Shilo
Property); provided that MEI shall pay up to $35,000 in start-
up/upfit and relocation expenses (whether to or from the Shilo
Property) associated with the Company's occupancy of the Shilo
Property; (5) prior to the time that MEI vacates the premises
covered by the MCMS Lease, MEI will use its reasonable best
efforts to assist the Company in locating up to 12,000 additional
square feet (in the Company's discretion) of space in Nampa,
Idaho (the "Additional Space") after receiving a written request
from the Company for such assistance; and (6) the Company shall
pay all fees, expenses and rent of any kind associated with its
occupancy of the Additional Space.
ARTICLE V
Employee Benefits
Section V.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 V.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 provi
sions of this Section 5.2.
Section V.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 depen
dents 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 ser
vices that are the subject of the claim are performed; a claim
for life insurance or other death-related benefits shall be con
sidered 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 insurability
and without the application of any pre-existing physical or
mental condition restrictions, except to the extent such restric
tions 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 ap
plicable 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 Subsidiar
ies in which such individual participates after the Closing Date.
Section V.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).
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 fol
lowing conditions:
Section VI.1. Representations, Warranties and Cove
nants of MEI, Sub and the Company. The covenants and agreements
of MEI, Sub 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, Sub 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,
Sub and the Company.
Section VI.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 VI.3. No Injunction. At the Closing Date,
there shall be no Order of any nature of any Governmental Author
ity of competent jurisdiction that is in effect that restrains,
enjoins or prohibits the consummation of the Recapitalization or
the other transactions contemplated hereby.
Section VI.4. Transitional Services Agreement. MEI
and MTI shall have duly delivered authorized and executed counter
parts of each of the Transitional Services Agreements containing
the terms set forth in the term sheet annexed hereto as Exhibit
A.
Section VI.5. Stockholders Agreement and Registration
Rights Agreement. Sub 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.
Section VI.6. Financing. The Company shall have
received the financing described in the BTAB Commitment Letter
and the BT Letter consistent with the terms therein or otherwise
obtained financing sufficient to consummate the transactions
contemplated hereby on terms reasonably satisfactory to Investor.
Section VI.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 VI.8. Material Adverse Effect. Since February
1, 1998, 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 VI.9. Opinion of Counsel. MEI, Sub and the
Company shall have delivered to Investor an opinion of counsel to
MEI, Sub 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 VI.10. Resignation of Directors. MEI, Sub and
the Company shall have delivered to Investor the written resig
nations 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 VI.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.
Section VI.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 VI.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 VI.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 VI.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 VI.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 VI.17. MTI License Agreement. MTI shall have
duly delivered an authorized and executed counterpart of a
covenant not to xxx agreement substantially in the form attached
hereto as Exhibit F (the "MTI Agreement").
ARTICLE VII
Conditions to MEI's, Sub's and the Company's Obligation to Close
MEI's, Sub'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, Sub and the Company, of
all of the following conditions:
Section VII.1. Representations, Warranties and Cove
nants of Investor. The covenants and agreements of Investor to
be performed on or before the Closing Date in accordance with
this Agreement shall have been duly performed in all material
respects and the representations and warranties of Investor con
tained in this Agreement shall be true and correct in all
material respects 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
representations and warranties that speak as of a specific date
or time other than the Closing Date (which need other only be
true and correct in all material respects as of such other date
or time), and MEI, Sub and the Company shall have received a
certificate to such effect signed by an authorized person of
Investor.
Section VII.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 VII.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 re
strains, enjoins or prohibits the consummation of the
Recapitalization or the other transactions contemplated hereby.
Section VII.4. Transitional Services Agreements. The
Company shall have delivered duly authorized and executed counter
parts of each of the Transitional Services Agreements.
Section VII.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 VII.6. Patent Agreement. The Company shall
have duly delivered an authorized and executed counterpart of the
Patent Agreement.
Section VII.7. Know-How Agreement. The Company shall
have duly delivered an authorized and executed counterpart of the
Know-How Agreement.
Section VII.8. MTI Agreement. The Company shall have
duly delivered an authorized and executed counterpart of the MTI
Agreement.
ARTICLE VIII
The Recapitalization; Closing
Section VIII.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.
Section VIII.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 VIII.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 Sub shall offer for redemption, and the Company
shall redeem the Redemption Shares. In consideration for the
Redemption Shares, at the Closing, Sub will receive $249,200,000
(the "Redemption Price") from the Company.
Section VIII.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 Xxxxxxxx & Xxxxx, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 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 Sub to the Company. Sub 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 Sub. The Company
shall pay to Sub the Redemption Price by wire transfer of
immediately available funds to one or more accounts as designated
by Sub.
(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.
ARTICLE IX
Tax Matters
Section IX.1. Tax Indemnification by MEI and Sub. 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 por
tion 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 IX.2. Tax Indemnification by the Company. The
Company shall be liable for, and shall hold MEI and Sub 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 beginning 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 IX.3. Filing Responsibility. (a) MEI or Sub
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 ex
tensions) prior to the Closing Date; and
(b) The Company shall, subject to the provisions of
Section 9.3(c), file or cause to be filed all Returns for which
MEI or Sub does not have filing responsibility pursuant to Sec
tion 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 and Sub 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, Sub 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. Section 1.1502-
76(b)(1)(B).
Section IX.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 re
imburse 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, Sub, 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 IX.5. Cooperation and Exchange of Information.
(a) Investor, Sub and MEI and their respective affiliates shall
cooperate in the preparation of all Returns relating in whole or
in part 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, Sub
or MEI, as the case may be, as may be reasonably requested. In
the case of any state, local or foreign joint, consolidated, com
bined, 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 ob
taining 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 resolu
tion 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 unreasonably 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 is
xxx 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 re
sulted 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.
(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 IX.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 pur
poses 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 and Sub's liability with respect thereto shall be reduced
by that amount.
Section IX.7. Certain Taxes. All transfer, docu
mentary, 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 or Sub when
due, and MEI or Sub 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 X.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 oc
curred by the close of business on April 30, 1998 and if the
failure 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, Sub and the Company
of a material breach of any material representation, warranty or
covenant of MEI, Sub 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 X.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 fur
ther 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 XI.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 amends and restates the Original
Agreement in its entirety. 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 XI.2. Survival of Representations and War
ranties 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 earlier of (a) one
year after the Closing Date and (b) termination of this Agreement
in accordance with Article X hereof.
Section XI.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 XI.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 XI.5. Expenses. MEI shall pay and hold the
Company, the Transferred Subsidiaries and Investor harmless
against liability for the payment of the Coopers Auction Fees,
the DMG Fees, the Wachtell Fees, the Fenwick Fees and all fees
and expenses paid or payable with respect to the items required
to be delivered by the Company pursuant to Section 6.11
(collectively, the "Seller Expenses"). In the event any Seller
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. Other than the Seller
Expenses, neither MEI nor Sub shall be responsible for any fees
or expenses incurred by the Company or any Transferred Subsidiary
in connection with the negotiation, execution or delivery of the
Original Agreement or this Agreement or the consummation of the
transactions contemplated thereby or hereby. Except as provided
in this Section 11.5 or as otherwise set forth in this Agreement,
all 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. As a matter of
clarification, all fees and expenses (including, without
limitation, commitment fees, underwriting fees, legal and
accounting fees and expenses and printing fees and expenses but
excluding any fees and expenses paid or payable with respect to
the items required to be delivered by the Company pursuant to
Section 6.11) relating to the BTAB Financing or any other
financing proposed by Investor and arranged by the Company in
lieu of the BTAB Financing shall be the responsibility of the
Company, and MEI and Sub shall have no responsibility therefor.
Notwithstanding the foregoing, if the transactions contemplated
hereby are consummated, then the Company shall pay all fees and
expenses of Investor and Investor's Affiliates (other than the
Company and the Transferred Subsidiaries) in connection with the
transactions contemplated hereby, including, any and all
commitment fees and reasonable legal, accounting and consulting
fees, and MEI and Sub shall have no responsibility therefor.
Section XI.6. Notices. All notices and other com
munications 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 and Sub shall be addressed to:
Micron Electronics, Inc.
MEI California, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy No: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy No: (000) 000-0000
or at such other address and to the attention of such other
person as MEI or Sub 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.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Xxxxxxx X. Xxxxxx
Telecopy No: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxx
Telecopy No: (000) 000-0000
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.
000 Xxxx Xxxxxxx Xxxx
Xxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy No: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy No: (000) 000-0000
and notices to the Company after the Closing shall be addressed
to:
MCMS, Inc.
00000 Xxxxxxxx Xxxx
Xxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy No: (000) 000-0000
with a copy to:
Cornerstone Equity Investors, L.L.C.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Xxxxxxx X. Xxxxxx
Telecopy No: (000) 000-0000
and
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxx
Telecopy No: (000) 000-0000
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 XI.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 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 XI.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 XI.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 mo
tion 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 transac
tions 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 XI.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 XI.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.
Section XI.12. Interpretation; Schedules and Exhibits.
For purposes of this Agreement, all representations
and warranties contained herein shall be deemed to
have been made as of February 1, 1998, except for
representations and warranties contained herein that
speak as of a specific date (which representations
and warranties shall speak as of such specific
date). The schedules and exhibits attached to the
Original Agreement shall be deemed to be the
schedules and exhibits of this Agreement except that
(i) all references to MEI contained in Exhibit C are
hereby changed to Sub, (ii) the Amended and Restated
Schedule 2.8 attached hereto hereby replaces the
Schedule 2.8 attached to the Original Agreement, and
(iii) the Amended and Restated Schedule 2.10(a)
attached hereto hereby replaces the Schedule 2.10(a)
attached to the Original Agreement.
ARTICLE XII
INDEMNIFICATION
The parties hereto agree as follows:
Section XII.1. General Indemnification Obligations.
MEI and Sub hereby agree to, jointly and severally,
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 following: (i) any and all
Damages arising out of or resulting from a
misrepresentation or breach of warranty of MEI, Sub
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 or Sub 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 and Sub agree
that neither MEI nor Sub will make any claim for
indemnification or contribution against the Company
and MEI and Sub will cause their 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, Sub 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, Sub 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 XII.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.
Section XII.3. Indemnification Basket. MEI and Sub
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 and Sub together
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
and/or Sub in their entirety. Notwithstanding the
foregoing, the Threshold shall not be available for
any wilful breach of any representation or warranty.
Section XII.4. Indemnification Cap. In no event shall
MEI and Sub together 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 and/or Sub in their
entirety. Notwithstanding the foregoing, the Cap
shall not be available for any wilful breach of any
representation or warranty.
Section XII.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,
Sub or the Company contained in this Agreement or in
any exhibit or schedule hereto, any breach of any
covenant or obligation of MEI or Sub 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.
IN WITNESS WHEREOF, this Amended and Restated
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:
MEI CALIFORNIA, INC.
By:
---------------------------------
Name:
Title:
CORNERSTONE EQUITY INVESTORS IV, L.P.
By:Cornerstone IV, L.L.C.,
as General Partner
By:
---------------------------------
Name:
Title:
