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EXHIBIT 2.2
INTERNATIONAL MANUFACTURING SERVICES, INC.
REDEMPTION AGREEMENT
THIS REDEMPTION AGREEMENT is entered into as of May 16, 1996, by and
between INTERNATIONAL MANUFACTURING SERVICES, INC., a Delaware corporation
(individually, "IMS Delaware" and together with the Holding Companies (as
hereinafter defined) and the International IMS Entities (as hereinafter
defined), the "Company"), and MAXTOR CORPORATION, a Delaware corporation
("Maxtor").
RECITALS
A. Maxtor owns 10,000,000 shares of Common Stock of IMS Delaware,
representing all of the issued and outstanding capital stock of the Company.
B. IMS Delaware wishes to redeem from Maxtor, and Maxtor wishes to
sell to IMS Delaware, 8,010,000 shares of Common Stock of IMS Delaware (the
"Shares") on the terms set forth in this Agreement and in accordance with the
Delaware General Corporation Law.
C. IMS Delaware, Maxtor and the investors named on Exhibit A
thereto (the "Investors") have entered into a Recapitalization Agreement, dated
the date hereof (the "Recapitalization Agreement"), pursuant to which,
immediately prior to the Closing (as hereinafter defined) and on the Closing
Date (as hereinafter defined), IMS Delaware will sell, and the Investors will
purchase, common stock and convertible preferred stock of IMS Delaware.
D. IMS Delaware contemplates that, in connection with the
Transactions (as hereinafter defined), it will obtain (i) senior debt financing
in an amount of not less than $32,000,000 (the "Senior Debt") and (ii) junior
subordinated debt financing in an amount of not less than $12,500,000 (the
"Junior Debt").
E. IMS Delaware and the Investors have required, as a condition to
entering into the Transactions and incurring the Senior Debt and the Junior
Debt, that Maxtor make certain representations and warranties and perform
certain covenants set forth in this Agreement.
F. IMS Delaware, the Investors and Maxtor contemplate that certain
reorganization actions, as set forth in Part 3.3 of the Disclosure Schedule (the
"Reorganization Actions"), will be taken prior to Closing.
G. Maxtor, the Investors and IMS Delaware contemplate that as a
condition to entering into the Transactions that Maxtor and IMS Delaware will
enter into the Manufacturing Services Agreement (as hereinafter defined) and the
Transition Services Agreement (as hereinafter defined).
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AGREEMENT
The parties to this Agreement, intending to be legally bound, and in
consideration of the mutual promises and covenants set forth herein, in the
Recapitalization Agreement, the Manufacturing Services Agreement and the
Transition Services, agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions. For purposes of the Agreement, except as otherwise
expressly provided:
"Agreement" shall mean this Redemption Agreement, including the
documents referenced herein and the exhibits and schedules attached hereto
(including the Disclosure Schedule), as it may be amended from time to time.
A "Breach" of a representation, warranty, covenant, obligation or other
provision shall be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach (including any inadvertent or innocent breach) of, or
any failure (including any inadvertent failure) to comply with or perform, such
representation, warranty, covenant, obligation or other provision, or (b) any
claim by any Person or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
"Business" shall have the meaning specified in Section 3.6(c) of the
Agreement.
"Claim Notice" shall have the meaning specified in Section 10.1(c) of
the Agreement.
"Closing" shall have the meaning specified in Section 2.3(c) of the
Agreement.
"Closing Certificate" shall have the meaning specified in Section
2.3(b)(v) of the Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean International Manufacturing Services, Inc., a
Delaware corporation (or any successor thereto), together with the Holding
Companies and the International IMS Entities.
"Comparable Entities" shall mean Entities (other than the Company) that
are engaged in businesses similar to the business of the Company.
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"Common Stock" shall mean the Class A Common Stock, $0.001 par value,
and Class B Common Stock, $0.001 par value, of IMS Delaware.
"Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"Contract" shall mean any written, oral, implied or other agreement,
contract, understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment,
covenant, assurance or undertaking of any nature.
"Damages" shall include any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, Settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee (excluding costs relating solely to
in-house attorneys), expert fee, accounting fee or advisory fee), charge, cost
(including any cost of investigation) (but excluding in-house costs of
investigation) or expense of any nature; provided, however, that the amount of
any Damages shall be net of (i) any amounts actually recovered by the Company
under insurance policies with respect to any loss (offset by any increase in
insurance premiums or other insurance costs as a result of any claim with
respect to any loss) and (ii) any Tax benefit actually realized by the Company
arising from the incurrence or payment of any such loss.
"Disclosure Schedule" shall mean the schedule (dated as of the date of
the Agreement) delivered to IMS Delaware on behalf of Maxtor.
"Employee Benefit Plan" shall mean (i) a plan described in Section 3(3)
of ERISA, and (ii) each salary, bonus, deferred compensation, incentive
compensation, fringe benefit, stock purchase, severance, termination pay plan,
program, agreement or arrangement.
"Encumbrance" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, equity, trust, equitable interest,
claim, preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right of first
refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
transfer of any asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
"Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
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"ERISA Affiliate" shall mean any Entity that is (or at any time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with Maxtor or the Company
under Section 414 of the Code.
"Fully-Diluted Common Share Equivalents" shall mean all outstanding
shares of IMS Delaware's Common Stock and all shares of Common Stock issuable
upon conversion of outstanding Preferred Stock or upon exercise of outstanding
options or warrants.
"GAAP" shall mean generally accepted accounting principles, applied on a
basis consistent with the basis on which the Financial Statements were prepared.
"Governmental Authorization" shall mean any:
(a) Permit, license, certificate, franchise, concession,
approval, consent, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or
(b) right under any Contract with any Governmental Body.
"Governmental Body" shall mean any:
(a) Nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) Federal, state, local, municipal, foreign or other
government;
(c) Governmental or quasi-governmental authority of any
nature (including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality, officer,
official, representative, organization, unit, body or Entity and any court or
other tribunal);
(d) Multi-national organization or body; or
(e) Individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
"Hazardous Material" shall include:
(a) Any petroleum, waste oil, crude oil, asbestos, urea
formaldehyde or polychlorinated biphenyl;
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(b) Any waste, gas or other substance or material that is
explosive or radioactive;
(c) Any "hazardous substance," "pollutant," "contaminant,"
"hazardous waste," "hazardous chemical" or "toxic chemical" as designated,
listed or defined (whether expressly or by reference) in any statute, regulation
or other Legal Requirement (including CERCLA and any other so-called "superfund"
or "superlien" law and the respective regulations promulgated thereunder);
(d) Any compound, mixture, solution, product or other
substance or material that contains any substance or material referred to in
clause "(a)", "(b)" or "(c)" above.
"Holding Companies" shall mean IMS Borrower, a Delaware corporation to
be formed prior to the Closing, and IMS Holdco, a Delaware corporation to be
formed prior to the Closing (and any successors thereto or subsidiaries thereof,
respectively).
"Hong Kong Note" shall have the meaning specified in Section 2.2 of the
Agreement.
"IMS Affiliated Group" means any consolidated, combined or unitary Tax
group that includes one or more of IMS, the Holding Companies and the
International IMS Entities for any Tax period that (i) ends before the Closing
Date or (ii) includes any period through the Closing Date.
"IMS Contract" shall mean any Contract: (a) to which the Company is a
party; (b) by which the Company or any of its assets is or may become bound or
under which the Company has, or may become subject to, any obligation; or (c)
under which the Company has or may acquire any right or interest.
"IMS Delaware Note" shall have the meaning specified in Section 2.3 of
the Agreement.
"IMS Guarantee" shall have the meaning specified in Section 2.3 of the
Agreement.
"IMS Plan" shall mean any Employee Benefit Plan that is currently
maintained, sponsored or contributed to by Maxtor or the Company or any ERISA
Affiliate for the benefit of any current or former employee of the Company.
"Indemnitee" shall mean the Company and the Investors, and their
respective Representatives, successors and assigns.
"International IMS Entities" shall mean IMS International Manufacturing
Services Limited, an exempted Company incorporated in the Cayman Islands ("IMS
Cayman"), IMS International Manufacturing Services (Thailand) Limited, a Company
organized under the laws
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of Thailand ("IMS Thailand"), and Maxtor (Hong Kong) Limited ("IMS Hong Kong")
(and any successors thereto or subsidiaries thereof, respectively).
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign or other law, statute, legislation, constitution, principle of common
law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
"Liability" shall mean any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with generally accepted accounting principles and regardless of
whether such debt, obligation, duty or liability is immediately due and payable
and includes the principal, notional or capitalized amount of any liability or
obligation, together with any unpaid interest, finance charges, transactional
costs, fees, expenses and any other amounts owing in respect thereof.
"Manufacturing Services Agreement" shall have the meaning specified in
Section 2.4(b)(vi) of the Agreement.
"Material Adverse Change" means any material adverse change that has
occurred in the business, financial condition, assets, liabilities, results of
operations, financial performance, net income or prospects of the Company, taken
as a whole, including, without limitation any material adverse legislation or
rule making; provided, however, that any change directly relating to the
conversion of the commercial relationship between the Company and Maxtor from a
turnkey basis to a consignment basis shall not in and of itself be deemed to be
a Material Adverse Change.
"Material Adverse Effect" means any material adverse effect on the
business, financial condition, assets, liabilities, results of operations,
financial performance, net income or prospects of the Company, taken as a whole.
"Material Contract" shall mean any
(a) Collective bargaining agreement;
(b) Mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing of an amount in
excess $100,000 by the Company;
(c) Guaranty of any obligation in excess of $100,000 by the
Company (excluding any endorsement made in the Ordinary Course of Business for
collection);
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(d) License agreement involving the payment or receipt by
the Company of $100,000 or more during any 12-month period during the term
thereof;
(e) Lease of real or personal property under which the
Company is lessor involving annual rentals in excess of $100,000;
(f) Lease of real property under which the Company is lessee
involving annual rentals in excess of $100,000;
(g) Lease of personal property under which the Company is
lessee and which any such entity is obligated to make annual aggregate payments
of more than $100,000;
(h) Agreement for the purchase by the Company of equipment
involving outstanding commitments in excess of $100,000;
(i) Agreement purporting to limit the right of the Company
to compete in any line of business, with any person or other entity or in any
geographic area;
(j) Agreement for the purchase or sale of raw materials,
products or goods or the provision of services (i) involving payments in excess
of $100,000, (ii) at prices that vary from the prices therefor generally
prevailing in customary, arms-length transactions or (iii) that may not be
terminated by Company on not more than thirty (30) days' notice without penalty;
(k) Contract with any Governmental Body or
quasi-governmental authority involving payments in excess $100,000;
(l) Bond, deposit, financial assurance requirement or
insurance coverage in excess of $100,000 individually required to be submitted
to customers of the Company, as the case may be, under any sale, lease or
service arrangement or to any Governmental Body under any Legal Requirement;
(m) Agreement or instrument relating to the acquisition by
the Company of any entity or all or substantially all of the assets of any
person or entity;
(n) Agreement or commitment relating to the borrowing of
money or the guaranty or indemnity (direct or indirect) in respect of or the
granting of security for any obligation for the borrowing of money, by the
Company in excess of $100,000, including, without limitation, guarantees,
accommodation collateral, letters of credit, mortgages, deeds of trust,
indentures, loan agreements and credit agreements;
(o) Agreement or commitment relating to clean-up or
remediation involving Hazardous Materials;
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(p) Agreement that creates an encumbrance or any restriction
on the ability of the Company to (i) pay dividends or make similar
distributions; (ii) make loans or advances to any person or entity, or (iii)
sell, lease or transfer any of their respective properties or assets, except (in
each case) for such restrictions or encumbrances existing under or by reason of
(A) applicable Legal Requirements, (B) customary non-assignment provisions in
leases and other contracts entered into in the ordinary course of business, or
(C) any instrument governing any outstanding debt of the Company;
(q) Material indemnification obligations in favor of any
person or entity, and any escrow agreements related to any material
indemnification or obligation;
(r) Material confidentiality, secrecy, development or
settlement agreement pertaining to any Proprietary Asset;
(s) Other agreement, Contract or obligation of the Company
calling for or involving the payment, potential payment or accrued obligation by
or to the Company, as the case may be, from the date hereof through the earliest
date /such agreement, contract or obligation can be terminated unilaterally
without material penalty by the Company, as the case may be, of an amount in
excess of $100,000; or
(t) Any other Contract, the violation, breach, default or
termination of which could result in a Material Adverse Effect.
"Maxtor" shall mean Maxtor Corporation, a Delaware corporation, or any
successor thereof.
"Maxtor's Knowledge" shall mean, after reasonable investigation, the
current actual knowledge of any executive officer or director of each of Maxtor,
IMS Delaware, the Holding Companies or the International IMS Entities, except
for Xxxxxxx Xxxxxx, Xxxxxxxxx Xxxxx, Xxxxxxx Xxx and Xxxxxx Xxxxxx.
"Maxtor Notes" shall have the meaning specified in Section 2.3 of the
Agreement.
"Maxtor Warrant" shall have the meaning specified in Section 2.2 of the
Agreement.
"Order" shall mean any:
(a) Order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award issued, made, entered, rendered or otherwise put into effect by or
under the authority of any court, administrative agency or other Governmental
Body or any arbitrator or arbitration panel; or
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(b) Contract with any Governmental Body entered into in
connection with any Proceeding.
"Ordinary Course of Business" shall mean any action taken by or on
behalf of the Company that:
(a) Is recurring in nature, is consistent with the past
practices of the Company and is taken in the ordinary course of the normal
day-to-day operations of the Company;
(b) Is taken in accordance with sound and prudent business
practices;
(c) Is not required to be authorized by the stockholder of
the Company, the board of directors of the Company or any committee of the board
of directors of the Company and does not require any other separate or special
authorization of any nature; and
(d) Is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of Comparable Entities.
"Person" shall mean any individual, Entity or Governmental Body.
"Pre-Closing Period" shall mean the period from the date of the
Agreement through the Closing Date.
"Preferred Stock" shall mean the convertible preferred stock of IMS
Delaware including the Series A Preferred Stock, $0.001 par value, and Series B
Preferred Stock and any subsequently created series.
"Proceeding" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or any arbitrator or arbitration panel.
"Proprietary Asset" shall mean any patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service xxxx (whether registered or unregistered),
service xxxx application, trade styles, trade dress, logos, other source of
business identifiers, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset, and all rights arising or
derivative from, or associated with, any of the foregoing, including without
limitation license rights, renewals, extensions, continuations,
continuations-in-part,
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rights to xxx for past infringement, associated goodwill, formulae, algorithms,
quality control procedures, product and service specifications, and operating,
production and quality control manuals.
"Recapitalization Agreement" shall have the meaning set forth in Recital
C of the Agreement.
"Related Party" shall mean each of the following:
(a) Each individual (including Maxtor) who is, or who has at
any time been, an officer, director or stockholder of IMS Delaware or any
International IMS Entity;
(b) Each member of the family of each of the individuals
referred to in clause "(a)" above;
(c) Any Entity (other than IMS Delaware) in which any one of
the individuals referred to in clauses "(a)" and "(b)" above holds or held (or
in which more than one of such individuals collectively hold or held),
beneficially or otherwise, a controlling interest or a material voting,
proprietary or equity interest; and
(d) Any Entity (other than IMS Delaware) which possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of IMS Delaware, whether through the ownership of voting
securities, by contract or otherwise.
"Representatives" shall mean officers, directors, employees, agents,
attorneys and advisors.
"Scheduled Closing Time" shall have the meaning specified in Section
2.3(a) of the Agreement.
"Stockholders Agreement" shall mean the Stockholders Agreement dated the
Closing Date among IMS Delaware, Maxtor and the other Investors pursuant to the
Recapitalization Agreement.
"Subsidiary Notes" shall have the meaning specified in Section 2.3 of
the Agreement.
"Tax" (and, with the correlative meaning, "Taxes" and "Taxable") shall
mean (i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Body responsible for the imposition of any such tax
(domestic or foreign), (ii) any liability for the
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payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period and (ii) any liability for the payment of any amounts of the type
described in (i) or (ii) any liability for the payment of any amounts of the
type described in (i) or (ii) as a result of any express or implied obligation
to indemnify any other person.
"Tax Return" shall mean any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Thailand Note" shall have the meaning specified in Section 2.2 of the
Agreement.
"Transactional Agreements" shall mean:
(a) The Agreement;
(b) The Recapitalization Agreement;
(c) The Stockholders' Agreement;
(d) The Maxtor Notes;
(e) The Subordinated Notes; and
(f) The Maxtor Warrant.
"Transactions" shall mean (a) the execution and delivery of the
respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including:
(i) The sale of the Shares by Maxtor to IMS Delaware in
accordance with the Agreement;
(ii) The sale by IMS Delaware to the Investors in the
Recapitalization Agreement of all securities called for thereby; and
(iii) The performance by IMS Delaware, Maxtor and the
Investors pursuant to the Recapitalization Agreement of their respective
obligations under the Transactional
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Agreements, and the exercise by IMS Delaware, Maxtor and the Investors pursuant
to the Recapitalization Agreement of their respective rights under the
Transactional Agreements.
"Transition Services Agreement" shall have the meaning specified in
Section 2.4(b)(vii) of the Agreement.
"Unaudited Financial Statements" shall mean: (i) the unaudited combined
balance sheets of IMS Delaware as of March 30, 1996 (the "Unaudited Balance
Sheet") and March 25, 1995, and the related combined statements of income,
stockholders' equity and cash flows for the fiscal years ended March 30, 1996,
March 25, 1995 and March 26, 1994, and (ii) a pro forma combined balance sheet
as of March 30, 1996, giving effect to the conversion of the commercial
relationship between the Company and Maxtor from a turnkey basis to consignment
basis (the "Pro Forma Balance Sheet").
1.2 Interpretations. The words "herein," "hereof," and "hereunder,"
and other words of similar import refer to this Agreement as a whole and not to
any particular article, section or other subdivision of this Agreement.
SECTION 2
REDEMPTION AND RELATED TRANSACTIONS
2.1 Purchase of Shares. Maxtor shall cause to be sold, assigned,
transferred, conveyed and delivered to IMS Delaware at the Closing, good, valid
and marketable title to the Shares free of any Encumbrances on the terms and
subject to the conditions set forth in this Agreement.
2.2 Purchase Price. As consideration for the sale of the Shares to
IMS Delaware at the Closing, IMS Delaware shall (a) pay to Maxtor, by cashier's
check or by wire transfer of immediately available funds, $23,700,000, (b) cause
IMS Hong Kong to pay to Maxtor $1,300,000 in full satisfaction of a promissory
note of IMS Hong Kong to Maxtor (the "Hong Kong Note") (c) issue to Maxtor a
promissory note in the amount of $1,700,000 containing the terms set forth in
the Terms of Maxtor Notes (as hereinafter defined) attached hereto as Exhibit B
(the "IMS Delaware Note"), and (c) issue to Maxtor a warrant to purchase 200,000
shares of IMS Delaware's Class A Common Stock upon substantially the terms
described in the Form of Warrant attached hereto as Exhibit A (the "Maxtor
Warrant").
2.3 Ownership of the Holding Companies and the International IMS
Entities. On or prior to the Closing, Maxtor shall have (a) caused IMS Delaware
to be the sole stockholder, either directly or indirectly, of each of the
Holding Companies, IMS Holdco to be the sole stockholder of IMS Hong Kong and
IMS Cayman, and IMS Cayman to be the sole stockholder of IMS Thailand (other
than directors' qualifying shares or the like, to the extent required by local
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law) and the corporate structure to be as set forth on Part 2.3 of the
Disclosure Schedule and (b) taken the Reorganization Actions set forth on Part
3.3 of the Disclosure Schedule, including the issuance to Maxtor by IMS Hong
Kong and IMS Thailand of notes in the aggregate principal amounts of $16,300,000
and $2,000,000, respectively (the "Subsidiary Notes"), containing the terms set
forth in the Terms of Maxtor Notes attached hereto as Exhibit B (the IMS
Delaware Note and the Subsidiary Notes are hereinafter referred to collectively
as the "Maxtor Notes"), and the issuance by IMS Delaware of a guarantee with
respect to the Maxtor Notes containing the terms set forth in the term sheet
attached hereto as Exhibit B (the "IMS Guarantee").
2.4 Closing.
(a) The closing of the sale of the Shares to IMS Delaware
(the "Closing") shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, 00000 at 10:00 a.m. (Pacific
Time) on May 31, 1996 (or at such other place or time as IMS Delaware and Maxtor
may jointly designate with the consent of the Investors). For purposes of this
Agreement, "Scheduled Closing Time" shall mean the time and date as of which the
Closing is required to take place pursuant to this Section 2.4(a), and "Closing
Date" shall mean the time and date as of which the Closing actually takes place.
(b) At the Closing:
(i) Maxtor shall execute and deliver to IMS Delaware
the stock certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers);
(ii) IMS Delaware shall pay to Maxtor $23,700,000 by
cashier's check or by wire transfer of immediately available funds as
contemplated by Section 2.2(a);
(iii) IMS Delaware shall cause IMS Hong Kong to pay
the Hong Kong Note in full by cashier's check or by wire transfer of immediately
available funds as contemplated by Section 2.2(b).
(iv) IMS Delaware shall issue to Maxtor the IMS
Delaware Note;
(v) IMS Delaware shall issue to Maxtor the Maxtor
Warrant as contemplated by Section 2.2(b);
(vi) Maxtor shall execute and deliver to IMS Delaware
a certificate (the "Closing Certificate") certifying that (A) each of the
representations and warranties made by Maxtor in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in all respects as
of the Closing Date as if made on the Closing Date, (B) each of the covenants
and obligations that Maxtor is required to have complied with or performed
pursuant to this Agreement at or prior to the Closing has been duly complied
with and performed in all
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respects, and (C) except as expressly set forth in the Closing Certificate, each
of the conditions set forth in Sections 7.3 and 7.4 has been satisfied in all
respects;
(vii) IMS Delaware shall execute and deliver to Maxtor
a certificate (the "IMS Delaware Closing Certificate") certifying that (A) each
of the representations and warranties made by IMS Delaware in this Agreement was
accurate in all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date, (B) each of the
covenants and obligations that IMS Delaware is required to have complied with or
performed pursuant to this Agreement at or prior to Closing has been duly
complied with and performed in all respects; and (C) except as expressly set
forth in the IMS Delaware Closing Certificate, each of the conditions in Section
8 has been satisfied in all respects;
(viii) Xxxxxx X. Xxxxxxx shall execute and deliver to
Maxtor a certificate in the form attached hereto as Exhibit C (the "IMS Officer
Certificate").
(ix) Maxtor, at its own expense and without any
additional consideration from the Company or the Investors, shall execute and
deliver all reasonable assignments and licenses and such other documents and
instruments as the Company may reasonably request for the purpose of effecting
the transfer or license from Maxtor to the Company of the assets listed on Parts
3.6(c) and 3.9(c) of the Disclosure Schedule (it also being understood that, to
the extent following the Closing it is reasonably determined that any other
assets necessary to enable the Company to conduct the Business have not been
transferred or licensed to the Company, Maxtor shall execute and deliver all
reasonable assignments and licenses and such other documents and instruments as
the Company may reasonably request for the purpose of effecting the transfer or
license of such other assets from Maxtor to the Company);
(x) Maxtor and IMS Delaware shall execute and
deliver the Manufacturing Services Agreement in substantially the form attached
hereto as Exhibit D (the "Manufacturing Services Agreement"); and
(xi) Maxtor and IMS Delaware shall execute and
deliver the Transition Services Agreement in substantially the form attached
hereto as Exhibit E (the "Transition Services Agreement").
SECTION 3
REPRESENTATIONS AND WARRANTIES OF MAXTOR
Maxtor represents and warrants, to and for the benefit of the Company
and the other Indemnities, except as set forth on the Disclosure Schedule, which
is numbered to correspond to the section numbers of this Agreement, as follows:
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3.1 Due Organization; Subsidiaries; Etc.
(a) IMS Delaware is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Except as
set forth in Part 3.1(a) of the Disclosure Schedule, each of the Holding
Companies will be prior to the Closing, and each of the International IMS
Entities is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation.
(b) Except as set forth in Part 3.3 of the Disclosure
Schedule, since January 1, 1996, neither IMS Delaware nor any of the Holding
Companies or the International IMS Entities has merged with, assumed any
liabilities of or acquired or succeeded to a substantial portion of the business
of any other Entity.
(c) Each of IMS Delaware and the International IMS Entities
is, and each of the Holding Companies will be on or prior to the time IMS Holdco
becomes the sole stockholder of IMS Hong Kong and IMS Cayman, duly qualified,
licensed or admitted to do business and is in good standing in those
jurisdictions specified in Part 3.1(c) of the Disclosure Schedule, which are the
only jurisdictions in which the ownership, use or leasing of each such entity's
assets and properties, or nature of its business, makes such qualification,
licensing or admission necessary, except for those jurisdictions in which the
adverse effects of all such failures by such entity to be qualified, licensed or
admitted or in good standing could not in the aggregate reasonably be expected
to have a Material Adverse Effect.
(d) As of the Closing Date, IMS Delaware will be the sole
stockholder, either directly or indirectly, of each of the Holding Companies and
the International IMS Entities (other than directors qualifying shares or the
like required by local law). As of the Closing Date the Holding Companies will
be formed as part of the Reorganization Actions set forth on Part 3.3 of the
Disclosure Schedule. Other than the International IMS Entities themselves,
neither IMS Delaware nor any of the International IMS Entities owns,
beneficially or otherwise, any shares or other securities of, or has any direct
or indirect interest of any nature in, any other Entity.
3.2 Certificate of Incorporation and Bylaws; Records.
(a) Except as set forth in Part 3.2(b) of the Disclosure
Schedule, the Company's records include accurate and complete copies of:
(i) The Certificate of Incorporation and Bylaws (or
equivalent charter documents) of IMS Delaware, each of the Holding Companies and
each of the International IMS Entities, including all amendments thereto;
(ii) The stock records of IMS Delaware, each of the
Holding Companies and each of the International IMS Entities, respectively; and
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(iii) The minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of IMS Delaware, each of the
Holding Companies and each of the International IMS Entities, respectively, the
board of directors of IMS Delaware and each of the International IMS Entities,
respectively, and all committees of the board of directors of IMS Delaware and
each of the International IMS Entities, respectively.
(b) Except as set forth in Part 3.2(b) of the Disclosure
Schedule, the books of account, stock records, minute books and other corporate
records of IMS Delaware, each of the Holding Companies and each of the
International IMS Entities, respectively are accurate, up-to-date and complete.
All of the corporate records of IMS Delaware and each of the International IMS
Entities, respectively, are in the direct control of IMS Delaware.
3.3 Capitalization. Maxtor is, and will be as of the Closing Date,
the sole stockholder of IMS Delaware. Part 3.3 of the Disclosure Schedule sets
forth a complete description of the capitalization of IMS Delaware, each of the
Holding Companies and each International IMS Entity (i) as of March 30, 1996
(except with respect to the Holding Companies, which shall be formed following
the execution of this Agreement), and (ii) following the Reorganization Actions
set forth on Part 3.3 of the Disclosure Schedule. Except as set forth in Part
3.3 of the Disclosure Schedule, other than as set forth in the Transactional
Agreements and as contemplated in Recital A of the Recapitalization Agreement,
there is no: (a) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of IMS Delaware, any of the Holding Companies or any
International IMS Entity; (b) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of the
capital stock or other securities of IMS Delaware, any of the Holding Companies
or any International IMS Entity; or (c) Contract under which IMS Delaware, any
of the Holding Companies or any International IMS Entity is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities.
3.4 Financial Statements. The Unaudited Financial Statements were,
and when delivered pursuant to Section 5.4 the Audited Financial Statements will
be, prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered (except that the Unaudited Financial Statements do not have
notes), present fairly the financial position of the Company as of the
respective dates thereof and the results of operations and cash flows of the
Company for the periods covered thereby, are correct and complete in all
material respects and are consistent with the books and records of the Company.
3.5 Absence Of Changes. Except as set forth in Part 3.5 of the
Disclosure Schedule, since the date of the Unaudited Balance Sheet:
(a) There has not been any Material Adverse Change, and no
event has occurred that could reasonably be expected to have a Material Adverse
Effect.
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(b) There has not been any material loss, damage or
destruction to, or any interruption in the use of, any of the tangible or
intangible assets of the Company (whether or not covered by insurance);
(c) Other than as set forth in Part 3.3 of the Disclosure
Schedule, the Company has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock or other securities, or (ii) repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities;
(d) The Company has not purchased or otherwise acquired any
asset from any other Person having a value of greater than $100,000 individually
or $250,000 in the aggregate, except for supplies or inventory (or capital
equipment as provided under Section 3.4(f)) acquired by the Company in the
Ordinary Course of Business;
(e) The Company has not leased or licensed any asset from
any other Person having a value of greater than $100,000, except in the Ordinary
Course of Business;
(f) The Company has not made any capital expenditure having
a value of greater than $100,000 individually or $250,000 in the aggregate;
(g) The Company has not sold or otherwise transferred,
leased or licensed any asset to any other Person, except for sales of the
Company's products in the Ordinary Course of Business and sales of assets that
are not material;
(h) The Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness having a value of greater than $100,000 individually or
$250,000 in the aggregate;
(i) The Company has not made any loan or advance to any
other Person, except travel and other similar expense advances to employees made
in the Ordinary Course of Business;
(j) The Company has not (i) established or adopted any
Employee Benefit Plan, or (ii) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fees, fringe benefits or other compensation or remuneration payable to, any of
its directors, officers, employees or independent contractors, except wage and
salary increases made in connection with annual reviews in the Ordinary Course
of Business, none of which exceeded 10% of current salary;
(k) No Contract by which the Company or any of the assets
owned or used by the Company is or was bound, or under which the Company has or
had any rights or interest, has been amended or terminated (except for scheduled
terminations in accordance with the terms of such Contract) in a manner or under
circumstances that will have a Material Adverse Effect;
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(l) The Company has not discharged any Encumbrance or
discharged or paid any indebtedness or other Liability having a value in excess
of $100,000 individually or $250,000 in the aggregate, except for accounts
payable that (i) are reflected as current liabilities in the "liabilities"
column of the Unaudited Balance Sheet or have been incurred by the Company since
the date of the Unaudited Balance Sheet in bona fide transactions entered into
in the Ordinary Course of Business, and (ii) have been discharged or paid in the
Ordinary Course of Business;
(m) The Company has not forgiven any debt or otherwise
released or waived any right or claim which has had or will have, in any case or
in the aggregate, a Material Adverse Effect;
(n) The Company has not changed any of its methods of
accounting or accounting practices in any material respect for financial,
accounting or Tax purposes;
(o) The Company has not incurred any Liability other than
the current Liabilities incurred, or obligations under Contracts entered into,
in the Ordinary Course of Business;
(p) The Company has not entered into any transaction or
taken any other action outside the Ordinary Course of Business which has had or
could have, in any case or in the aggregate, a Material Adverse Effect;
(q) The Company has not suffered any labor difficulty; and
(r) The Company has not agreed, committed or offered (in
writing or otherwise) to take any of the actions referred to in clauses "(c)"
through "(p)" above.
3.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable
title to, all assets purported to be owned by it, including: (i) all assets
reflected on the Unaudited Balance Sheet; (ii) all assets acquired by the
Company since the date of the Unaudited Balance Sheet; (iii) all assets referred
to in Part 3.9 of the Disclosure Schedule identified as being owned by the
Company; and (iv) all other assets reflected in the books and records of the
Company as being owned by the Company. As of the Closing, all of said assets are
owned by the Company free and clear of any Encumbrances, except as set forth in
Part 3.6(a) of the Disclosure Schedule and except for Encumbrances incidental to
the conduct of the Company's business or the ownership of said assets (and not
incurred in connection with the borrowing of money or the acquisition of said
assets), which do not materially detract from the value of said assets or impair
the use thereof in the conduct of the Company's business or the financing
thereof.
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(b) Part 3.6(b) of the Disclosure Schedule identifies all
assets that are being leased or licensed to the Company under agreements
providing for aggregate lease or license payments greater than $100,000.
(c) The assets owned by, and leased and licensed to, the
Company (including the assets reflected on the Pro Forma Balance Sheet) will
collectively constitute, as of the Closing Date, all of the properties, rights,
interests and other tangible and intangible assets reasonably necessary to
enable the Company to conduct its business in the manner in which such business
is currently being conducted (the "Business"). Maxtor does not possess any
assets which would be reasonably necessary to produce the results set forth in
the Financial Statements, except for the assets set forth on Part 3.6(c) of the
Disclosure Schedule.
(d) Since March 30, 1996, neither IMS Delaware nor any of
the International IMS Entities has changed its name or corporate structure.
Except as set forth in Parts 3.3 and 3.9 of the Disclosure Schedule, the Company
does not use any trade names.
3.7 Equipment, Etc. Each item of equipment, material, prototype,
tool, supply, vehicle, item of furniture, fixture, improvement and other
tangible asset owned by or leased to the Company (i) is in good condition and
repair (reasonable wear and tear excepted); (ii) complies in all material
respects with, and is being operated and otherwise used in material compliance
with, all applicable Legal Requirements; and (iii) is reasonably suitable for
the uses to which it is being put.
3.8 Real Property. The Company does not own any real property or any
leasehold interest in real property, except as identified in Part 3.8 of the
Disclosure Schedule. Part 3.8 of the Disclosure Schedule provides an accurate
and complete description of the premises owned or occupied by the Company or
covered by said leases and the facilities located on such premises. The Company
enjoys peaceful and undisturbed possession of such premises. Except as set forth
on Part 3.8 of the Disclosure Schedule, there exists no event of default by the
Company or Maxtor (nor any event which with notice or lapse of time would
constitute an event of default by the Company or Maxtor) with respect to any
agreement or instrument with regard to such premises and facilities, and to the
knowledge of Maxtor, there exists no event of default by any of the other
parties thereto (nor any event which with notice or lapse of time would
constitute an event of default by any of the other parties thereto) with respect
to any such agreement or instrument, except where such default would not have a
Material Adverse Effect on the Business. Except as set forth on Part 3.8 of the
Disclosure Schedule, all such agreements and instruments are in full force and
effect.
3.9 Proprietary Assets.
(a) Set forth on Part 3.9(a) of the Disclosure Schedule is a
list of all (i) patented or registered Proprietary Assets and pending
applications for the registration of Proprietary Assets, in each case owned by
the Company relating to the Business; (ii) trade or
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corporate names used by the Company relating to the Business; (iii) material
computer software and material third party databases created or used by the
Company related to the Business; (iv) material unregistered trademarks owned or
used by the Company relating to the Company; and (v) material licenses and other
rights granted by the Company to any third party or material licenses granted by
any third party to the Company, in each case with respect to Proprietary Assets
relating to the Business.
(b) Except as set forth on Part 3.9(b) of the Disclosure
Schedule, (i) the Company owns all right, title and interest in or has a valid
license from a third party to use all Proprietary Assets reasonably necessary
for the operation of the Business, free and clear of any Encumbrances or adverse
claims; (ii) no claim by any third party contesting the validity,
enforceability, ownership or use of any of the Proprietary Assets owned or used
by the Company relating to the Business has been made, is currently outstanding
or is threatened, and there are no grounds for the same; (iii) no loss or
expiration of any individual Proprietary Assets right or related group of
Proprietary Assets rights owned or used by the Company relating to the Business
is threatened, pending or foreseeable to Maxtor's Knowledge; (iv) the Company
has not received any notice of, and is not aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict with, any
third party with respect to the Proprietary Asset owned or used by the Company
relating to the Business; (v) the Company has not infringed, misappropriated or
otherwise conflicted with any Proprietary Asset of any third party, to Maxtor's
Knowledge, nor received any claims of such infringement, misappropriation or
conflict from a third party, and, to Maxtor's Knowledge, there is no
infringement, misappropriation or conflict which will occur as a result of the
continued operation of the Business; and (vi) the Company has taken all action
reasonably necessary to maintain and protect the Proprietary Assets relating to
the Business owned or used by it and will continue to reasonably maintain and
protect such Proprietary Assets prior to the Closing so as not to affect
adversely the validity or enforceability of such Proprietary Assets.
(c) Without limiting the foregoing, and except for Maxtor
Proprietary Assets which are licensed to and used by the Company to provide
services to Maxtor, none of the Proprietary Assets necessary to enable the
Company to conduct the Business is licensed to or from Maxtor, nor does Maxtor
have any ownership interest in or claim thereto, except as set forth on Part
3.9(c) of the Disclosure Schedule, all of which interest will be transferred to
the Company.
(d) Except as set forth in Part 3.9(d) of the Disclosure
Schedule, each current and former employee of the Company has executed a
non-disclosure and invention assignment agreement in the Company's current
standard form thereof or in substantially similar form. Copies of all such
agreements are in the possession of the Company.
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3.10 Contracts.
(a) Part 3.10(a) of the Disclosure Schedule identifies each
IMS Contract that is a Material Contract and to Maxtor's Knowledge provides an
accurate and complete description of all oral IMS Contracts that are Material
Contracts. The Company has in its actual possession and direct control accurate
and complete copies of all IMS Contracts that are Material Contracts, including
all amendments thereto. Each IMS Contract is valid and in full force and effect.
(b) Except as set forth in Part 3.10(b) of the Disclosure
Schedule:
(i) No Person has violated or breached, or declared
or committed any default under, any IMS Contract, except for any violation,
breach or default which has not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect;
(ii) No event has occurred, and no circumstance or
condition exists, that could reasonably be expected to (with or without notice
or lapse of time) (A) result in a violation or breach of any of the provisions
of any IMS Contract, except for any violation or breach which could not
reasonably be expected to result in a Material Adverse Effect, (B) give any
Person the right to declare a default or exercise any remedy under any IMS
Contract, except for any default or remedy which could not reasonably be
expected to result in a Material Adverse Effect, (C) give any Person the right
to accelerate the maturity or performance of any IMS Contract, except for any
such acceleration in maturity or performance which could not reasonably be
expected to result in a Material Adverse Effect, or (D) give any Person the
right to cancel, terminate or modify any IMS Contract, except for any such
cancellation, termination or modification which could not reasonably be expected
to result in a Material Adverse Effect;
(iii) The Company has not received any notice or other
communication (in writing or otherwise) regarding any actual, alleged, possible
or potential violation or breach of, or default under, any IMS Contract, except
for any violation, breach or default which has not resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect; and
(iv) The Company has not knowingly waived any right
under any IMS Contract, except for any waiver which has not resulted in, and
could not reasonably be expected to result in, a Material Adverse Effect.
(c) Except as set forth in Part 3.10(a) of the Disclosure
Schedule, the Company has not guaranteed or otherwise agreed to cause, insure or
become liable for, and the Company has not pledged any of its assets to secure,
the performance or payment of any obligation or other Liability of any other
Person.
(d) The Contracts identified in Part 3.10(a) of the
Disclosure Schedule collectively constitute all of the Contracts necessary to
enable the Company to conduct the Business prior to and following the Closing.
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3.11 Liabilities. Except as set forth in Part 3.11 of the Disclosure
Schedule, the Company has no Liabilities, except for:
(a) Liabilities identified in the Unaudited Balance Sheet as
and to the extent reflected or reserved therein;
(b) Liabilities incurred by the Company in bona fide
transactions entered into in the Ordinary Course of Business since the date of
the Unaudited Balance Sheet, and not otherwise in contravention of this
Agreement;
(c) Obligations under the Contracts listed in Part 3.10(a)
of the Disclosure Schedule, to the extent that the existence of such obligations
is ascertainable by reference to such Contracts; and
(d) Obligations which individually and in the aggregate
arose in the Ordinary Course of Business, are not material to the Company and
have not resulted in, and could not reasonably be expected to result in, a
Material Adverse Effect.
3.12 Compliance With Legal Requirements. Except as set forth in Part
3.12 of the Disclosure Schedule:
(a) The Company is in compliance in all material respects
with each Legal Requirement that is applicable to it or reasonably necessary to
enable it to conduct the Business or to own or use any of its assets and to
occupy its facilities;
(b) Since March 30, 1996, the Company has at all times been
in compliance with each Legal Requirement, the default of which could have a
Material Adverse Effect, that is or was applicable to it or to the conduct of
its business or the ownership or use of any of its assets;
(c) No event has occurred, and no condition or circumstance
exists, that could (with or without notice or lapse of time) constitute or
result directly or indirectly in a violation by the Company of, or a failure on
the part of the Company to comply with, any Legal Requirement, the default of
which could reasonably be expected to have a Material Adverse Effect or
interfere with the consummation of the transactions contemplated hereby; and
(d) The Company has not received, at any time since March
30, 1996, any notice or other communication (in writing or otherwise) from any
Governmental Body or any other Person regarding (i) any actual, alleged,
possible or potential violation of, or failure to comply with, any Legal
Requirement, the violation or default of which could have a Material Adverse
Effect, or (ii) any actual, alleged, possible or potential obligation on the
part of the Company to undertake, or to bear all or any portion of the cost of,
any cleanup or any remedial,
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corrective or response action of any nature, the violation or default of which
could have a Material Adverse Effect.
3.13 Governmental Authorizations.
(a) Part 3.13(a) of the Disclosure Schedule identifies each
Governmental Authorization that is held by the Company. Each Governmental
Authorization identified in Part 3.13 of the Disclosure Schedule is valid and in
full force and effect.
(b) Except as set forth in Part 3.13(b) of the Disclosure
Schedule:
(i) The Company is and at all times since March 30,
1996, has been in compliance with all of the terms and requirements of each
Governmental Authorization identified in Part 3.13(b) of the Disclosure
Schedule; and
(ii) No event has occurred, and to Maxtor's Knowledge
no condition or circumstance exists, that could (with or without notice or lapse
of time) (A) constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental Authorization
identified in Part 3.13(b) of the Disclosure Schedule, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Authorization identified in Part 3.13(b) of
the Disclosure Schedule.
(c) The Governmental Authorizations held by the Company
constitute all of the Governmental Authorizations necessary (i) to enable the
Company to conduct the Business, (ii) to permit the Company to own and use its
assets in the manner in which they are currently owned and used, and (iii) to
enable and permit the Company, following the Closing, to do the same.
3.14 Tax Matters.
(a) All Tax returns, statements, reports and forms
(including estimated Tax returns and reports and information returns and
reports) required to be filed with any taxing authority with respect to any
Taxable period ending on or before the Closing, by or on behalf of the Company,
and each IMS Affiliated Group (collectively, the "Company Returns"), have been
or will be filed when due (including any extensions of such due date). All such
Company Returns were or will be correct and complete when filed. All Taxes owed
by the Company that are due have been paid. The Unaudited Balance Sheet (i)
fully accrues all actual and contingent liabilities for Taxes with respect to
all periods through the date thereof, and the Company will not incur any Tax
liability in excess of the amount reflected on the Unaudited Balance Sheet with
respect to such periods, and (ii) properly accrues in accordance with GAAP all
liabilities for Taxes payable after March 30, 1996, with respect to all
transactions and events occurring on or
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prior to such date. Any and all information set forth in the notes to the
Company's consolidated financial statements relating to Tax matters is true,
complete and accurate in all respects.
(b) No Tax liability since March 30, 1996, has been incurred
by the Company or any IMS Affiliated Group other than in the Ordinary Course of
Business and adequate provision has been made for all Taxes since that date in
accordance with GAAP on at least a quarterly basis. The Company has withheld and
paid to the applicable financial institution or Governmental Body, as the case
may be, all amounts required to be withheld. All Company Returns filed with
respect to Taxable years of the Company through the Taxable year ended March 28,
1992, have been examined and closed or are Tax Returns with respect to which the
applicable period for assessment under applicable law, after giving effect to
extensions or waivers, has expired. Neither the Company nor any IMS Affiliated
Group has granted any extension or waiver of the limitation period applicable to
any Taxes.
(c) There is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened against or with respect to the Company
or any IMS Affiliated Group in respect of any Tax or assessment. No notice of
deficiency or similar document of any Governmental Body has been received by the
Company or any IMS Affiliated Group, and there are no liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to the issues that have been raised (and are
currently pending) by any Governmental Body that could, if determined adversely
to the Company, materially and adversely affect the liability of the Company or
any IMS Affiliated Group for Taxes. Neither the Company, nor any other person on
behalf of the Company, has entered into nor will it enter into any agreement or
consent pursuant to Section 341(f) of the Code. There are no liens for Taxes
upon the assets of the Company, except liens for current Taxes not yet due.
Except as may be required as a result of the transactions contemplated hereby,
the Company has not been and will not be required to include any adjustment in
Taxable income for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions, events or accounting methods employed prior to the
Closing.
(d) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or independent contractor or former employee or independent contractor
of the Company that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to Section 280G, 162
or 404 of the Code. Other than pursuant to this Agreement and as set forth in
Part 3.14 of the Disclosure Schedule, the Company is not a party to or bound by
(or will prior to the Closing become a party to or bound by) any tax indemnity,
tax sharing or tax allocation agreement (whether written, unwritten or arising
under operation of federal law as a result of being a member of a group filing
consolidated tax returns, under operation of certain state laws as a result of
being a member of a unitary group, or under comparable laws of other states or
foreign jurisdictions) other than by virtue of any obligation arising by
operation of law as a result of being a member of an IMS Affiliated Group of
which Maxtor is the common parent. None of
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the assets of the Company (i) directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code or (ii) is "tax
exempt use property" within the meaning of Section 168(h) of the Code. The
Company has not participated in (or will prior to the Closing participate in) an
international boycott within the meaning of Section 999 of the Code. The Company
has heretofore provided or made available to the Investors true and correct
copies of all Tax Returns, and, as reasonably requested by the Investors prior
to or following the date hereof, information statements, reports, work papers,
Tax opinions and memoranda and other Tax data and documents.
(e) Part 3.14(e) of the Disclosure Schedule lists (i) any
Tax exemption, Tax holiday or other Tax-sparing agreement that the Company has
in any jurisdiction, including the nature, amount and lengths or such Tax
exemption, Tax holiday or other Tax-sparing arrangement and (ii) any expatriate
tax programs or policies affecting the Company. The Company is in full
compliance with all terms and conditions of any Tax exemption, Tax holiday or
other Tax-sparing agreement or order of a foreign government and the
consummation of the transactions contemplated hereby shall not have any adverse
effect on the continued validity and effectiveness of any such Tax exemption,
Tax holiday or other Tax sharing agreement or order.
3.15 Employee And Labor Matters. Except as set forth in Part 3.15 of
the Disclosure Schedule:
(a) The Company is not a party to or bound by any employment
agreement or any union contract, collective bargaining agreement or similar
Contract.
(b) The employment of the employees of the Company is
terminable by the Company at will. The Company has in its actual possession and
direct control accurate and complete copies of all employee manuals and
handbooks, disclosure materials, policy statements and other materials relating
to the employment of the current and former employees of the Company.
(c) The Company is not engaged in any unfair labor practice
of any nature. Since January 1, 1994, there has never been any slowdown, work
stoppage, labor dispute or union organizing activity, or any similar activity or
dispute, affecting the Company or any of its employees, and no Person has
threatened to commence any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute.
(d) The Company has at all times conducted its business in
compliance in all respects with the local labor laws of all jurisdictions in
which the Company has conducted its business and the United States Fair Labor
Standards Act, to the extent applicable, except for any noncompliance which
could not be reasonably expected to have a Material Adverse Effect.
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(e) The Company is not a party to or bound by any employment
agreement which obligates the Company to pay separation, severance, termination
or similar benefits as a result of or arising out of any of the Transactions.
3.16 Benefit Plans; ERISA.
(a) Part 3.16(a) of the Disclosure Schedule identifies each
IMS Plan. The Company has not incurred any Liability with respect to any IMS
Plan, except as set forth in Part 3.16(a) of the Disclosure Schedule.
(b) No IMS Plan:
(i) Provides or provided any benefit guaranteed by
the Pension Benefit Guaranty Corporation;
(ii) Is or was a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA; or
(iii) Is or was subject to the minimum funding
standards of Section 412 of the Code or Section 302 of ERISA.
(iv) Obligates the Company to pay separation,
severance, termination or similar benefits as a result of or arising out of any
of the Transactions.
(c) The Company has in its actual possession and direct
control, with respect to each IMS Plan:
(i) An accurate and complete copy of such IMS Plan
and all amendments thereto (including any amendment that is scheduled to take
effect in the future);
(ii) An accurate and complete copy of each Contract
(including any trust agreement, funding agreement, service provider agreement,
insurance agreement, investment management agreement or recordkeeping agreement)
relating to such IMS Plan; an accurate and complete copy of any description,
summary, notification, report or other document that has been furnished to any
employee of the Company with respect to such IMS Plan;
(iii) An accurate and complete copy of any form,
report, registration statement or other document that has been filed with or
submitted to any Governmental Body with respect to such IMS Plan; and
(iv) An accurate and complete copy of any
determination letter, notice or other document that has been issued by, or that
has been received by the Company from, any Governmental Body with respect to
such IMS Plan.
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(d) Each IMS Plan is being and at all times has been
operated and administered in compliance with the provisions thereof. Each
contribution or other payment that is required to have been accrued or made
under or with respect to any IMS Plan has been duly accrued and made on a timely
basis.
(e) Each IMS Plan at all times has complied and been
operated and administered in compliance with all applicable reporting,
disclosure and other requirements of ERISA and the Code and all other applicable
Legal Requirements. The Company has not incurred any Liability to the Internal
Revenue Service or any other Governmental Body with respect to any IMS Plan; and
no event has occurred, and no condition or circumstance exists, that might (with
or without notice or lapse of time) give rise directly or indirectly to any such
Liability. Neither the Company, nor any Person that is or was an administrator
or fiduciary of any IMS Plan (or that acts or has acted as an agent of the
Company or any such administrator or fiduciary), has engaged in any transaction
or has otherwise acted or failed to act in a manner that has subjected or may
subject the Company to any Liability for breach of any fiduciary duty or any
other duty. No IMS Plan, and no Person that is or was an administrator or
fiduciary of any IMS Plan (or that acts or has acted as an agent of any such
administrator or fiduciary) has in any respect:
(i) Engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code;
(ii) Failed to perform any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA; or
(iii) Taken any action that (A) may subject such IMS
Plan or such Person to any Tax, penalty or Liability relating to any "prohibited
transaction," or (B) may directly or indirectly give rise to or serve as a basis
for the assertion (by any employee or by any other Person) of any claim under,
on behalf of or with respect to such IMS Plan.
(f) Except as set forth in Part 3.16(f) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or other related
Transactional Agreements by Maxtor or the Company nor the consummation of the
Transactions contemplated hereby or the related Transactions will result in the
acceleration or creation of any rights of any person to benefits under any IMS
Plan (including, without limitation, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any IMS Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
3.17 Environment, Health and Safety.
(a) For the purpose of this Section the following terms are
defined as set forth below:
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"Contamination" is the presence of any Hazardous
Material in the soil, groundwater, surface water, ambient air, or building
materials of any real property in a concentration exceeding a level which would
require any investigation, remediation, removal, or monitoring pursuant to
Applicable Environmental Health and Safety Requirements, or which would
otherwise exceed the concentrations allowed by Applicable Environmental Health
and Safety Requirements.
"Applicable Environmental Health and Safety Requirement"
are all currently applicable Legal Requirements (including common laws and
equitable principles) regulating, prohibiting or relating to any Hazardous
Material, any Hazardous Material Activity, public health, worker health or
safety, pollution, protection of the environment, and any currently applicable
order, injunction, settlement agreement, consent decree, or guideline issued by
any court of competent jurisdiction or any Governmental Body pursuant to or with
respect to any of the foregoing.
"Hazardous Materials" are any materials or substances
prohibited or regulated by any Applicable Environmental Health and Safety
Requirement or designated by any Governmental Body to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment,
(including without limitation solvents, petroleum, crude oil fractions,
pesticides, asbestos containing materials, radon gas, radioactive materials,
blood, biological substances used in or produced from the diagnosis, treatment
or immunization of human beings or animals or from research or testing
pertaining thereto, and medical "sharps" waste). For the purposes of this
agreement, Hazardous Materials do not include janitorial or office materials in
customary quantities used solely for office and janitorial purposes, provided no
permit or approval is required by any Governmental Body for such use.
"Hazardous Materials Activity" is the transportation,
transfer, recycling, storage, use, handling, treatment, manufacture,
investigation, removal, remediation, release, exposure of others to, sale, or
distribution of any Hazardous Material or any product or material containing a
Hazardous Material.
(b) Compliance With Applicable Environmental Health and
Safety Requirements and Agreements. Except as set forth on Part 3.17 of the
Disclosure Schedule, to Maxtor's Knowledge, all Hazardous Materials Activities
of the Company have been conducted in compliance with Applicable Environmental
Health and Safety Requirements, except any non-compliance with which will not
have a Material Adverse Effect on the Company. Except as set forth on Part 3.17
of the Disclosure Schedule, the current Hazardous Materials Activities of the
Company comply in all material respects with Applicable Environmental Health and
Safety Requirements and with any Contract currently binding upon Company with
respect to the Hazardous Materials Activities currently conducted by the
Company.
(c) Contamination. Except as disclosed on Part 3.17 of the
Disclosure Schedule, the Company is not discharging, releasing, or disposing of,
Hazardous Materials to the
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soil, groundwater, surface water or building materials of any facility currently
occupied by the Company nor any manner which violates any Applicable
Environmental Health and Safety Requirement or contract binding upon the
Company's Hazardous Materials Activities. Except as disclosed on Part 3.17 of
the Disclosure Schedule, to Maxtor's Knowledge, the Company has not discharged,
released, disposed of or emitted any Hazardous Materials to the soil,
groundwater, surface water or building materials of any facility in an amount or
in a manner that would, if known by a Governmental Body having jurisdiction over
such matters, result in any fine or monetary obligation or require
investigation, containment, remediation, monitoring, or removal under Applicable
Environmental Health and Safety Requirements that would in the aggregate have a
Material Adverse Effect. Except as disclosed on Part 3.17 of the Disclosure
Schedule, to Maxtor's knowledge as of the Closing, no Contamination which would
be the legal responsibility of the Company in whole or in part (a) is present at
any real property which is now operated, or which has anytime been owned, by the
Company; (b) was present at any real property operated by the Company at the
time the Company's legal and possessory rights in the property ended, or (c) is
present at any other real property to which Hazardous Materials produced,
generated or transported by the Company have been delivered that would in the
aggregate have a Material Adverse Effect.
(d) Permits. Except as set forth on Part 3.17 of the
Disclosure Schedule, all approvals, permits, licenses, environmental clearances
and consents required for the conduct of Hazardous Materials Activities of the
Company as presently conducted ("Environmental Permits") are in full force and
effect, and the Company is in compliance in material respects with all covenants
and conditions of said Permits. Except as set forth on Part 3.17 of the
Disclosure Schedule, the occurrence of the Transaction, in and of themselves,
will not cause any such Environmental Permit to be revoked, modified, or
rendered non-renewable upon payment of typical permit fees and no filing is
required with any governmental authority issuing an Environmental Permit in
connection with the occurrence of the Transactions.
(e) Environmental Expenditures. Except as set forth on Part
3.17 of the Disclosure Schedule, as of the Closing, except for expenditures
which have been reserved against in the Company's Unaudited Financial Statements
and Audited Financial Statements or which in the aggregate do not exceed
$100,000, neither the Company nor Maxtor has received any notice that (and
neither is otherwise aware that) any Applicable Environmental Health and Safety
Requirement or any Contract currently binding upon the Company with respect to
its Hazardous Materials Activities currently requires (a) the making of any
capital improvement or repair, (b) the making of any modification, cessation or
removal of any manufacturing, storage, or assembly process or equipment; or (c)
the investigation, monitoring, removal, remediation or monitoring of any
Contamination.
3.18 Insurance. The Company has in its actual possession and direct
control accurate and complete copies of all of the insurance policies (including
all renewals thereof and endorsements thereto) maintained by or on behalf of
the Company. Each of such policies is valid, enforceable and in full force and
effect, and such insurance policies are in coverage amounts,
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scope and terms of a nature as is customary for Comparable Entities and
reasonably sufficient to insure the Company against the risks associated with
the Business. All of the information contained in the applications submitted in
connection with said policies was (at the times said applications were
submitted) accurate and complete in all material respects, and all premiums and
other amounts owing with respect to said policies have been paid in full on a
timely basis.
3.19 Related Party Transactions. Except as set forth in Part 3.3 or
Part 3.19 of the Disclosure Schedule or as contemplated by the Transaction
Agreements:
(a) No Related Party has any ownership interest of any
nature in any of the assets of the Company;
(b) No Related Party is indebted to the Company;
(c) The Company is not indebted to any Related Party; and
(d) No Related Party currently has any direct or indirect
financial interest in, any Contract, transaction or business dealing of any
nature involving the Company (other than employee non-disclosure and invention
assignment agreements entered into in the Ordinary Course of Business).
3.20 Proceedings; Orders.
(a) Except as set forth in Part 3.20 of the Disclosure
Schedule, there is no pending Proceeding, nor, to Maxtor's Knowledge, any threat
thereof by any Person:
(i) That involves the Company, any of its assets or
the Shares or that otherwise relates to or might affect the Business or any of
the Company's assets or the Shares or the Company's interest in the Shares
following the Closing (whether or not the Company is named as a party thereto);
or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Transactions.
Except as set forth in Part 3.20 of the Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
could directly or indirectly to give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) The Company has in its actual possession and direct
control accurate and complete copies of all pleadings, correspondence and other
written materials (to which Maxtor or the Company has access) that relate to the
Proceedings required to be identified in Part 3.20 of the Disclosure Schedule
and all other Proceedings completed since January 1, 1994.
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(c) There is no Order to which the Company, or any of the
assets owned or used by the Company, is subject. Neither Maxtor nor any other
Related Party is subject to any Order could reasonably be expected to have a
Material Adverse Effect.
(d) To Maxtor's Knowledge, no employee of the Company is
subject to any Order that may prohibit such officer or employee from engaging in
or continuing any conduct, activity or practice involving his or her employment
by the Company.
(e) To Maxtor's Knowledge, there is no proposed Order that,
if issued or otherwise put into effect, (i) could reasonably be expected to have
a Material Adverse Effect or materially adversely affect the ability of Maxtor
or the Company to comply with or perform any covenant or obligation under any of
the Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
3.21 Authority; Binding Nature of Agreements. Each of Maxtor, IMS
Delaware, the Holding Companies and the International IMS Entities has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under each of the Transactional Agreements to which it
is or may become a party. The execution, delivery and performance by each of
Maxtor, IMS Delaware, the Holding Companies and the International IMS Entities
of the Transactional Agreements to which it is or may become a party have been,
or prior to Closing will be, duly authorized by all necessary action on the part
of Maxtor, IMS Delaware, the Holding Companies or the International IMS
Entities, as the case may be, and their respective stockholders, boards of
directors and officers. This Agreement constitutes the legal, valid and binding
obligation of each of Maxtor and IMS Delaware, enforceable against each of them
in accordance with its terms. Upon the execution and delivery of each of the
other Transactional Agreements at the Closing, each of such other Transactional
Agreements to which Maxtor, IMS Delaware, the Holding Companies or any of the
International IMS Entities is a party will constitute the legal, valid and
binding obligation of each of Maxtor, IMS Delaware, the Holding Companies and
the International IMS Entities, as the case may be, and will be enforceable
against each of them in accordance with its terms.
3.22 Non-Contravention; Consents. Except as set forth in Part 3.22 of
the Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions (excluding any consummation or performance to occur after the
Closing), will directly or indirectly (with or without notice or lapse of time):
(a) Contravene, conflict with or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Maxtor or the Company, or any of the assets of
the Company, is subject;
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(b) Contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or any employee of the Company;
(c) Contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any IMS Contract,
except for any contravention, conflict, violation, breach or default which could
not reasonably be expected to result in a Material Adverse Effect;
(d) Give any Person the right to (i) declare a default or
exercise any remedy under any IMS Contract, except where any such default or
exercise of a remedy could not reasonably be expected to result in a Material
Adverse Effect, (ii) accelerate the maturity or performance of any IMS Contract,
except where such acceleration could not reasonably be expected to result in a
Material Adverse Effect, or (iii) cancel, terminate or modify any IMS Contract,
except where any such cancellation, termination or modification could not
reasonably be expected to result in a Material Adverse Effect;
(e) Contravene, conflict with or result in a violation or
breach of or a default under any provision of, or give any Person the right to
declare a default under, any Contract to which Maxtor is a party or by which
Maxtor is bound; or
(f) Result in the imposition or creation of any Encumbrance
upon or with respect to any of the Shares or the assets of the Company.
Except as set forth in Part 3.22 of the Disclosure Schedule, and assuming the
representations in Section 3 of the Recapitalization Agreement are accurate,
neither Maxtor nor the Company was, is or will be required to make any filing
with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.
3.23 Notes and Accounts Receivable. All notes and accounts receivable
of the Company comprising part of the assets of the Company are reflected
properly on its books and records in accordance with GAAP consistently applied,
are current (according to the historical accounting practices of IMS Delaware
and each of the International IMS Entities) and are valid receivables subject to
no Encumbrances, setoffs or counterclaims, except for an allowance for doubtful
accounts set forth on the face of the Unaudited Balance Sheet, as reasonably
adjusted for the passage of time through the Closing Date.
3.24 Inventory. Except as set forth on Part 3.24 of the Disclosure
Schedule, the inventory of the Company consists of raw materials and supplies,
manufactured and purchased parts, goods in process and finished goods, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete,
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damaged or defective, subject only to the reserve for inventory write down set
forth on the face of the Pro Forma Balance Sheet (rather than in any notes
thereto), as reasonably adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company.
3.25 Product Warranty. Each product manufactured, sold, leased or
delivered by the Company has been manufactured, sold, leased or delivered in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company does not have any liability (and to Maxtor's
Knowledge there is no basis for any present or future action, suit, Proceeding,
claim or demand against the Company giving rise to any liability) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims as set forth on the face of the
Unaudited Balance Sheet (rather than in any notes thereto) as reasonably
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. Except as set forth on Part 3.25 of the
Disclosure Schedule, no product manufactured, sold, leased or delivered by the
Company is subject to any guarantee, warranty or other indemnity beyond the
Company's applicable standard terms and conditions of sale or lease.
3.26 Product Liability. To Maxtor's Knowledge, the Company does not
have any liability (and there is no basis for any present or future action,
suit, Proceeding, claim or demand against the Company giving rise to any
liability) arising out of any injury to individuals or property as a result of
the ownership, possession or use of any product manufactured, sold, leased or
delivered by the Company.
3.27 Brokers. Neither Maxtor nor any of its officers or directors has
agreed to or become obligated to pay, or has taken any action that might result
in any Person claiming to be entitled to receive, any brokerage commission,
finder's fee or similar commission or fee in connection with any of the
Transactions.
3.28 Manufacturing Services Agreement. To Maxtor's Knowledge, Maxtor
has no current reason to believe that products to be manufactured by the Company
for Maxtor pursuant to the Manufacturing Services Agreement will not be
competitive in terms of price or quality, provided that Maxtor's future
assertion of its right not to purchase products under the Manufacturing Services
Agreement if the Company is not competitive in terms of price and quality shall
not be deemed to be a breach of this representation and shall not be limited in
any manner by this representation.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF IMS DELAWARE
IMS Delaware represents and warrants, to and for the benefit of Maxtor,
as follows:
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4.1 Brokers. Neither IMS Delaware nor its officers or directors has
agreed or become obligated to pay, or has taken any action that might result in
any Person claiming to be entitled to receive, any brokerage commission,
finders' fee or similar commission or fee from Maxtor in connection with any of
the Transactions.
SECTION 5
CLOSING COVENANTS OF MAXTOR.
5.1 Access And Investigation. At all times from and after the date
hereof and until the Closing, Maxtor shall provide the Company, its
Representatives and the Investors: (i) full access during normal business hours
to all facilities and existing books, records, Tax Returns, work papers and
other documents and other information relating to the Company and the Business;
and (ii) all such additional financial, operating and other data and information
with respect to the business and affairs of the Company and the Business as they
may reasonably request. Such investigation shall be conducted in a manner which
does not unreasonably interfere with the Company or the Business.
5.2 Filings And Consents. Maxtor shall ensure that all filings,
notices and Consents required to be made, given and obtained by Maxtor in order
to consummate the Transactions (including the filings, notices and Consents
referred to in Part 3.22 of the Disclosure Schedule and including, if
applicable, any filings by Maxtor or the Company required under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and the rules promulgated
thereunder) are made, given and obtained on a timely basis.
5.3 Notification; Updates To Disclosure Schedule.
(a) During the Pre-Closing Period, Maxtor shall promptly
notify the Company and the Investors in writing of:
(i) The discovery by Maxtor of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material Breach of any representation
or warranty made by Maxtor in this Agreement;
(ii) Any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would cause
or constitute a Breach of any representation or warranty made by Maxtor in this
Agreement if (A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
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(iii) Any Breach of any covenant or obligation of
Maxtor; and
(iv) Any event, condition, fact or circumstance that
may make the timely satisfaction of any of the conditions set forth in Section 7
or Section 8 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 5.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then Maxtor shall promptly deliver to IMS Delaware and the
Investors an update to the Disclosure Schedule specifying such change, provided,
however, that any update to the Disclosure Schedule so delivered to the Company
and the Investors shall not be deemed to amend the representations and
warranties of Maxtor unless each of the Company and the Investors accept in
writing any such updates.
5.4 Audited March 30 Financial Statements.
(a) As soon as practicable after the date hereof, but in any
event prior to the Closing Date, Maxtor shall cause IMS Delaware to prepare and
deliver to the Investors audited consolidated balance sheets of IMS Delaware and
the International IMS Entities (and/or any predecessors, if appropriate) as of
March 30, 1996 (the "Combined Balance Sheet") and 1995 and related statements of
operations and cashflows for the three fiscal year periods ended March 30, 1996
(collectively, the "Audited Financial Statements"). The Combined Balance Sheet
shall contain only those assets and those liabilities in nature and amount
appropriate for the normal operation of the Business in the ordinary course. The
Audited Financial Statements (i) shall be prepared in accordance with GAAP,
consistent with the prior audited financial statements included in the Financial
Statements, (ii) shall satisfy the U.S. Securities and Exchange Commission's
requirements under Regulation S-X, and (iii) shall not differ materially from
the Unaudited Financial Statements.
(b) Notwithstanding the foregoing, if the Closing shall not
have occurred prior to June 29, 1996, then Maxtor shall cause IMS Delaware to
deliver, in addition to the Audited Financial Statements referred to in Section
5.4(a), an unaudited consolidated balance sheet of IMS Delaware, the Holding
Companies and the International IMS Entities (and/or any predecessors, if
appropriate) as of June 29, 1996, and related statements of operations and
cashflows for the three month period then ended. In such event, such June 29,
1996 financial statements shall (i) be prepared in accordance with GAAP applied
on a consistent basis with the Audited Financial Statements, (ii) present fairly
the financial position of the Company as of the date thereof and the results of
operations and cash flows of the Company for the period covered thereby, (iii)
be correct and complete in all material respects, and (iv) be consistent with
the books and records of the Company.
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5.5 Reasonable Commercial Efforts. During the Pre-Closing Period,
Maxtor shall use reasonable commercial efforts to cause the conditions set forth
in Sections 7 (it being acknowledged that the condition set forth in Section 7.7
hereof is not under Maxtor's control or supervision) and 8 to be satisfied on a
timely basis.
5.6 Maintenance of Records. From and after the Closing Date, Maxtor
shall use reasonable care to maintain the books, records, Tax Returns, work
papers and other documents and information in its possession relating to the
Company arising prior to the Closing and, damage by fire or other casualty or
accident excepted, shall not for a period of six (6) years after the Closing
Date destroy or dispose of any such records unless it shall first have notified
the Company of its intention to do so and shall have afforded the Company an
opportunity to take possession thereof. From and after the Closing Date, Maxtor
shall afford the Company access to all preclosing business record and
information of the Company in its possession, including data processing
information, upon reasonable notice during ordinary business hours for all
reasonable business purposes, and Maxtor shall permit the Company to make copies
of any such records and retain possession of such copies.
5.7 Indemnification Agreements. Prior to the Closing Date Maxtor
shall have, entered into indemnification agreements with each officer or
director of IMS Delaware, each of the Holding Companies and each of the
International IMS Entities, pursuant to which Maxtor shall indemnify any such
officer or director to the maximum extent permitted by law in connection with
any action taken by any such officer or director in his or her capacity as an
officer or director of IMS Delaware, the Holding Companies and/or the
International IMS Entities relating to the Transactions and the Reorganization
Actions. Maxtor further agrees to indemnify the Company for any and all
liabilities and/or expenses incurred by the Company as a result of any claim
relating to any such action taken by any such officer or director in connection
with the Transactions and the Reorganization Actions. Maxtor's obligation to
indemnify such officers and directors and the Company with regard to such
actions shall survive the Closing for an unlimited period of time.
SECTION 6
COVENANTS OF IMS DELAWARE
6.1 Reasonable Commercial Efforts. During the Pre-Closing Period,
IMS Delaware shall use its reasonable commercial efforts to cause all of the
conditions to the obligations of Maxtor and the Company under this Agreement
which are within its control to be satisfied as promptly as practicable, and
will not undertake any course of action inconsistent therewith or which would
make any of such representations or warranties contained herein untrue at or
prior to the Closing and will not undertake any course of action inconsistent
therewith or which makes its representations or warranties contained herein
untrue at or prior to the Closing.
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6.2 Filings and Consents. IMS Delaware shall ensure that all
filings, notices and Consents required to be made, given and obtained by IMS
Delaware in order to consummate the Transactions (including, if applicable, any
filings by IMS Delaware required under the HSR Act and the rules promulgated
thereunder) are made, given and obtained on a timely basis.
6.3 Notification. During the Pre-Closing Period, IMS Delaware shall
promptly notify Maxtor in writing of any event, condition, fact or circumstance
that may make the timely satisfaction of any of the conditions set forth in
Section 7 or Section 8 impossible or unlikely.
6.4 Maintenance of Records. From and after the Closing Date, the
Company shall use reasonable care to maintain the books, records, Tax Returns,
work papers and other documents and information in its possession relating to
the Company arising prior to the Closing and, damage by fire or other casualty
or accident excepted, shall not for a period of six (6) years after the Closing
Date destroy or dispose of any such records unless it shall first have notified
Maxtor of its intention to do so and shall have afforded Maxtor an opportunity
to take possession thereof. From and after the Closing Date, the Company shall
afford Maxtor access to all preclosing business record and information of the
Company in its possession, including data processing information, upon
reasonable notice during ordinary business hours for all reasonable business
purposes, and the Company shall permit Maxtor to make copies of any such records
and retain possession of such copies.
6.5 Release from Guarantees. Promptly after the Closing, the Company
shall take such commercially reasonable actions as may be necessary to relieve
Maxtor from any guarantee with respect to the funded debt or operating liens of
the Company with G.E. Capital and Comdisco set forth in Part 3.10(a) of the
Disclosure Schedule.
6.6 Reimbursement for Capital Expenditures. At the Closing, the
reimbursement of expenditures under Section 4.10 of the Recapitalization
Agreement shall be paid to Maxtor.
SECTION 7
CONDITIONS PRECEDENT TO IMS DELAWARE'S OBLIGATION TO CLOSE
IMS Delaware's obligation to purchase the Shares, and to issue the IMS
Note and the Warrant and take the other actions required to be taken by IMS
Delaware at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by IMS
Delaware in whole or in part, in writing, and with the written consent of the
Investors):
7.1 Accuracy of Representations. The representations and warranties
made by Maxtor in this Agreement shall be accurate in all respects as of the
Closing Date as if made at the Closing Date except that to the extent any such
representation or warranty relates expressly to
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another date, such representation or warranty shall be accurate in all respects
as of such date, and the Recapitalization Agreement shall not have been
terminated pursuant to Section 4.4(b) thereof.
7.2 Performance of Obligations.
(a) The transactions contemplated by Section 2.3 hereof
shall have been consummated.
(b) Each of the documents referred to in Sections 2.4(b)(i),
2.4(b)(vi), 2.4(b)(ix), 2.4(b)(x) and 2.4(b)(xi) shall have been executed by
each of the parties thereto and delivered to IMS Delaware.
(c) All covenants, conditions and agreements contained in
this Agreement to be performed by Maxtor on or prior to the Closing, shall have
been duly complied with and performed in all respects.
7.3 Consents. Each of the Consents identified in Part 3.22 of the
Disclosure Schedule shall have been obtained and shall be in full force and
effect, except for such consents, the failure to obtain such consents would not
either individually or in the aggregate result in a Material Adverse Effect with
regard to the Company or any of the International IMS Entities.
7.4 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of the Unaudited Balance Sheet, and, if the
Closing has not occurred prior to June 29, 1996, the results set forth in the
financial statements as of and for the period ended June 29, 1996, delivered
pursuant to Section 5.4(b) hereof shall not differ materially from the results
for such period set forth in the financial projections provided to the Investors
on or prior to the date hereof and attached as Schedule 7.4 to this Agreement.
7.5 Additional Documents. The Company shall have received the
following documents:
(a) An opinion letter from Xxxx Xxxx Xxxx & Freidenrich with
respect to matters relating to Maxtor and IMS Delaware, an opinion letter of
Xxxxxxxxxx Xxxxxxx & Co. as to matters relating to IMS Hong Kong and an opinion
letter of Xxx Xxxxxx & Co. as to matters relating to IMS Cayman, in
substantially the respective forms set forth as Exhibit F. With respect to an
opinion letter of Xxxxx & XxXxxxxx as to matters relating to IMS Thailand the
Company shall have received an opinion in a form reasonably acceptable to the
Company and the Investors.
(b) Such other documents as IMS Delaware may reasonably
request in good faith at least five (5) business days prior to the Closing Date
for the purpose of (i) evidencing the accuracy of any representation or warranty
made by Maxtor, (ii) evidencing the compliance by Maxtor with, or the
performance by Maxtor of, any covenant or obligation set forth in this
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Agreement, (iii) evidencing the satisfaction of any condition set forth in this
Section 7, or (iv) otherwise facilitating the consummation or performance of any
of the Transactions.
7.6 No Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Transactions shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending,
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Transactions, which makes
the consummation of the Transactions illegal.
7.7 Financing. The Company shall have obtained commitments to
provide the debt and equity financings contemplated by the Transactional
Agreements, all Transactional Agreements and definitive agreements for such debt
financings reasonably satisfactory in form and substance to the Company and the
Investors shall have been entered into by all parties thereto, and all
conditions to such commitments and to the parties' obligations to close the
transactions contemplated thereby (including such financings) (other than the
closing of the transactions hereunder) shall have been satisfied or waived.
7.8 Termination of Existing Options, Warrants and Other Rights. Any
Option, warrant or other right to purchase the capital stock of any of IMS
Delaware, the Holding Companies or the International IMS Entities pursuant to
any IMS Plan or otherwise shall have been canceled, redeemed or otherwise
terminated on or prior to the Closing Date.
7.9 HEA Side Letter. The Company and the Investors shall have
received a letter from Hyundai Electronics America ("HEA") in substantially the
form previously supplied in draft form to the Investors indicating that it has
not elected and will not elect push-down accounting treatment with respect to
the acquisition of Maxtor by HEA.
7.10 Compensation of Employees. Prior to the Closing, Maxtor shall
have paid all accrued salary and bonus obligations to any and all employees,
officers and directors of the Company pursuant to any employment agreement,
arrangement or understanding.
7.11 Indemnification Agreements. Prior to the Closing, Maxtor and
each of the officers and directors of IMS Delaware, each of the Holding
Companies and each of the International IMS entities shall have entered into
indemnification agreements as contemplated by Section 5.7 hereof and in form and
substance satisfactory to the Investors.
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SECTION 8
CONDITIONS PRECEDENT TO MAXTOR'S OBLIGATION TO CLOSE
Maxtor's obligation to sell the Shares and to take the other actions
required to be taken by Maxtor at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Maxtor, in whole or in part, in writing):
8.1 Accuracy of Representations. All of the representations and
warranties made by the Company in this Agreement and by the Investors in the
Recapitalization Agreement shall have been accurate as of the date of this
Agreement and shall be accurate as of the Closing Date as if made at the Closing
Date.
8.2 Company's Performance.
(a) The Transactions contemplated by Section 2.3 hereof and
the Reorganization Actions shall have been consummated.
(b) IMS Delaware shall have paid $23.7 million to Maxtor
shall have caused IMS Hong Kong to repay the Hong Kong Note, and shall have
issued the IMS Delaware Note and the Maxtor Warrant to Maxtor.
(c) The certificate from IMS Delaware required under Section
2.4 hereof, the Stockholders Agreement, the Manufacturing Services Agreement and
the Transition Services Agreement shall have been executed by each of the
parties thereto and delivered to Maxtor.
(d) All of the other covenants, conditions and agreements
contained in this Agreement to be performed by the Company on or prior to the
Closing shall have been duly complied with and performed in all respects.
8.3 No Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Transactions shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Transactions, which makes
the consummation of the Transactions illegal.
8.4 Financing. The Company shall have obtained commitments to
provide the debt and equity financings contemplated by the Transactional
Agreements, all Transactional Agreements shall have been entered into by all
parties thereto, and all conditions to such commitments and to the parties'
obligated to close such agreements (other than the closing of the transactions
hereunder) shall have been satisfied or waived.
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8.5 Additional Documents. Maxtor shall have received the following:
(a) A certificate from the Investors to the effect that the
representations of the Investors in Section 3 of the Recapitalization Agreement
are accurate as of the Closing and that all covenants, agreements and conditions
contained in the Recapitalization Agreement to be performed by the Investors on
or prior to the Closing Date shall have been performed or complied with.
(b) The IMS Officer Certificate.
8.6 Key Employees Confidentiality Agreements. Key employees of the
Company and the International IMS entities shall have signed or reaffirmed
confidentiality agreements with Maxtor in consideration of Maxtor entering to
the Transactional Agreements.
8.7 Legal Opinion. Maxtor shall have received an opinion letter from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C. as to the valid and binding effect of the
IMS Guarantee in form and substance reasonably satisfactory to Maxtor.
SECTION 9
TERMINATION
9.1 Termination Events. This Agreement may be terminated prior to
the Closing:
(a) By the Company or Maxtor, if the Recapitalization
Agreement shall have been terminated;
(b) By the Company if the Closing has not taken place on or
before August 15, 1996 (other than as a result of any failure on the part of the
Company to comply with or perform any covenant or obligation under this
Agreement);
(c) By Maxtor if the Closing has not taken place on or
before August 15, 1996 (other than as a result of any failure on the part of
Maxtor to comply with or perform any covenant or obligation set forth in this
Agreement); or
(d) By the Company, in the event that the Company and the
Investors have not accepted any update to the Disclosing Schedule delivered by
Maxtor pursuant to Section 5.3 hereof, or Maxtor, the Company and the Investors
have not reached a resolution as to Environmental Matters as contemplated by
Section 4.11 of the Recapitalization Agreement.
9.2 Termination Procedures. If the Company wishes to terminate this
Agreement, the Company shall deliver to Maxtor a written notice stating that the
Company is terminating this
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Agreement and setting forth a brief description of the basis on which the
Purchaser is terminating this Agreement. If Maxtor wishes to terminate this
Agreement, Maxtor shall deliver to the Company a written notice stating that
Maxtor is terminating this Agreement and setting forth a brief description of
the basis on which Maxtor is terminating this Agreement.
9.3 Effect Of Termination. If this Agreement is terminated pursuant
to Section 9.1, all further obligations of the parties under this Agreement
shall terminate and, subject to the proviso of this sentence, neither Maxtor, on
the one hand, nor the Company and the other Indemnitees, on the other, shall
have any obligations to the other for any Damages in connection with or arising
out of this Agreement; provided, however, that: (a) no party shall be relieved
of any obligation or other Liability arising from any Breach by such party of
any provision of this Agreement; and (b) the parties shall, in all events,
remain bound by and continue to be subject to the provisions set forth in
Section 12.3.
SECTION 10
SURVIVAL OF REPRESENTATIONS AND COVENANTS
10.1 Survival Of Representations And Covenants.
(a) The representations, warranties, covenants and
obligations of each party to this Agreement shall survive (without limitation):
(i) the Closing and the sale of the Shares to the Company; (ii) any sale or
other disposition of any or all of the Shares by the Company; and (iii) the sale
or dissolution of any party to this Agreement, and (except for those set forth
in Sections 2.1, 3.1, 3.3, 3.14, 3.17, 3.21 and 5.7) shall expire on the second
anniversary of the Closing Date. Those representations and warranties set forth
in Sections 3.14 and 3.17 shall survive until 30 days after the expiration of
the applicable statute of limitations period, and the representations,
warranties, covenants and obligations set forth in Sections 2.1, 3.1, 3.3, 3.21
and 5.7 shall survive for an unlimited period of time. No party shall be
entitled to any remedy resulting from the Breach of a representation, warranty,
covenant or obligation of the other party unless the Breaching party has
received during the applicable survival period a Claim Notice (as defined in the
Recapitalization Agreement). Notwithstanding the foregoing, if a Claim Notice
relating to any representation, warranty, covenant or obligation is given to
Maxtor on or prior to the second anniversary of the Closing Date (or such longer
survival period as applicable), then, notwithstanding anything to the contrary
contained in this Section 10.1(a), such representation or warranty shall not so
expire, but rather shall remain in full force and effect solely with respect to
such claim until such time as each and every claim specifically set forth in
such Claim Notice has been fully and finally resolved, either by means of a
written settlement agreement executed on behalf of Maxtor and the Company or by
means of a final, non-appealable judgment issued by a court of competent
jurisdiction.
(b) For purposes of this Agreement, each statement or other
item of infor-
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mation set forth in the Disclosure Schedule or in any update to the Disclosure
Schedule shall be deemed to be a representation and warranty made by Maxtor in
this Agreement.
SECTION 11
CERTAIN POST-CLOSING COVENANTS
11.1 Publicity. Maxtor and the Company shall ensure that, on and at
all times after the date hereof, neither the Company nor Maxtor will furnish any
communication to the public generally if the subject matter thereof describes
any substantive provision of the Transactions without the prior approval of the
other of them as to the content thereof, which approval shall not be
unreasonably withheld; provided that the foregoing shall not be deemed to
prohibit any disclosure required by any applicable law, the rules and
regulations of any securities exchange or automated quotation system on which
such party is listed or traded or by any competent Governmental Body.
11.2 Tax Indemnification and Returns.
(a) Maxtor shall be responsible for and shall pay or cause
to be paid (i) any and all Taxes (other than IMS' Taxes, as defined below) with
respect to or relating to the Company, whensoever arising, including any
transferee or secondary liability for Taxes, that are attributable to any
taxable period ending on or prior to the Closing Date and, in the case of a
taxable period that includes, but does not end on the Closing Date, the portion
of such taxable period that ends on the Closing Date, (ii) any and all Taxes of
Maxtor and its affiliates, whensoever arising, including any transferee or
secondary liability for Taxes, (x) for which the Company is or would be liable
or responsible as a result of having been (or ceasing to be) a member of any
affiliated, consolidated, combined or unitary group which included Maxtor and
its affiliates or (y) attributable to the transactions contemplated by this
Agreement, and (iii) any and all Taxes arising out of a breach of any
representation or warranty contained in Section 3.14 hereof ("Maxtor's Taxes");
provided, however, that, with respect to Taxes for any period described in (i)
above, Maxtor shall be responsible for and shall pay such Taxes only to the
extent that they exceed $1,145,245 (the "Current Income Taxes Payable"). For
purposes of this Section 11.2(a), Maxtor will not be liable to the Company as a
result of the eventual reversal of the deferred tax liability of $299,016
accrued on the Company's Unaudited Balance Sheet, which equals the difference
between the Company's total income tax liability on the Unaudited Balance Sheet
and the Current Income Taxes Payable.
(b) The Company shall be responsible for and shall timely
pay or cause to be paid (i) any and all Taxes (other than Maxtor's Taxes) with
respect to the Company, whensoever arising, including any transferee or
secondary liability for Taxes, that are attributable to any taxable period
commencing after the Closing Date and, in the case of a taxable period that
includes, but does not end on, the Effective Time, the portion of such taxable
period that begins
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on the day after the Closing Date, (other than any liability for the Taxes of
Maxtor and its affiliates (other than the Company) which arises pursuant to
Treas. Reg. Section 1.1502-6 or a corresponding provision of state, local, or
foreign law) and (ii) Taxes of the Company for which Maxtor is otherwise
responsible (because such Taxes are attributable to taxable periods ending on or
prior to the Closing Date), where such Taxes arise as a result of actions taken
by the Company after the Closing, and relate to the loss, in whole or in part,
of a Tax exemption, Tax holiday, or other Tax-sparing arrangement ("IMS'
Taxes").
(c) If the Company files any Tax Return which includes
payment of Maxtor's Taxes, Maxtor shall promptly reimburse the Company for such
Maxtor's Taxes when such Return is filed. If Maxtor files any Return which
includes payments of IMS' Taxes, the Company shall promptly reimburse Maxtor for
such IMS' Taxes when such Return is filed. Maxtor shall timely provide to the
Company all information and documents within the possession of Maxtor (or its
auditors, advisors or affiliates) and signatures and consents necessary for the
Company to properly prepare and file the Returns described in the second
preceding sentence or in connection with the determination of any Tax liability
or any audit, examination or proceeding. The Company shall timely provide to
Maxtor all information and documents within its possession or the possession of
its auditors, advisors or affiliates and signatures and consents necessary for
Maxtor to properly prepare and file the Returns described in the second
preceding sentence or in connection with the determination of any Tax liability
or any audit, examination or proceeding. Each party hereto shall reasonably
cooperate with the other (at their own expense) party to obtain other
information or documents necessary or appropriate to prepare and file Returns or
elections or necessary or appropriate in connection with the determination of
any Tax liability or any audit, examination or proceeding. Any amount payable
pursuant to this Section 11.2 shall not be payable unless and until the party
requesting payment has made available all information reasonably necessary to
verify the amount of the requested payment. The party responsible for the
payment of Taxes under the indemnity provisions of this Agreement shall have
ultimate control, in an audit, with respect to decisions related to items for
which it is responsible.
(d) For all United States Federal income tax purposes, and,
to the extent not prohibited by applicable law, for purposes of United States
state and local income tax laws, Maxtor shall include the Closing Date in their
holding period for the non-U.S. subsidiaries of the Company.
11.3 Agreement Not to Compete.
(a) Maxtor understands that the Company shall be entitled to
protect and preserve the going concern value of the Business to the extent
permitted by law and that IMS Delaware would not have entered into this
Agreement absent the provisions of this Section 11.3 and, therefore, Maxtor
agrees that Maxtor will not (except for activities contemplated by the
Manufacturing Services Agreement) (i) prior to the third anniversary of the
Closing Date, directly or indirectly engage in any business competing with the
Business, and (ii) at any time communicate or divulge any secret or confidential
information, knowledge or data related to the
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Business to any Person other than the Company, all of which it agrees to hold in
confidence and protect as it protects its own confidential information for the
benefit of the Company; provided that nothing contained in this Agreement shall
in any way restrict or impair Maxtor's right to use, disclose or otherwise deal
with information which at the time of disclosure is generally available to the
public through no act of Maxtor. For purposes of this Section 11.3, the phrase
"directly or indirectly engage in" shall include having a direct or indirect
ownership interest (other than ownership of less than 5% of the outstanding
voting securities of a Person) in any Person which is primarily engaged in a
business competing with the Business and shall not include any pre-existing or
current activities by Hyundai Electronics Industries ("HEI") or its subsidiaries
other than activities conducted by Maxtor and its subsidiaries.
(b) Notwithstanding any other provision of this Agreement,
it is understood and agreed that the remedy of indemnity payments pursuant to
Section 10 hereof and other remedies at law would be inadequate in the case of
any Breach of the covenants contained in Section 11.3(a) and Maxtor agrees that
the Company shall be entitled to equitable relief, including the remedy of
specific performance, with respect to any breach or attempted breach of such
covenants.
11.4 Waiver of Defense. IMS Delaware hereby agrees that neither it
nor any of the Holding Companies or the International IMS Entities will assert
as a defense to the enforcement by Maxtor of any Transactional Agreement (i) the
failure of any such entity to have the absolute and unrestricted right, power
and authority to enter into and to perform its obligations under each such
agreement, or (ii) the failure of each such agreement to be executed and
delivered by such entity to have been duly authorized by all necessary action on
the part of such entity and its board of directors.
SECTION 12
MISCELLANEOUS PROVISIONS
12.1 Obligations of Maxtor. The obligations and liability of Maxtor
under this Agreement and the other Transactional Agreements shall not be limited
in any way by:
(a) The dissolution or insolvency of, or the appointment of
any receiver, conservator or liquidator for, or the commencement of any
bankruptcy, reorganization, moratorium, arrangement or other proceeding by,
against or with respect to, the Company or Maxtor;
(b) Any merger of the Company with or into any other Entity;
or
(c) Any right or claim, including with respect to
indemnification, that Maxtor may have under the Recapitalization Agreement or
the Stockholders Agreement.
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12.2 Further Assurances. Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
12.3 Fees And Expenses.
(a) Maxtor shall bear and pay (i) all fees, costs and
expenses that have been incurred or that are in the future incurred by, on
behalf of or for the benefit of Maxtor in connection with the Transactional
Agreements and the Transactions and (ii) all legal fees, costs and expenses
payable to Xxxx Xxxx Xxxx & Freidenrich and, Xxxxxxxxxx Xxxxxxx & Co., Xxxxx &
XxXxxxxx and Xxx Xxxxxx & Co. in connection with the Transactional Agreements
and the Transactions. The Company shall indemnify and hold Maxtor harmless from
any brokerage commissions, finders fee or similar commission or fees incurred by
the Company or its management in connection with any of the Transactions.
(b) If the Closing occurs, the Company shall bear and pay
all fees, costs and expenses that have been incurred or that are in the future
incurred by, on behalf of or for the benefit of the Company, the Company's
management or the Investors in connection with the Transactional Agreements and
the Transactions (including all fees, costs and expenses payable to the
environmental consultant engaged in connection with the Transactions, Price
Waterhouse LLP, Chemical Bank, Chemical Securities Asia Limited, Cravath, Swaine
& Xxxxx, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., Xxxxxxxx & Xxxxx, Xxxxxxx
Xxxxxx & Master, Xxxxxxxx & Thong-Ek and Xxxxxx & Xxxxxx).
(c) If the Closing does not occur (i) because of a decision
by Maxtor not to consummate the Transactions or because of any other material
breach of the Transactional Agreements by Maxtor or the Company, then Maxtor
shall bear and pay only fees, costs and expenses in connection with the
Transactional Agreements and the Transactions payable to Chemical Bank, Chemical
Securities Asia Limited, Cravath, Swaine & Xxxxx, Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, P.C., any environmental consultant engaged in connection with the
Transactions and Price Waterhouse LLP, provided that the fees of Price
Waterhouse LLP payable by Maxtor pursuant to this Section 12.3(c) shall not
exceed $100,000 and the fees, costs and expenses payable to Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, P.C., payable pursuant to this Section 12.3(c) shall be only
agreed upon reasonable fees, costs and expenses and shall not exceed $175,000,
and the Investors shall pay fees, costs and expenses of foreign counsel acting
on behalf of the Company and the Investors and the fees, costs and expenses of
Xxxxxxxx & Xxxxx; (ii) because of a decision by the Investors not to consummate
the Transactions not due to a material breach of the Transactional Agreements by
Maxtor or the Company or because of any other material breach of the
Transactional Agreements by the Investors, then the Investors shall bear and pay
only fees, costs and expenses in connection with the Transactional Agreements
and the Transactions payable to Chemical Bank, Chemical Securities Asia Limited,
Cravath, Swaine & Xxxxx, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., any
environmental consultant engaged in connection with the Transactions (and the
Investors exclusively shall be entitled to own and to
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use the work product of any such consultant) and Price Waterhouse LLP; or (iii)
for any reason other than as set forth in (i) or (ii) above, the Investors shall
bear and pay only fees, costs and expenses in connection with the Transactional
Agreements and the Transactions payable to Chemical Bank, Chemical Securities
Asia Limited, Cravath, Swaine & Xxxxx, foreign counsel acting on behalf of the
Company and the Investors and Price Waterhouse LLP, and Maxtor shall pay only
fees, costs and expenses in connection with the Transactional Agreements and the
Transactions payable to Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., and any
environmental consultant engaged in connection with the Transactions, provided
that the fees, costs and expenses payable to Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
P.C. payable pursuant to this section shall only be agreed upon reasonable fees,
costs and expenses and shall not exceed $175,000, and provided in all events
that Maxtor shall pay the fees, costs and expenses of Xxxx Xxxx Xxxx &
Freidenrich and foreign counsel acting on behalf of Maxtor.
12.4 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this Agreement
is brought against any party to this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
12.5 Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
If to Maxtor, to: Maxtor Corporation
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
with a copy to: Xxxx Xxxx Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxx Xxxx Xxxxxxx, Esq.
If to the Company, to: International Manufacturing Services, Inc.
000 Xxxxx Xxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx
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with copies to: Prudential Private Equity Investors III, L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Attention: Xxxx Xxxxx
Xxxx X. Xxxxxx
Oak Investment Partners
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telecopier: 000- 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier: 212-446-4900
Attention: Xxxxxxxxx Xxxxx, Esq.
12.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
12.7 Governing Law.
(a) This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) The parties hereby consent to the jurisdiction of the
courts of the State of California and the federal courts of the Northern
District of California for all disputes arising under this Agreement.
(c) Nothing in this Section 12.7 shall be deemed to limit or
otherwise affect the right of any Indemnitee to commence any legal proceeding or
otherwise against Maxtor in any forum or jurisdiction.
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12.8 Successors And Assigns; Parties In Interest.
(a) This Agreement shall be binding upon the Company and its
successors and assigns (if any), and Maxtor and its successors and assigns (if
any). This Agreement shall inure to the benefit of the Company, Maxtor, the
other Indemnitees, and the respective successors and assigns (if any) of the
foregoing.
(b) Except for an assignment of rights for the benefit of
any creditor of the Company, neither Maxtor nor the Company shall be permitted
to assign any of its rights or delegate any of its obligations under this
Agreement.
(c) Except for the provisions of Sections 5.1, 10, 12.1,
12.3 and 12.8 hereof, none of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than the parties to this
Agreement and their respective successors and permitted assigns, if any.
12.9 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative and not alternative. Maxtor
and the Company agree that:
(a) In the event of any Breach or threatened Breach either
party of any covenant, obligation or other provision set forth in this
Agreement, the other party shall be entitled (in addition to any other remedy
that may be available to it) to (i) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and/or (ii) an injunction restraining such Breach or
threatened Breach; and
(b) No Party shall be required to provide any bond or other
security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.
12.10 Severability. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party to be bound thereby. The waiver by a party
of any breach hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
12.11 Amendments. This Agreement may not be amended, modified, altered
or supplemented, and no provision of this Agreement may be waived, other than
by means of a written instrument duly executed and delivered on behalf of Maxtor
and IMS Delaware, which instrument shall be satisfactory in form and substance
to, and consented to in writing by, the Investors.
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12.12 Waiver. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances, other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12.13 Entire Agreement. The Transactional Agreements set forth the
entire under standing of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
12.14 Construction. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement. As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation." Except
as otherwise indicated, all references in this Agreement to "Sections" and
"Exhibits" are intended to refer to Sections of this Agreement and Exhibits to
this Agreement.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed and delivered as of ____________, 1996.
INTERNATIONAL MANUFACTURING
SERVICES, INC.
a Delaware corporation
By:______________________________________
Xxxxxx X. Xxxxxxx
Its: President
MAXTOR CORPORATION
a Delaware Corporation
By:______________________________________
_____________________________________
Its:_____________________________________
52
--------------------------------------------------------------------------------
REDEMPTION AGREEMENT
between
INTERNATIONAL MANUFACTURING SERVICES, INC.,
a Delaware corporation;
and
MAXTOR CORPORATION,
a Delaware corporation
------------------------
Dated as of May 16, 1996
------------------------
--------------------------------------------------------------------------------
53
TABLE OF CONTENTS
PAGE
----
SECTION 1 - DEFINITIONS......................................................................2
1.1 Definitions...................................................................2
1.2 Interpretations..............................................................12
SECTION 2 - REDEMPTION AND RELATED TRANSACTIONS.............................................12
2.1 Purchase of Shares...........................................................12
2.2 Purchase Price...............................................................12
2.3 Ownership of the Holding Companies and the International IMS Entities........12
2.4 Closing......................................................................13
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF MAXTOR.......................................14
3.1 Due Organization; Subsidiaries; Etc..........................................15
3.2 Certificate of Incorporation and Bylaws; Records.............................15
3.3 Capitalization...............................................................16
3.4 Financial Statements.........................................................16
3.5 Absence Of Changes...........................................................16
3.6 Title to Assets..............................................................18
3.7 Equipment, Etc...............................................................19
3.8 Real Property................................................................19
3.9 Proprietary Assets...........................................................19
3.10 Contracts....................................................................21
3.11 Liabilities..................................................................22
3.12 Compliance With Legal Requirements...........................................22
3.13 Governmental Authorizations..................................................23
3.14 Tax Matters..................................................................23
3.15 Employee And Labor Matters...................................................25
3.16 Benefit Plans; ERISA.........................................................26
3.17 Environment, Health and Safety...............................................27
3.18 Insurance....................................................................29
3.19 Related Party Transactions...................................................30
3.20 Proceedings; Orders..........................................................30
3.21 Authority; Binding Nature of Agreements......................................31
3.22 Non-Contravention; Consents..................................................31
3.23 Notes and Accounts Receivable................................................32
3.24 Inventory....................................................................32
3.25 Product Warranty.............................................................33
3.26 Product Liability............................................................33
3.27 Brokers......................................................................33
3.28 Manufacturing Services Agreement.............................................33
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF IMS DELAWARE..................................33
4.1 Brokers......................................................................34
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
SECTION 5 - CLOSING COVENANTS OF MAXTOR.....................................................34
5.1 Access And Investigation.....................................................34
5.2 Filings And Consents.........................................................34
5.3 Notification; Updates To Disclosure Schedule.................................34
5.4 Audited March 30 Financial Statements........................................35
5.5 Reasonable Commercial Efforts................................................36
5.6 Maintenance of Records.......................................................36
5.7 Indemnification Agreements...................................................36
SECTION 6 - COVENANTS OF IMS DELAWARE.......................................................36
6.1 Reasonable Commercial Efforts................................................36
6.2 Filings and Consents.........................................................37
6.3 Notification.................................................................37
6.4 Maintenance of Records.......................................................37
6.5 Release from Guarantees......................................................37
6.6 Reimbursement for Capital Expenditures.......................................37
SECTION 7 - CONDITIONS PRECEDENT TO IMS DELAWARE'S OBLIGATION TO CLOSE......................37
7.1 Accuracy of Representations..................................................37
7.2 Performance of Obligations...................................................38
7.3 Consents.....................................................................38
7.4 No Material Adverse Change...................................................38
7.5 Additional Documents.........................................................38
7.6 No Illegality................................................................39
7.7 Financing. .................................................................39
7.8 Termination of Existing Options, Warrants and Other Rights. ................39
7.9 HEA Side Letter..............................................................39
7.10 Compensation of Employees....................................................39
7.11 Indemnification Agreements...................................................39
SECTION 8 - CONDITIONS PRECEDENT TO MAXTOR'S OBLIGATION TO CLOSE............................40
8.1 Accuracy of Representations..................................................40
8.2 Company's Performance........................................................40
8.3 No Illegality................................................................40
8.4 Financing....................................................................40
8.5 Additional Documents.........................................................41
8.6 Key Employees Confidentiality Agreements.....................................41
8.7 Legal Opinion................................................................41
SECTION 9 - TERMINATION.....................................................................41
9.1 Termination Events...........................................................41
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
9.2 Termination Procedures.......................................................41
9.3 Effect Of Termination........................................................42
SECTION 10 - SURVIVAL OF REPRESENTATIONS AND COVENANTS......................................42
10.1 Survival Of Representations And Covenants....................................42
SECTION 11 - CERTAIN POST-CLOSING COVENANTS.................................................43
11.1 Publicity....................................................................43
11.2 Tax Indemnification and Returns..............................................43
11.3 Agreement Not to Compete.....................................................44
11.4 Waiver of Defense............................................................45
SECTION 12 - MISCELLANEOUS PROVISIONS.......................................................45
12.1 Obligations of Maxtor........................................................45
12.2 Further Assurances...........................................................46
12.3 Fees And Expenses............................................................46
12.4 Attorneys' Fees..............................................................47
12.5 Notices......................................................................47
12.6 Counterparts.................................................................48
12.7 Governing Law................................................................48
12.8 Successors And Assigns; Parties In Interest..................................49
12.9 Remedies Cumulative; Specific Performance....................................49
12.10 Severability.................................................................49
12.11 Amendments...................................................................49
12.12 Waiver.......................................................................50
12.13 Entire Agreement.............................................................50
12.14 Construction.................................................................50
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EXHIBITS
Exhibit A: Form of Maxtor Warrant
Exhibit B: Terms of Maxtor Notes and Terms of IMS Guarantee
Exhibit C: Form of IMS Officer Certificate
Exhibit D: Form of Manufacturing Services Agreement
Exhibit E: Form of Transition Services Agreement
Exhibit F: Forms of Opinion Letters from Xxxx Xxxx Xxxx & Freidenrich and
Foreign Counsel
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INTERNATIONAL MANUFACTURING SERVICES INC.
TERMS OF GUARANTY TO MAXTOR CORPORATION
Guarantor: International Manufacturing Services, Inc., a Delaware
corporation ("IMS") and each of its current and future
subsidiaries (individually and collectively "Delaware Corp.")
Obligations
Guaranteed: Long Term Notes (the "Guaranteed Obligations") issued to
Maxtor Corporation ("Maxtor") by Delaware Corp.'s Hong Kong
and Thailand subsidiaries (the "Borrowers") in aggregate
principal amount of Twenty Million Dollars.
Nature of
Guaranty: Guaranty of payment (i.e., Maxtor can request payment under
the Guaranty without first seeking payment from the
Borrowers).
Time of
Issuance: Concurrent with the issuance of the Borrowers' Notes.
Term: Guaranty to remain in effect until the Guaranteed Obligations
are satisfied in cash. Delaware Corp. may not terminate the
Guaranty for any reason.
Security: No assets (except the Subordinated Notes (as defined below),
on the terms set forth herein) are pledged (or will at any
time be pledged) to secure the Guaranteed Obligations.
Priority of
Guaranty: H. Subordinated to (i) the bank group (the "Bank Group")
credit facility obligations and any modifications or
increases thereto or refinancings or replacements
thereof up to an aggregate amount not to exceed
$50,000,000 (the "Bank Facility"), and (ii) any other
indebtedness (other than trade payables) or
contingent obligations of Delaware Corp. that are
specified as "Senior Indebtedness," provided that the
aggregate amount of indebtedness and contingent
obligations referred to in clause (i) shall not
exceed $50,000,000, and provided further, that the
indebtedness and contingent obligations referred to
in clause (ii) shall not constitute Senior
Indebtedness to the extent including the same would
cause the aggregate principal amount plus commitments
outstanding under Senior Indebtedness, including the
Bank Facility, to exceed $50,000,000. Such other
Senior Indebtedness shall not contain any limitations
on the repayment of the Guaranteed Obligations that
58
are more restrictive than those provided for in the
Bank Facility, but may contain limitations on the
ability of the holders thereof to exercise the rights
given to holders of Senior Indebtedness under the
subordination provisions of the Guaranty and the
Guaranteed Obligations.
I. Senior to the 12% Subordinated Notes (the
"Subordinated Notes") made payable to Prudential
Equity Partners and Oak Investment Partners
(collectively, "Investors").
Terms of
Subordination
to Bank Facility: A. No payment may be made with respect to the Guaranteed
Obligations during the existence of a payment default
under Senior Indebtedness, or a non-payment default
under the Bank Facility, or a non-payment default
under Senior Indebtedness other than the Bank
Facility, if the aggregate amount of such Senior
Indebtedness equals or exceeds $5,000,000. So long as
any amounts are outstanding or any commitments to
advance funds exist in respect of the Bank Facility,
only scheduled interest payments and permitted
principal payments (whether expressly permitted by
the terms of the Bank Facility or by consent of the
holders thereof) may be made with respect to the
Guaranteed Obligations.
B. If Delaware Corp. or any Borrower under the Bank
Facility is dissolved or in bankruptcy, no payments
may be made with respect to the Guaranteed
Obligations until the Senior Indebtedness obligations
are satisfied in cash (or the Event of Default caused
by such dissolution or bankruptcy is waived or cured
to the satisfaction of the holders of the Bank
Facility or, if the Bank Facility is not then in
effect, the holders of the other Senior
Indebtedness). If, as of the date of dissolution or
bankruptcy, the agent under the Bank Facility has not
made any demand for payment by Delaware Corp. under
its obligations in respect of the Bank Facility, then
payments to Maxtor under the Note shall be held by
the agent under the Bank Facility as collateral for
the obligations thereunder. The agent and the Bank
Group shall have no liability to Maxtor with respect
to the handling of such collateral, except such
losses arising from their gross negligence or willful
misconduct.
C. Maxtor may not enforce any rights and remedies with
respect to the Guaranty or the Guaranteed Obligations
while the Senior Indebtedness remains outstanding.
Maxtor shall enforce its rights and remedies with
respect to the Guaranty and the Guaranteed
Obligations at the direction of the agent for the
Bank Facility during the continuance of any Event of
Default until the obligations under the Bank Facility
are
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satisfied in cash (provided that the Bank Group shall
indemnify Maxtor for liabilities resulting from
actions taken by Maxtor at the direction of the agent
for the Bank Facility) .
D. The agent for the Bank Facility shall have the right
to submit claims on Maxtor's behalf in a bankruptcy
proceeding, and shall have the right to vote its
claims in such proceeding.
E. Any payments received in respect of the Guaranteed
Obligations in contravention hereof (or pursuant to
enforcement actions taken at the direction of the
agent for the Bank Facility) shall be paid over to
the agent for the Bank Facility (or, after all
obligations under the Bank Facility are satisfied in
cash, the holders of the Senior Indebtedness, as
their interests may appear, if so provided in the
definitive documentation for the Guaranty and the
Notes) and applied to all obligations thereunder
until such obligations are satisfied in cash.
F. If any Default or Event of Default occurs or if
payment is due under the Senior Indebtedness (e.g.
upon an initial public offering), then the
obligations under the Senior Indebtedness that are
then due and payable shall be paid in cash before any
payment is made in respect of the Guaranteed
Obligations.
G. Maxtor shall waive any right to bring, or to cause
any other party to bring, any fraudulent conveyance
or similar action with respect to the guaranty made
by Delaware Corp. under the Senior Indebtedness.
H. The subordination of the Guaranteed Obligations to
the obligations of Delaware Corp. in respect of the
Senior Indebtedness shall remain effective in the
event that such obligations of Delaware Corp. are
equitably subordinated for any reason in a bankruptcy
proceeding. Thus, any payments that Maxtor receives
in the proceeding, including distributions with
respect to Delaware Corp.'s obligations in respect of
the Senior Indebtedness (or in respect of the
Subordinated Notes), shall be turned over to the
agent for the Bank Facility (or, after all
obligations under the Bank Facility are satisfied in
cash, the holders of the Senior Indebtedness, as
their interests may appear, if so provided in the
definitive documentation for the Guaranty and the
Notes), for application to the obligations
thereunder.
Terms of
Notes
Subordination: A. Only scheduled payments may be made with respect to
the Subordinated Notes; however, during continuance
of Event of Default no payments may be made until the
Event of Default is cured or waived.
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B. If Delaware Corp. or any Borrower under the
Guaranteed Obligations is dissolved or in bankruptcy,
no payments may be made with respect to the
Subordinated Notes until the Guaranteed Obligations
are satisfied in cash (or the Event of Default caused
by such dissolution or bankruptcy is waived or cured
to the satisfaction of Maxtor). If Maxtor, as of the
date of dissolution or bankruptcy, has not made any
demand for payment under the Guaranty, the
Subordinated Notes payments shall be held by Maxtor
as collateral for the Guaranteed Obligations (except
to the extent being held as collateral for the Bank
Facility). Maxtor shall not have any liability to the
Subordinated Notes holders (the "Subordinated
Noteholders") with respect to the handling of such
collateral, except for losses arising from gross
negligence or willful misconduct.
C. If an Event of Default (as defined below) occurs or
if payment is due under the Guaranteed Obligations
(e.g., upon an initial public offering), then the
Guaranteed Obligations due and payable shall be paid
in cash before any Subordinated Notes payment is
made.
D. The Subordinated Noteholders may not enforce any
rights and remedies with respect to the Subordinated
Notes while the Guaranty is outstanding (except as
directed or undertaken by the agent for the Bank
Facility, provided that the Bank Group shall
indemnify Subordinated Noteholders for any
liabilities resulting from actions taken by the
Subordinated Noteholders at the direction of the
agent for the Bank Group).
E. The Subordinated Noteholders shall waive any right to
bring, or to cause any other party to bring, any
fraudulent conveyance or similar action with respect
to the Guaranty.
F. The subordination of the Subordinated Notes to the
Guaranty shall remain effective in the event that the
Guaranty is equitably subordinated for any reason in
a bankruptcy proceeding. Thus, any payments that the
Subordinated Noteholders receive in the proceeding,
including distributions with respect to the
Guaranteed Obligations, shall, after the obligations
under the Bank Facility are satisfied in cash, be
turned over to Maxtor for application to the
Guaranteed Obligations.
G. Subject to the rights of the agent for the Bank
Facility, Maxtor shall have to right to submit claims
on the Subordinated Noteholders' behalf in a
bankruptcy proceeding, if they are not acting in a
timely manner, and shall have the right to vote their
claims in such proceeding.
Covenants: Guaranty to contain the following covenants and such other
covenants as may
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be mutually agreed upon:
A. IMS shall not declare or pay any shareholder
distribution or repurchase any of its securities
except to the extent permitted under the Bank
Facility and except for employee stock repurchases;
B. Delaware Corp. shall not grant any security interests
in its assets to secure indebtedness for borrowed
money, except for liens existing at closing, and
liens in connection with the Bank Facility and other
Senior Indebtedness;
C. Delaware Corp. shall not engage in any business other
than the businesses conducted by IMS or any of its
subsidiaries on the closing date and other businesses
related or incidental thereto;
D. Delaware Corp. shall deliver periodic financial
information to Maxtor; and
E. At reasonable times and upon reasonable notice,
Delaware Corp. shall permit Maxtor to inspect its
properties.
Waivers: Guaranty to contain standard guarantor waivers of defenses to
enforcement.
Events of
Default: As defined in the Guaranteed Obligations (Guaranteed
Obligations' definitions to include specific Events of Default
relating to the Guaranty and Delaware Corp.). Specific Events
of Default relating to Delaware Corp.:
A. Dissolution or winding up of IMS;
B. Bankruptcy or similar proceeding initiated by or
against IMS;
C. Payment default under Senior Indebtedness;
non-payment default under the Bank Facility; and
non-payment default under Senior Indebtedness other
than the Bank Facility if the aggregate amount of
such Senior Indebtedness equals or exceeds
$5,000,000. (Upon the waiver or cure any such default
under Senior Indebtedness, the cross-default caused
under the Guaranty shall be automatically waived);
and
D. Event of Default under the Subordinated Notes (upon
the waiver or cure any Event of Default under the
Subordinated Notes, the cross-default caused under
the Guaranty shall be automatically waived).
Assignments: No assignments are permitted, except that Maxtor may assign to
Hyundai Electronics America ("Hyundai") or any of its
affiliates (provided that Hyundai shall own at least 51% of
the economic interests and at least 51% of
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62
the voting interests of such affiliate, and such affiliate
shall not have been created in anticipation of such
assignment); and provided that the Guaranty and the Guaranteed
Obligations must be assigned concurrently, and the assignment
documents must provide that if the assignee of the Guaranty
and the Guaranteed Obligations ceases to be an affiliate of
Hyundai, then either such assignment will automatically be
rescinded, or the Guaranty and the Guaranteed Obligations must
be assigned to another affiliate of Hyundai.
Offsets: Delaware Corp. may (with the prior written consent of the
agent under the Bank Facility) offset amounts due under the
Guaranty against amounts due from Maxtor to Delaware Corp. in
respect of Maxtor's indemnification obligations under the
Recapitalization Agreement, Redemption Agreement and other
agreements involving Delaware Corp., Maxtor and the other
parties thereto. In addition, Delaware Corp. may (with the
prior written consent of the agent under the Bank Facility)
offset amounts under the Guaranty against amounts due from
Maxtor to Investors in respect of Maxtor's indemnification
obligations under such agreements, but only to the extent such
indemnification rights have been assigned by Investors to
Delaware Corp. Amounts shall not be deemed to be "due" from
Maxtor in respect of its indemnification obligations until
such time as any applicable dispute resolution procedures set
forth in the relevant agreement have been satisfied.
Governing
Law: California, except that the subordination provisions shall be
governed by New York law.
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INTERNATIONAL MANUFACTURING SERVICES INC. HONG KONG
TERMS OF LONG TERM NOTE TO MAXTOR CORPORATION
Issuer: IMS Hong Kong ("Hong Kong").
Consideration: Issued as payment for stock redeemed.
Amount: Sixteen Million Three Hundred Thousand Dollars.
Interest: Interest shall accrue at the rate of seven and forty-three one
hundredths percent (7.43%) per annum (computed on the basis of
a 360-day year and the actual number of days elapsed in any
year) on the unpaid principal amount outstanding; provided,
however, that on the first anniversary date of the Note,
interest shall automatically adjust to, and be calculated in
accordance with the formula for, the Bank Facility Interest
Rate (as defined below) in effect on the first anniversary
date of the Note plus forty-three one hundredths percent
(0.43%); provided that in no event shall the rate of interest,
as so adjusted, exceed the rate equal to the Bank Facility
Interest Rate in effect on the closing date plus one and
forty-three one hundredths percent (1.43%). As used herein,
"Bank Facility Interest Rate" means, as of any date of
determination, the fixed rate of interest that would then be
applicable to a LIBOR loan under the Bank Facility (as defined
below) with a six-month interest period commencing on such
date, plus the interest rate spread then applicable under the
Bank Facility. Accrued interest to be paid quarterly on the
last day of each March, June, September and December,
commencing June 1996. Payments shall be subject to any
applicable withholding or other taxes imposed by taxing
authorities.
Term: Anniversary date of issuance in 2001.
Security: No assets are pledged to secure the Note.
Scheduled
Amortization: Straight line principal amortization on the third, fourth and
fifth anniversaries of the Note, payable solely under the
circumstances and to the extent permitted in the Bank Facility
Documentation (as in effect on the closing date). Any material
changes in the circumstances under which, and the extent to
which, such payments are permitted in the Bank Facility
Documentation shall require the consent of Maxtor. Any
amortization payments that cannot be made as a result of the
limitations set forth in the Bank Facility Documentation shall
be due and payable on the following scheduled amortization
date.
Mandatory
Prepayment: A. Upon closing of the initial public offering ("IPO")
by International Manufacturing Services, Inc., a
Delaware corporation ("Delaware
64
Corp.") or any of Delaware Corp.'s direct or indirect
subsidiaries, the Note and the Notes issued by IMS
Thailand and Delaware Corp. shall be prepaid, either
ratably or as otherwise selected by IMS, in amount
equal to the IPO Proceeds Amount (as defined below),
subject to (a) the consent of the underwriters for
the IPO, (b) no default under the Bank Credit
Facility, and (c) any changes in the IPO Proceeds
Amount required to be applied to the Bank Facility,
so long as such changes were made as a result of or
in conjunction with any potential or actual default
under the Bank Facility, or were reasonably
necessary, in the reasonable opinion of Delaware
Corp., to allow Delaware Corp. or any of its
subsidiaries to continue the availability of or to
obtain financing under the Bank Facility. The "IPO
Proceeds Amount" shall be an amount equal to a
portion of the net proceeds of the IPO payable to
Delaware Corp., after deduction of underwriters
discounts and expenses, determined in accordance with
Schedule A attached hereto.
B. Upon closing of a secondary public offering (an
"Offering") by Delaware Corp. or any of Delaware
Corp.'s direct or indirect subsidiaries, the Note and
the Notes issued by IMS Thailand and Delaware Corp.
shall be prepaid, either ratably or as otherwise
selected by IMS, in amount equal to the Offering
Proceeds Amount (as defined below), subject to (a)
the consent of the underwriters for the Offering and
(b) satisfaction of the capital needs of Delaware
Corp., as determined by the board of directors of
Delaware Corp. in the exercise of its reasonable
discretion. The "Offering Proceeds Amount" shall be
fifty percent of the net proceeds of the Offering
payable to Delaware Corp., after deduction of
underwriters discounts and expenses, and deduction of
such amounts as shall be applied to the Bank
Facility.
C. Principal outstanding due on termination date.
D. Upon a Change in Ownership or Fundamental Change
(using definitions comparable to those in IMS's
restated Certificate of Incorporation) of IMS, then
the net cash proceeds received from such change shall
be applied to prepay scheduled principal amortization
payments under the Note and the Notes made by
Thailand and Delaware Corp., in order of their
maturity.
E. Upon a Change in Ownership or Fundamental Change of
Hong Kong or any subsidiary of Delaware Corp. of
which Hong Kong is a subsidiary (unless Hong Kong
remains, directly or indirectly, a subsidiary of
Delaware Corp., or the assets sold will be owned,
directly or indirectly, by Delaware Corp. or any of
its subsidiaries), then the net cash proceeds
received from such change shall, to the extent not
required to be used to repay the Bank Facility, be
applied to prepay scheduled principal amortization
payments under the Note and the
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Notes made by Thailand and Delaware Corp., in order
of their maturity.
F. Upon a Change in Ownership or Fundamental Change of
Thailand (unless Thailand remains, directly or
indirectly, a subsidiary of Delaware Corp. or the
assets sold will be owned, directly or indirectly, by
Delaware Corp. or any of its subsidiaries), then (a)
Delaware Corp. shall commit, within three months
following the consummation of such change, to
reinvest the net cash proceeds thereof attributable
to Thailand in businesses comparable, related or
incidental to the businesses of Delaware Corp., or
(b) if Delaware Corp. shall fail to make such
commitment within such three month period, than such
net cash proceeds shall, to the extent not required
to be used to repay the Bank Facility, be applied to
prepay scheduled principal amortization payments
under the Note and the Notes made by Thailand and
Delaware Corp., in order of their maturity.
Optional
Prepayment: Hong Kong may prepay the Note, in part or in full, at any time
without payment of any premium or penalty, subject to the
consent of the holders of the Bank Facility.
Subordination: Subordinated to (i) the bank group (the "Bank Group") credit
facility obligations and any modifications or increases
thereto or refinancings or replacements thereof (the "Bank
Facility"), regardless of the amount thereof, and (ii) any
other indebtedness or contingent obligations of Delaware Corp.
and its subsidiaries, including Hong Kong, that are specified
as "Senior Indebtedness," up to a maximum aggregate
outstanding amount and subject to such other limitations as
set forth in the term sheet for the Delaware Corp. Guaranty.
Terms of subordination are same as those for subordination of
the Delaware Corp. Guaranty to the Bank Facility.
Covenants: Note to contain the following covenants and such other
covenants as may be mutually agreed upon:
A. Hong Kong shall not grant any security interests in
its assets to secure indebtedness for borrowed money,
except for liens existing at closing, and liens in
connection with the Bank Facility and other Senior
Indebtedness;
B. Hong Kong shall not engage in any business other than
the businesses conducted by Delaware Corp. or any of
its subsidiaries on the closing date and other
businesses related or incidental thereto;
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66
C. Hong Kong shall deliver periodic financial
information to Maxtor; and
D. At reasonable times and upon reasonable notice, Hong
Kong shall permit Maxtor to inspect its properties.
Events of
Default: Events of Default to be mutually agreed upon. Specific Events
of Default relating to Hong Kong:
A. Dissolution or winding up of Hong Kong;
B. Bankruptcy or similar proceeding initiated by or
against Hong Kong; and
C. Payment default under Senior Indebtedness;
non-payment default under the Bank Facility; and
non-payment default under Senior Indebtedness other
than the Bank Facility if the aggregate amount of
such Senior Indebtedness equals or exceeds
$5,000,000. (Upon the waiver or cure any such default
or event of default under such Senior Indebtedness,
the cross-default caused under the Note shall be
automatically waived).
Remedies: A. Increase in interest rate
B. May accelerate principal balance
C. May exercise rights and remedies granted by law
Assignments: Assignments permitted only on the terms applicable to the
Delaware Corp. Guaranty.
Offsets: Offsets permitted only on the terms applicable to the Delaware
Corp. Guaranty.
Governing Law: California, except that the subordination provisions shall
be governed by New York law.
Venue: Hong Kong submits to jurisdiction of California and New York
courts.
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EXHIBIT B
INTERNATIONAL MANUFACTURING SERVICES INC.
TERMS OF LONG TERM NOTE TO MAXTOR CORPORATION
Issuer:IMS Thailand.
Consideration:Issued as payment for stock redeemed.
Amount:Two Million Dollars.
All other terms shall mirror those applicable to the Notes issued to Maxtor
Corporation by IMS Hong Kong and IMS Delaware, except that except that the
interest rate shall be three and five tenths percent (3.5%) per annum until the
first anniversary, and then shall be changed to the Bank
Facility Interest Rate minus three and five tenths (3.5%).
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INTERNATIONAL MANUFACTURING SERVICES INC.
TERMS OF LONG TERM NOTE TO MAXTOR CORPORATION
Issuer: IMS Delaware.
Consideration: Issued as payment for stock redeemed.
Amount: One Million Seven Hundred Thousand Dollars.
All other terms shall mirror those applicable to the Notes issued to Maxtor
Corporation by IMS Hong Kong and IMS Thailand, except that the interest rate
shall be seven percent (7%) per annum until the first anniversary, and then
shall be changed to the Bank Facility Interest Rate plus one percent (1%).
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SCHEDULE A
ALLOCATION OF IPO PROCEEDS
IPO PROCEEDS PAYABLE TO BANK
AMOUNT* GROUP** PAYABLE TO MAXTOR PAYABLE TO IMS
------------ --------------- ----------------- --------------
$30,000,000 10 12 8
35,000,000 10 15 10
40,000,000 10 19 11
45,000,000 10 20 15
50,000,000 10 20 20
* In the event the IPO Proceeds Amount is (i) less than $30,000,000, then
IPO Proceeds Amount payable to Maxtor and IMS shall be reduced on a pro
rata basis; (ii) greater than $50,000,000, then the IPO Proceeds Amount
payable to IMS shall be increased by such excess amount; (iii) in
between two of the amounts set forth above, then the IPO Proceeds
Amount payable to Maxtor and IMS shall be interpolated in the ratios
set forth in the above table (until Maxtor is paid in full).
** In the event the IPO Proceeds Amount payable to the Bank Group is
greater than or less than $10,000,000, then the IPO Proceeds Amount
payable to Maxtor and IMS shall be decreased or increased, as
applicable, on a pro rata basis (until Maxtor is paid in full).
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EXHIBIT C
INTERNATIONAL MANUFACTURING SERVICES, INC.
OFFICER CERTIFICATE
Pursuant to Section 8.6(c) of the Redemption Agreement, dated May 16,
1996, by and between International Manufacturing Services, Inc., a Delaware
corporation ("IMS Delaware"), and Maxtor Corporation, a Delaware corporation
("Maxtor") (the "Redemption Agreement"), the undersigned, Xxxxxx X. Xxxxxxx,
hereby certifies to Maxtor on behalf of the IMS Delaware that:
1. To the undersigned's current actual knowledge, he is the duly elected,
qualified and acting President and Chief Executive Officer of IMS
Delaware and is authorized to execute this certificate on behalf of the
management of IMS Delaware and in that capacity is familiar with the
operations of the Company (as defined in the Redemption Agreement).
2. The undersigned has carefully reviewed the Redemption Agreement and the
related Disclosure Schedule.
3. To the undersigned's current actual knowledge, after duly inquiring
orally as to the actual knowledge of Xxxxx Xxxxxxxx, X.X. Xxxx, and
Xxxxxx Xxxx, but without any further investigation, the representations
and warranties made by Maxtor in the Sections 3.5(a), (b), (d), (e),
(f), (g), (i), (j)(ii), (k), (o), (p), (q) and (r) (exclusively with
respect to the representations set forth in this certificate), 3.7,
3.9(a)(iii) and (v), 3.10, 3.11, 3.15(c) and (e), 3.19, 3.20(a)(i), (c)
and (d), 3.24, 3.25 and 3.26 of the Redemption Agreement (considered
collectively), after giving effect to any update to the Disclosure
Schedule delivered in accordance with Section 5.3 prior to Closing, are
accurate in all material respects as of the Closing Date as if made at
the Closing Date;
This IMS Officer Certificate may be relied upon solely by Maxtor for
the purpose of making representations and warranties contained in the Redemption
Agreement, and may not be relied upon by any other Person, including any other
party to the Redemption Agreement and the related Recapitalization Agreement. No
Person other than the undersigned shall have any liability hereunder, and the
undersigned shall have no liability hereunder except in the case of willful
deception or gross negligence. Nothing herein shall affect in any way any
obligation of Maxtor, whether pursuant to contract, law or otherwise, to
indemnify Xxxxxx X. Xxxxxxx for any matter regardless of whether such matter may
be covered by one or more representation or warranty referenced to above. In
addition, nothing herein shall affect in any way the indemnification obligations
of Maxtor to any Indemnitee pursuant to the Recapitalization Agreement.
All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Redemption Agreement.
IN WITNESS WHEREOF, the undersigned has executed this IMS Officer
Certificate this ____ day of June, 1996.
INTERNATIONAL MANUFACTURING SERVICES, INC.
-----------------------------------------
Xxxxxx X. Xxxxxxx,
President and Chief Executive Officer
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EXHIBIT E
FORM OF TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement ("Agreement") is entered into by and
between Maxtor Corporation, a Delaware corporation, with its principal place of
business at 000 Xxxxx Xxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000, XXX ("Maxtor")
and International Manufacturing Services, Inc., a Delaware corporation, with its
principal place of business at 000 Xxxxx Xxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx
00000, XXX ("IMS"). This Agreement is effective as of May 16, 1996 ("Effective
Date").
RECITALS
WHEREAS, concurrent with the execution of this Agreement, Maxtor and
IMS will close certain related transactions set forth in that certain
Recapitalization Agreement, Redemption Agreement and Stockholders Agreement of
even date herewith, and will execute that certain Manufacturing Services
Agreement of even date herewith (collectively, the "Related Agreements");
WHEREAS, IMS wishes to-procure certain services from Maxtor;
WHEREAS, Maxtor is willing to provide such services on the terms and
conditions set forth below;
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth in the Related Agreements and herein, the parties agree as follows:
AGREEMENT
D. Services Appendix. IMS will purchase and Maxtor will provide
the services set forth in Exhibit A. as amended from time to time by mutual
agreement ("Services"). The Services are currently being provided by Maxtor to
IMS as Maxtor's wholly-owned subsidiary. Maxtor will continue to provide these
Services in a manner similar to the services as currently provided for the
period of this Agreement, subject to the provisions of Section 5.
E. Purchase Price. Fees for Services are to be based upon current
transfer pricing levels unless such levels have not been established. In such
case, pricing shall be at Maxtor's reasonable cost. Maxtor shall be entitled to
increase any and all pricing levels in an amount commensurate with actual cost
increases. The Services and the corresponding fees as of the Effective Date are
set forth in Exhibit A.
F. Payment Term. As of the Effective Date, payment for Services
shall be fifteen (15) days from invoice date. Thirty (30) days thereafter,
payment terms shall be twenty (20) days
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72
from invoice date. Sixty (60) days from the Effective Date and thereafter,
payment terms shall be net thirty (30) days from receipt of invoice by IMS.
During the transition period herein .defined, the same payment terms shall apply
under the Manufacturing Services Agreement being executed concurrently by the
parties. All invoices shall be paid in U.S. dollars.
G. Term and Termination. The term of this Agreement shall begin
on the Effective Date and continue for 6 months thereafter unless earlier
terminated as provided herein and subject to section 5 below. Either party may
terminate this Agreement for default by the other party of any material
obligation, unless the defaulting party cures such material breach within thirty
(30) days after receipt of written notice from the non-defaulting party.
Additionally, IMS may terminate, in whole or in part, any of the Services
provided upon fifteen (15) days written notification to Maxtor. Except for
Services referred to in Section 5 hereafter, IMS has the option to extend this
agreement for Services not previously canceled by written notice and subject to
Maxtor's acceptance, which may be conditioned on the scope, type and price of
added services.
H. Office Space and Related Services. Subject to compliance by
IMS with such facility security requirements as may be established by Maxtor
from time to time, Maxtor shall continue to provide office space and related
services to IMS in its current location as specified in Exhibit A throughout the
term of this Agreement including any extension under Section 4, or until Maxtor
moves its principal offices, whichever is earlier. Following written notice from
Maxtor that it is moving out of its current space, IMS shall have ninety (90)
days to relocate to its own office space and to provide its own related
services. If, however, IMS is not successful in locating its own space, IMS may
request and Maxtor may, at its sole option, continue to provide equivalent
office space and related services in its new facilities.
I. Indemnification. Each party hereto ("Indemnitor") shall
defend, indemnify and hold harmless the other ("Indemnitee") from and against
all actions, claims, liabilities, losses and expenses (including reasonable
attorneys' fees) where it is alleged that the tortious conduct of Indemnitor
related to its performance hereunder has proximately caused death or injury to
persons or damage to real or tangible personal property.
J. No Warranty. All Services are provided by Maxtor AS IS, with
no warranty, express, implied or statutory of any kind. Except for the express
obligations undertaken by Maxtor herein, Maxtor disclaims any warranties as to
the nature or quality of the Services. IMS assumes sole responsibility for
determining whether the Services are appropriate to IMS' requirements.
K. Limits of Liability. Maxtor shall not be responsible for
indirect, special, or consequential damages of any kind (including, without
limitation, lost profits or revenues), whether or not informed of the
possibility thereof, or for direct damages in excess of the aggregate fees paid
to Maxtor by IMS hereunder.
L. Miscellaneous Provisions.
1 Entire Agreement. This Agreement constitutes the
entire agreement
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73
between the parties regarding the subject matter hereof and supersedes all prior
agreements and understandings between the parties relating thereto. This
Agreement may not be modified except by a writing signed by an authorized
representative of both parties.
2 Independent Contractor. The relationship of the
parties established by this Agreement is that of independent contractors, and
nothing contained herein shall be constructed to constitute either party as the
agent of the other party or as partners, joint ventures, co-owners or otherwise
as participants in a joint or common undertaking.
3 Advertising. No advertising by either party shall
display or contain any trademarks or references to the other party without the
other part's prior written approval.
4 Assignment and Subcontracting. This Agreement may not
be assigned by either party without the advance written consent of the other
party, which shall not be unreasonably withhold, except to its affiliate or
subsidiary or pursuant to a merger, sale of all or substantially all of its
assets, or other corporate reorganization.
5 Force Majeure. Except for IMS' payment obligations,
neither party, shall be liable to the other party arising out of delays or
failures to perform under the Agreement to the extent that any such delays or
failures result from any cause beyond the reasonable control of the party
affected by a force majeure event. If any such force majeure extends to beyond
ninety (90) days, either party shall have the right to terminate this Agreement
upon written notice to the other party.
6 Governing Law. This Agreement shall be governed by
the laws of the State of California, without reference to conflict of laws
principles.
7 Venue. All disputes arising under this Agreement
shall be brought in the Superior Court of the State of California in Santa Xxxxx
County or the Xxxxxxx Xxxxxxxx Xxxxx xx Xxx Xxxx, Xxxxxxxxxx, as applicable. The
Superior Court of Santa Xxxxx County and the Federal District Court of San Xxxx
shall each have exclusive jurisdiction over disputes under this Agreement. Both
parties consent to the personal jurisdiction of the above courts.
8 English Language. This Agreement is executed in the
English language only, and any transitions hereof are of no force and effect.
9 Invalidity. If any provisions or portion thereof of
this Agreement is held to be unenforceable or invalid, the remaining provisions
and portions thereof shall nevertheless be given full force and effect.
10 No Waiver. No failure to delay on the part of either
party in exercising any right or remedy hereunder shall operate as waiver
thereof, nor shall any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or of any other right or remedy.
No provision of this Agreement may be waived except in a writing signed by the
party granting such waiver.
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11 No Licenses Created. Nothing contained in this
Agreement shall be construed as conferring any license, right to use or other
right with respect to information, trademark or trade names of either party.
12 Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall constitute one single agreement
between the parties.
13 Limitation of Actions. No action, regardless of form,
arising out of this Agreement, may be brought by either party more than one year
after the cause of action has arisen.
14 Survival. Sections 6 through 9 shall survive any
expiration or termination of this Agreement.
15 Construction. This Agreement has been negotiated by
the parties and their respective counsel. This Agreement will be fairly
interpreted in accordance with its terms and without any strict construction in
favor of or against any party. Any ambiguity will not be interpreted against the
drafting party.
IN WITNESS WHEREOF, Maxtor and IMS have caused this Transition Services
Agreement to be executed by their respective officers, duly authorized.
MAXTOR: IMS:
Maxtor Corporation International Manufacturing Services,
Inc.
By:_______________________________ By:_______________________________
Name:_____________________________ Name:_____________________________
Title:____________________________ Title:____________________________
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EXHIBIT A
SERVICES APPENDIX
I. Description of Services
A. Receivables Accounting and Cash Collections. Maxtor will
continue to print invoices based upon data input by IMS and apply the cash
receipts against outstanding invoices by customer.
B. Accounts Payable Accounting and Payment Made to Vendors.
Maxtor will continue to process and voucher vendor invoices, as well as process
weekly check runs to pay the vendor invoices. Maxtor will be available to
process manual checks on an as needed basis. When separate bank accounts have
been established by IMS, IMS must provide the checks which are compatible with
Maxtor's printer. Maxtor will continue to process expense reports after IMS has
approved them for payment.
C. General Accounting and Support. Maxtor will continue to
process (but not approve) monthly journal vouchers (posted directly to IMS
accounts) and the bi-weekly payroll. The payroll process will affect the IMS
accounts directly rather than be processed into Maxtor's accounts and be billed
as an intercompany transaction. Maxtor will continue to capitalize into
property, plant and equipment and perform month end procedures to reconcile the
IMS property, plant and equipment accounts (including depreciation accounts).
Maxtor will continue to print general ledgers as currently supplied to IMS.
D. Financial Statements Preparation. Maxtor will make available
its personnel to answer any questions and provide supporting data to IMS while
performing its monthly consolidation procedures. IMS will be responsible for
filing its government compliance reports effective for all reports requiring
information as of and subsequent to April 1, 1996.
E. Credit Management. Maxtor will continue to provide and update
credit evaluation procedures of current and potential future IMS customers in
the same capacity as currently performed.
F. Foreign Exchange Management. Maxtor will purchase foreign
currencies on IMS' behalf at spot rates as instructed by IMS approved personnel.
G. Data Processing Support. Maxtor will continue to provide
information system support including data base maintenance and general ledger
application and will continue to provide month end reports as currently
provided. Maxtor will also make available EDS support for immediate computer
needs.
H. Office Space and Related Services. Subject to Section 5 of the
Agreement, Maxtor will continue to provide the same office space as currently
used and will continue to make available copies, telephone services, securities,
supplies and e-mail access so IMS has adequate facilities to perform its work
efforts.
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I. Health and Insurance Coverage. Except in cases where Maxtor's
health and insurance providers decline to extend coverage, U.S.-based employees
of IMS shall continue to have health and insurance coverage as currently
provided under Maxtor's plans.
II. Fees for Services
The fees below are subject to change by Maxtor in an amount
commensurate with any increased direct cost to Maxtor.
------------------------------------------------------------------------------------------
Service Monthly Fee
------------------------------------------------------------------------------------------
1. Receivables Accounting and Cash Collections $2,300
------------------------------------------------------------------------------------------
2. Accounts Payable Accounting and Payment Made to Vendors. 1,000
------------------------------------------------------------------------------------------
3. General Accounting and Support. 1,000
------------------------------------------------------------------------------------------
4. Financial Statements Preparation. 500
------------------------------------------------------------------------------------------
5. Credit Management. 1,000
------------------------------------------------------------------------------------------
6. Foreign Exchange Management. 1,000
------------------------------------------------------------------------------------------
7. Data Processing Support. 3,000
------------------------------------------------------------------------------------------
8. Office Space and Related Services. 5,200
------------------------------------------------------------------------------------------
TOTAL: $15,000
------------------------------------------------------------------------------------------
The fees for health and insurance coverage shall be as quoted by the
provider on a per employee basis.
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