1
EXHIBIT 2.01
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and between
Micron Electronics, Inc.,
and
GTG PC Holdings, LLC
April 30, 2001
2
MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS................................................... 2
Section 1.1: Definitions............................................... 2
Section 1.2: Other Defined Terms....................................... 10
ARTICLE 2 CONTRIBUTION OF THE BUSINESS TO THE
COMPANY....................................................... 12
Section 2.1: Formation of the Company.................................. 12
Section 2.2: Conversion of the Subsidiaries............................ 12
Section 2.3: Contribution of Certain Assets to the Company............. 12
Section 2.4: Retained Liabilities; Excluded Contracts.................. 12
ARTICLE 3 PURCHASE AND SALE............................................. 12
Section 3.1: Purchase of the Membership Interests...................... 13
Section 3.2: The Purchase Price........................................ 13
Section 3.3: Required Minimum Net Working Capital and Cash
at Closing................................................ 13
Section 3.4: Income Tax Treatment of the Purchase and Sale
of the Membership Interests............................... 14
Section 3.5: Allocation of the Purchase Price.......................... 15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER...................... 15
Section 4.1: Organization and Existence................................ 15
Section 4.2: Authorization............................................. 15
Section 4.3: Due Execution and Delivery; Binding Obligations........... 15
Section 4.4: The Company............................................... 16
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS (CONT'D)
PAGE
Section 4.5: Subsidiaries and Joint Ventures........................... 16
Section 4.6: No Conflict or Violation.................................. 17
Section 4.7: Consents and Approvals.................................... 17
Section 4.8: Litigation................................................ 18
Section 4.9: Financial Statements...................................... 18
Section 4.10: Additional/Retained Liabilities........................... 19
Section 4.11: Absence of Certain Changes................................ 19
Section 4.12: Real Property............................................. 20
Section 4.13: Material Contracts........................................ 21
Section 4.14: Customers, Resellers and Suppliers........................ 22
Section 4.15: Intellectual Property..................................... 23
Section 4.16: Books and Records......................................... 26
Section 4.17: Employees................................................. 26
Section 4.18: Employee Benefits......................................... 27
Section 4.19: Taxes..................................................... 27
Section 4.20: Compliance................................................ 29
Section 4.21: Permits................................................... 29
Section 4.22: Insurance................................................. 29
Section 4.23: Brokers and Finders....................................... 30
Section 4.24: SEC Filings, Full Disclosure.............................. 30
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS (CONT'D)
PAGE
Section 4.25: Environmental Matters..................................... 30
Section 4.26: Restrictive Documents and Territorial Restrictions........ 32
Section 4.27: Government Contracts...................................... 32
Section 4.28: Product Liability and Warranties.......................... 33
Section 4.29: Inventory................................................. 33
Section 4.30: Receivables............................................... 34
Section 4.31: Transactions with Affiliated Parties...................... 34
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
OF PURCHASER.................................................. 34
Section 5.1: Organization.............................................. 34
Section 5.2: Authorization............................................. 34
Section 5.3: Due Execution and Delivery; Binding Obligations........... 35
Section 5.4: No Conflict or Violation.................................. 35
Section 5.5: Litigation................................................ 35
Section 5.6: Consents and Approvals.................................... 35
Section 5.7: Purchase of the Membership Interests; Investment
Experience; Restricted Securities......................... 35
Section 5.8: Financial Capacity; Ability to Perform.................... 36
Section 5.9: Tax Liability............................................. 36
Section 5.10: No Ownership of Seller Securities......................... 37
Section 5.11: Full Disclosure........................................... 37
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS (CONT'D)
PAGE
Section 5.12: Brokers and Finders....................................... 37
Section 5.13: No Additional Representations and Warranties.............. 37
ARTICLE 6 COVENANTS..................................................... 37
Section 6.l: Access to Information..................................... 37
Section 6.2: Conduct of the Business................................... 38
Section 6.3: Third Party Consents...................................... 39
Section 6.4: Confidentiality........................................... 40
Section 6.5: Publicity................................................. 41
Section 6.6: Commercially Reasonable Efforts........................... 41
Section 6.7: Employees................................................. 42
Section 6.8: Updates to Schedules...................................... 43
Section 6.9: Filings................................................... 43
ARTICLE 7 CONDITIONS PRECEDENT TO PURCHASER'S
PERFORMANCE................................................... 44
Section 7.1: Seller's Performance of Covenants......................... 44
Section 7.2: Officer's Certificate..................................... 44
Section 7.3: No Injunction, etc........................................ 44
Section 7.4: HSR....................................................... 44
Section 7.5: Opinions of Counsel....................................... 45
Section 7.6: Net Working Capital and Cash.............................. 45
Section 7.7: Secretary's Certificate................................... 45
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS (CONT'D)
PAGE
ARTICLE 8 CONDITIONS PRECEDENT TO SELLER'S
PERFORMANCE................................................... 45
Section 8.1: Purchaser's Performance of Covenants...................... 45
Section 8.2: Officer's Certificate..................................... 45
Section 8.3: HSR....................................................... 45
Section 8.4: No Injunction, etc........................................ 45
Section 8.5: Financing Commitments..................................... 45
ARTICLE 9 THE CLOSING................................................... 46
Section 9.1: Closing................................................... 46
Section 9.2: Seller's Obligations...................................... 46
Section 9.3: Purchaser's Obligations................................... 46
ARTICLE 10 POST CLOSING COVENANTS........................................ 46
Section 10.1: Satisfaction of Obligations to Company Employees
Under Seller's Stock Option Plans......................... 46
Section 10.2: Further Assurances; Transition Assistance................. 46
Section 10.3: Non-Solicitation of Employees............................. 47
Section 10.4: Covenant Not to Compete................................... 47
Section 10.5: Litigation Support........................................ 48
Section 10.6: Liquidity Event........................................... 48
Section 10.7: Product Warranty and Support Obligations.................. 51
Section 10.8: Assumed Obligations....................................... 51
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS (CONT'D)
PAGE
Section 10.9: Capital Commitments....................................... 51
Section 10.10: Sole Remedy for Section 4.4(a)............................ 51
Section 10.11: Indemnification of Directors and Officers................. 52
Section 10.12: Standstill; Covenant Not to ▇▇▇........................... 52
Section 10.13: Performance of Government Contracts....................... 53
Section 10.14: GSA Contract.............................................. 53
Section 10.15: MTI Lease Payments........................................ 53
Section 10.16: Future Payments to Purchaser and its Affiliates........... 54
ARTICLE 11 INDEMNIFICATION............................................... 54
Section 11.1: Survival.................................................. 54
Section 11.2: Indemnification Obligations............................... 54
Section 11.3: Exclusive Remedy.......................................... 57
Section 11.4: Limitation on Indemnification............................. 58
ARTICLE 12 TAX MATTERS................................................... 58
Section 12.1: Tax Matters............................................... 58
ARTICLE 13 NO SOLICITATION, FIDUCIARY DUTY OUT,
TERMINATION................................................... 59
Section 13.1: No Solicitation........................................... 59
Section 13.2: Fiduciary Duty Out........................................ 60
Section 13.3: Termination............................................... 61
Section 13.4: Termination Fee........................................... 61
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
MICRON ELECTRONICS, INC.
AND
GTG PC HOLDINGS, LLC
TABLE OF CONTENTS (CONT'D)
PAGE
ARTICLE 14 MISCELLANEOUS PROVISIONS...................................... 62
Section 14.1: Further Assurances........................................ 62
Section 14.2: Expenses.................................................. 62
Section 14.3: Entire Agreement.......................................... 62
Section 14.4: Governing Law............................................. 62
Section 14.5: Attorneys' Fees........................................... 62
Section 14.6: Interest.................................................. 63
Section 14.7: Interpretation............................................ 63
Section 14.8: Waiver and Amendment...................................... 63
Section 14.9: Assignment................................................ 63
Section 14.10: Successors and Assigns; No Third Party Beneficiary;
No Joint Venture.......................................... 63
Section 14.11: Notices................................................... 63
Section 14.12: Severability.............................................. 65
Section 14.13: Pre-Closing Remedies...................................... 65
Section 14.14: No Right of Offset........................................ 65
Section 14.15: Dispute Resolution........................................ 65
Section 14.16: Transition Services....................................... 65
Section 14.17: Counterparts.............................................. 66
Section 14.18: Facsimile Signatures...................................... 66
Section 14.19: Warranty of Authority..................................... 66
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is made
and entered into as of April 30, 2001, by and between Micron Electronics, Inc.,
a Minnesota corporation ("Seller"), and GTG PC Holdings, LLC, a Delaware limited
liability company ("Purchaser").
R E C I T A L S
A. Seller owns and operates the business described on Schedule 1.1(a) of
the Disclosure Letter (the "Business") through Seller's PC division and several
subsidiary corporations.
B. Prior to the Closing (as defined below), Seller will form a single
member limited liability company under the laws of the State of Delaware named
"MicronPC, LLC" or another mutually acceptable name if such name is not
available (the "Company") as provided herein and will contribute certain assets
and liabilities of the Business to the Company in exchange for the sole
membership interest in the Company (the "Drop Down Membership Interest").
C. Prior to the Closing, Seller will statutorily convert each of the
Subsidiaries listed on Schedule 4.5 of the Disclosure Letter into a single
member Delaware limited liability company (collectively the "Converted
Companies") and by virtue thereof will hold the sole membership interest in each
of the Converted Companies (the "Converted Companies Membership Interests") and,
together with the Drop Down Membership Interest, the "Membership Interests").
D. Seller desires to sell the Membership Interests to Purchaser, and
Purchaser desires to purchase the Membership Interests from Seller, in each case
on the terms and subject to the conditions of this Agreement.
E. Contemporaneously with the execution of this Agreement, Purchaser and
Micron Technology, Inc., a shareholder of Seller ("MTI"), shall have entered
into licenses for certain Intellectual Property relating to the Business, the
MTI Lease Agreement and an indemnification agreement (collectively, the "MTI
Agreements"), and on the Closing Date, Purchaser and Seller shall enter into a
transition services agreement substantially in the form attached hereto as
Exhibit F (the "Transition Services Agreement").
F. Purchaser has agreed to provide funds to the Company (or to arrange
for such funding commitments from others) as shall be required to satisfy the
Assumed Liabilities (as defined herein) and provide working capital for the
Business, all as set forth in this Agreement.
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A G R E E M E N T
In consideration of the foregoing recitals and the respective covenants,
agreements, representations and warranties contained herein, the parties,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Unless otherwise defined, capitalized terms used herein
shall have the following meanings:
"Action" shall mean any action, claim, suit, litigation,
proceeding, investigation, arbitration, mediation or other dispute.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly, or through one or more intermediaries, controls or is
controlled by or is under common control with such Person; it being understood
that for purposes of this definition, any entity controlled by ▇▇▇▇ ▇. ▇▇▇▇▇ or
his Affiliates shall be deemed to be an Affiliate of Purchaser.
"Agreement" shall mean this Membership Interest Purchase
Agreement, as it may be amended or supplemented from time to time.
"Ancillary Agreement" and "Ancillary Agreements" shall have the
meaning given to such terms in Section 4.2 hereof.
"Assumed Liabilities" shall have the meaning given to such term in
the Contribution Agreement.
"Books and Records" shall mean all business, accounting, operating
and personnel records of Seller and the Subsidiaries primarily relating to the
Business and all other business records, books, ledgers and files of Seller and
the Subsidiaries primarily relating to the Business (other than Minutes Books
and stock records of Seller), in any form or medium, plus organizational
documents and membership interest records of the Company; provided that Seller
and the Subsidiaries may retain such original books and records and provide
copies of such books and records in cases where the original books and records
are relevant to the operations of Seller other than the Business, or are
relevant to the Retained Liabilities or the Excluded Assets or are necessary for
the preparation and/or defense of matters pertaining to Seller's and the
Subsidiaries' liability for Taxes or the preparation of financial statements or
are required to be retained by Seller by Law; provided, however, that with
respect to books and records that (i) are contained in storage or archives or
(ii) are too voluminous to copy expeditiously, Seller may fulfill its
obligations with respect thereto by providing the Company with reasonable access
to and an opportunity to copy such Books and Records.
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"Capital Leases" shall mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) by that Person as lessee which
would, in accordance with GAAP, be required to be accounted for as a capital
lease on the balance sheet of that Person.
"Cash Contribution" shall mean no less than $70,000,000; provided,
however, that if, upon the written request of Purchaser prior to the Closing,
Seller shall pay MTI an amount up to $1,500,000 under the July 1, 1996 Agreement
between IBM and MTI, such amount paid to MTI shall be deducted from the Cash
Contribution payable by Seller to Purchaser pursuant to Section 3.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Combined Assets" shall mean the Contributed Assets and the assets
of the Converted Companies immediately prior to the Closing, excluding, however,
any Excluded Assets.
"Confidential Information" shall mean all confidential and
proprietary information of a party not generally known to the public that is
disclosed by such party (the "Disclosing Party") to the other party (the
"Non-Disclosing Party") in connection with the parties' due diligence review and
the transactions contemplated by this Agreement and the Ancillary Agreements.
Confidential Information includes, without limitation, information relating to
the development, manufacturing, marketing and distribution of the Products,
customer and supplier databases, pricing and marketing information, the
Disclosing Party's business policies and practices, trade secrets, and the
Disclosing Party's financial information and projections. Confidential
Information does not include information (i) in the public domain at the time of
delivery, (ii) subsequently published or otherwise made part of the public
domain through no fault of the Non-Disclosing Party or of its Representatives,
(iii) rightfully in the Non-Disclosing Party's possession at the time of
disclosure and not acquired by the Non-Disclosing Party directly or indirectly
from such Disclosing Party or its Representatives on a confidential basis, or
(iv) which becomes available to the Non-Disclosing Party on a non-confidential
basis from a source that is not under an obligation to the Disclosing Party;
provided, however, that if the Closing shall occur, the confidential and
proprietary information of the Company and the Converted Companies will be kept
confidential by Seller and its affiliates notwithstanding Seller's rightful
possession of or access to such information.
"Contingent Payment Right" shall mean Seller's right to payments
of Net Proceeds pursuant to Section 10.6(a)(v) hereof.
"Contracts" shall mean all contracts, arrangements, licenses and
other agreements to which Seller or a Subsidiary is a party that is related
primarily to the Business or is required for the continued operation of the
Business in substantially the same manner as the Business is conducted as of the
date of this Agreement, including, without limitation, all sales agreements,
service agreements, manufacturing agreements, support agreements, sales agency
agreements, distributorship agreements, marketing agreements, purchase
commitments with suppliers or agreements relating to Intellectual Property.
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"Contributed Assets" shall have the meaning given to such term in
the Contribution Agreement.
"Damages" shall mean any claim, demand, loss, liability, damage or
expense, including, without limitation, interest, penalties and reasonable
attorneys', accountants' and experts' fees and costs of investigation and
defense incurred as a result thereof.
"Deferred Revenue" shall mean revenue amounts billed or collected
but not yet properly recognized and therefore deferred in accordance with GAAP.
"Employee Benefit Plan(s)" shall mean (i) any Employee Welfare
Plan or any Pension Plan, (ii) any "multi-employer plan," as defined in Section
4001(a)(3) of ERISA, to which Seller or any Subsidiary has contributed or been
obligated to contribute at any time or under which Seller or any Subsidiary may
incur any liability, and which covers any employee of Seller or of any
Subsidiary who may become a Company Employee, and (iii) any deferred
compensation plan, severance pay, bonus plan, profit sharing plan, workers'
compensation insurance arrangement, stock option plan, employee stock purchase
plan, and any other employee benefit plan, agreement, arrangement or commitment
maintained by Seller or any Subsidiary (whether governed by U.S. Law or the Law
of any foreign country in which Seller or any Subsidiary has any employees)
which covers any employee of Seller or of any Subsidiary who may become a
Company Employee.
"Employee Welfare Plan" shall mean any "employee welfare benefit
plan," as defined in Section 3(1) of ERISA, which Seller or any Subsidiary
sponsors or to which Seller or any Subsidiary contributes or is required to
contribute, or under which Seller or any Subsidiary may incur any liability
(whether governed by U.S. Law or the Law of any foreign country in which Seller
or any Subsidiary has any employees), and which covers any employee of Seller or
of any Subsidiary who may become a Company Employee, including each
multi-employer welfare benefit plan.
"Encumbrance" shall mean any lien, pledge, option, right of first
offer, right of first refusal or similar claim, charge, security interest, deed
of trust or mortgage or, with respect to real or tangible property only, any
easement, right-of-way, encroachment, restriction or license.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" shall mean Excluded Contracts and the assets set
forth on Schedule 1.1(b) of the Disclosure Letter.
"Excluded Contracts" shall mean the Contracts set forth on
Schedule 4.13(c) of the Disclosure Letter.
"FF&E" shall mean machinery, equipment, computers, peripherals,
Software booked as FF&E, office equipment, furnishings, leasehold improvements,
vehicles, tools and
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other similar property that are related primarily to the Business or are
required for the continued operation of the Business in substantially the same
manner as the Business is conducted as of the date of this Agreement.
"Final NWC Adjustment" shall mean (i) the absolute value of the
difference of (x) the sum of the Final NWC and the Initial NWC Adjustment and
(y) the Minimum NWC, if the Final NWC is less than zero, or (ii) the Initial NWC
Adjustment, if the Final NWC is zero or greater than zero.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States from time to time, applied on a consistent basis in
accordance with past practice.
"Governmental Authority" shall mean (i) any nation, state, county,
city or other jurisdiction of any nature, (ii) any federal, state, local,
municipal, foreign or other government, (iii) any governmental authority of any
nature, or (iv) any body exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"GSA Contract" shall mean General Services Administration Contract
No. GS35F4317D including, without limitation, (i) any modifications to such
contract, (ii) any blanket purchase agreements and teaming arrangements based on
such contract and (iii) any delivery orders and task orders issued against such
contract and/or its associated blanket purchase agreements and teaming
arrangements.
"Initial NWC Adjustment" shall mean the amount by which the
absolute value of Net Working Capital exceeds $35,000,000.
"Intellectual Property" means the following to the extent owned by
or exclusively licensed to Seller and/or the Subsidiaries and either related
primarily to the Business or required for the continued operation of the
Business in substantially the same manner as the Business is conducted as of the
date of this Agreement: material trademarks and service marks (whether
registered or unregistered), trade names, trade dress and similar intangible
property enforceable under the laws of non-U.S. jurisdictions, however
denominated, together with all goodwill related to the foregoing (collectively,
"Trademarks"); patents (including any continuations, continuations-in-part,
divisionals, reissues, renewals and applications for patents or any of the
foregoing) (collectively, "Patents"); material copyrights and mask works
(including any registrations and applications for registration thereof)
(collectively, "Copyrights"); and material information, including any formula,
pattern, compilation, program, device, method, technique, or process, that: (1)
derives independent economic value from not being generally known to the public
or to other persons who can obtain economic value from its disclosure or use;
and (2) is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy (collectively, "Trade Secrets"). Notwithstanding the
foregoing, Intellectual Property does not include any of the foregoing to the
extent licensed under the MTI Agreements.
"Inventory" shall mean all inventories of raw material, purchased
parts materials, work in process, finished products, goods, spare parts,
replacement and component parts,
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software, supplies, documentation and other assets recorded as inventory in
accordance with GAAP relating primarily to the Products or the Business that
exist as of the Closing Date.
"knowledge" and "to the knowledge of" shall mean, whether or not
capitalized, (i) for the Seller, the knowledge of the individuals identified in
Schedule 1.1(c) of the Disclosure Letter and (ii) for Purchaser, the knowledge
of the individuals identified in Schedule 1.1(c) of the Disclosure Letter.
"Laws" shall mean all laws of any supra national organization
(including without limitation the European Union), any nation or political
subdivision thereof, including, without limitation, all federal, state, local,
or foreign statutes, regulations, ordinances, orders, decrees, or any other
laws, common law theories, or reported decisions of any state, federal or other
court or tribunal including, without limitation, those now or at any time
hereafter in effect.
"Leases" shall mean all leases, subleases, or other occupancy
agreements, licenses, and lease agreements for equipment, machinery,
furnishings, vehicles or tools related primarily to the Business or required for
the continued operation of the Business in substantially the same manner as the
Business is conducted as of the date of this Agreement, together with all
amendments, supplements and nondisturbance agreements pertaining thereto, under
which Seller, any Subsidiary or any Converted Company leases, subleases,
licenses, occupies or uses any real or personal property.
"Liquidity Event" shall mean the direct or indirect transfer, in a
transaction or series of related transactions, of a substantial portion of the
assets of the Company or any of the Converted Companies or any of the membership
or other equity interests of the Company or the Converted Companies by asset
sale (other than the sale of the ▇▇▇▇▇▇▇▇ building, excess FF&E or ordinary
course sales of inventory), merger, sale of membership interests, stock or other
equity interests, recapitalization, reorganization, licenses (other than
ordinary course licenses), other transfer from the Company or the Converted
Companies to any other third party that is not a wholly owned subsidiary of the
Company, or an initial public offering of securities by the Company and/or any
of the Converted Companies; provided, however, that in no event shall the
liquidation or winding up of the Company or any of the Converted Companies be
deemed a Liquidity Event.
"Material Adverse Change" shall mean an event, occurrence or
change in circumstances that has had or would reasonably be expected to have a
material adverse effect on the Contributed Assets, the Business, the properties
of the Business, the Assumed Liabilities, the condition (financial or
otherwise), or the results of operations of the Business, taken as a whole,
other than an event, occurrence or change in circumstances resulting from (i)
changes attributable to conditions affecting the personal computer, laptop or
server business generally, (ii) changes in general economic, political or
regulatory conditions in the United States and in any foreign countries in which
the Business has any operations, (iii) changes arising out of or resulting from
actions contemplated by the parties in connection with the announcement of the
disposition by Seller of the Business or the announcement, execution or
consummation of this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby (including the
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termination of certain of Seller's employees employed for the Business), (iv)
any earnings (or losses) substantially consistent with the estimates, forecasts
or projections that on or prior to the date hereof have been disclosed to
Purchaser or publicly by Seller, or (v) changes arising out of or resulting from
actions of Seller taken at the request of Purchaser.
"Minimum NWC" shall mean negative $35,000,000.
"Mission Critical Contract" shall mean any Contract or Lease
(other than any real property Lease) that is required to manufacture the
Products in substantially the same hardware and software configurations as the
Products are manufactured as of the date of this Agreement and the Closing Date.
"Net Proceeds" shall mean, with respect to any Liquidity Event,
the proceeds received by Purchaser, the Company or any Converted Company (or,
where applicable, the holders of Membership Interests or other equity interests
of Purchaser, the Company or any Converted Company) in connection with such
Liquidity Event less any reasonable transaction expenses paid in connection
therewith. As used in this section, "proceeds" shall not be deemed to include
the assumption of current or non-current liabilities by an acquiror of assets or
membership or other equity interests in the Company or the Converted Companies,
except to the extent such assumption of liabilities is deemed to be a repayment
of funded debt pursuant to Section 10.6(a)(i) hereof. For purposes of
determining Net Proceeds, consideration received in connection with a Liquidity
Event that is other than cash shall be valued for purposes of Section 10.6(a) at
the time (i) such consideration is disposed of by Purchaser for cash or (ii)
only if such consideration constitutes securities listed on the New York Stock
Exchange or the Nasdaq National Market, such securities (A) may be sold (x)
under an effective registration statement under the 1933 Act or (y) under Rule
144 under the 1933 Act in a single transaction not subject to the volume
limitations under Rule 144(e) and (B) are not subject to any contractual
restriction on their sale, transfer or disposition. Until such time, such
consideration shall not be treated as Net Proceeds and shall be held in trust by
Purchaser for distribution in accordance with Section 10.6. The reasonable costs
of the disposition of such non-cash consideration shall be deducted from the
value thereof in computing Net Proceeds.
"Net Working Capital" shall mean, for purposes of Article 3,
Receivables (other than (i) non-current, non-trade Receivables in excess of
$100,000 and (ii) non-current, trade Receivables in excess of the lesser of (A)
the amount of such non-current, trade Receivables on the date of this Agreement
or (B) $2,000,000), less the allowance for doubtful accounts and the allowance
for sales returns and discounts as determined in accordance with GAAP in
connection therewith, plus Inventory, net of reserves accrued in accordance with
GAAP, plus Prepaid Items as determined with accordance to GAAP, minus the
following: accounts payable; accrued salaries, commissions, payroll, property
and sales taxes and other accrued expenses; accrued product and process
technology; obligations under Capital Leases; Deferred Revenue; the accrual for
product warranty claims; and other liabilities (to the extent included within
the Assumed Liabilities or the liabilities of the Converted Companies). Excluded
from the calculation shall be: cash and cash equivalents, liquid investments,
income taxes recoverable, intercompany accounts receivable, tax assets and
liabilities (other than payroll, property and sales taxes),
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property, plant and equipment, intangible assets, deferred loan costs, deferred
patent charges, intercompany accounts payable and income taxes payable and the
Excluded Assets and liabilities related thereto. Notwithstanding anything in
this Agreement to the contrary, all non-defined items referenced above shall be
defined for the calculation of "Net Working Capital" in accordance with GAAP.
"Pension Plan" shall mean any "employee pension benefit plan," as
defined in Section 3(2) of ERISA, which Seller or any Subsidiary sponsors or to
which Seller or any Subsidiary contributes or is required to contribute, or
under which Seller or any Subsidiary may incur any liability (whether governed
by U.S. Law or the Law of any foreign country in which Seller or any Subsidiary
has any employees), and which covers any employee of Seller or of any Subsidiary
who may become a Company Employee, including all multi-employer pension plans.
"Permits" shall mean all franchises, permits, licenses,
qualifications, rights-of-way, easements, municipal and other approvals,
authorizations, orders, consents and other rights from, and filings with, any
Governmental Authority of any jurisdiction worldwide that are related primarily
to the Business or are required for the continued operation of the Business in
substantially the same manner as the Business is conducted as of the date of
this Agreement.
"Permitted Encumbrances" shall mean (i) Encumbrances imposed by
law for Taxes that are not yet due or are being contested in good faith by
appropriate proceedings, (ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's, landlord's and other similar Encumbrances imposed by
law, arising in the ordinary course of business and securing obligations that
are not overdue by more than thirty (30) days or are being contested in good
faith by appropriate proceedings, (iii) Encumbrances made in the ordinary course
of business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations, (iv) attachment, judgment and other
similar non-tax Encumbrances arising in connection with court proceedings but
only if and for so long as the execution or enforcement of such Encumbrances is
and continues to be effectively stayed and bonded on appeal and the claims
secured thereby are being contested in good faith by appropriate proceedings,
(v) Encumbrances on any property acquired or held by Seller and Company, as the
case may be, in the ordinary course of business, securing indebtedness incurred
or assumed for the purpose of financing all or any part of the cost of acquiring
such property, provided that (a) any such Encumbrance attaches to such property
concurrently with or within ninety (90) days after the acquisition thereof, (b)
such Encumbrance attaches solely to the property so acquired in such
transaction, (c) the principal amount of the debt secured thereby does not
exceed one hundred percent (100%) of the cost of such property, and (d) such
Encumbrance, if it is an operating lease (other than a real property lease), is
disclosed on Schedule 1.1(d) of the Disclosure Letter if the obligation
thereunder is individually in excess of $50,000, (vi) any interest or title of a
vendor or lessor in property subject to a capital or operating lease, (vii)
other Encumbrances incidental to the conduct of business or the ownership or
lease of real property, including easements, rights of way, zoning and similar
restrictions, and sub-leases granted to others, which do not materially detract
from the value of any of Seller's and Company's owned or leased real property,
and (viii) the Encumbrances identified on Schedule 4.4(b) of the Disclosure
Letter.
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"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization, any other form of entity, a group and a government
or other department or agency thereof.
"Prepaid Items" shall mean all credits, prepaid expenses, deferred
charges, advance payments, security deposits and prepaid items in favor of
Seller related to assets included in the Contributed Assets or in the assets of
the Converted Companies that exist at the Closing Date (except for those related
to the Excluded Assets and property and liability insurance and other assets
that cannot be transferred to the Company or the Converted Companies).
"Products" shall mean the existing, whether launched or
unlaunched, products offered by Seller in the operation of the Business, listed
on Schedule 1.1(e) of the Disclosure Letter.
"Receivables" shall mean all notes, deposits and accounts
receivable in favor of Seller or any Subsidiary and all notes, bonds and other
evidence of indebtedness of and rights to receive payments from any person in
favor of Seller or any Subsidiary, in each case related primarily to the
Products or the Business and determined in accordance with GAAP, excluding those
Receivables included in Excluded Assets.
"Representative" shall mean any officer, director, principal,
partner, attorney, accountant, advisor, agent, trustee, employee or other
representative of a party.
"Software" means rights enforceable under patent, copyright or
trade secret law in the following to the extent related primarily to the
Business or required for the continued operation of the Business in
substantially the same manner as the Business is conducted as of the date of
this Agreement: (i) computer programs, including any and all software
implementations of algorithms, heuristics, models and methodologies, whether in
source code or object code, (ii) computer programs relating to testing,
validation, verification and quality assurance materials, (iii) computer
databases, conversions, interpreters and compilations, including any and all
data and collections of data, (iv) descriptions, schematics, flow-charts and
other work product constituting computer source code, and (v) all documentation,
including user manuals, web materials and architectural and design
specifications and training materials, relating to any of the foregoing.
"Tax(es)" shall mean all taxes, charges, fees, levies, imposts,
customs duties or other assessments imposed by and required to be paid to any
Governmental Authority including any federal, state, municipal, local or foreign
taxing authority, including, without limitation, income, excise, real and
personal property, sales, transfer, import, export, ad valorem, payroll, use,
goods and services, value added, capital, capital gains, alternative, net worth,
profits, withholding, employer health and franchise taxes (including any
interest, penalties, fines or additions attributable to or imposed on or with
respect to any such assessment) and any similar charges in the nature of a tax
including, unemployment and employment insurance payments and workers
compensation premiums, together with any installments with respect thereto and
any estimated payments or estimated taxes and whether disputed or not.
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"Tax Return" shall mean any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any Governmental Authority in connection with the
determination, assessment or collection of any Tax or the administration of any
Laws, regulations or administrative requirements relating to any Tax, including,
without limitation, any information, return, claim for refund, amended return or
declaration of estimated Tax and all federal, state, local and foreign returns,
reports and similar statements.
1.2 Other Defined Terms. The following capitalized terms shall have the
meanings given to them in the Sections set forth below:
Term Section
Accountants 3.3(d)
Acquisition Proposal 13.1
Additional Liability 4.10
Affiliated Parties 4.31
Agreed Value 3.4
Antitrust Filings 6.9
Assignment and Assumption Agreement 2.4
Balance Sheet 4.9
Balance Sheet Employee Liabilities 6.7(a)
Business Recitals
Cash Contribution 3.3(a)
Cash Purchase Price 3.2
Closing 9.1
Closing Date 9.1
Company Recitals
Closing Date Statement 3.3(b)
Company Employees 6.7(a)
Contribution Agreement 2.3
Converted Companies Membership Interests Recitals
Converted Companies Recitals
Copyrights 1.1 (Intellectual Property)
Delivery Date 3.3(c)
Disclosure Letter Introduction to Article 4
Drop Down Membership Interest Recitals
Employees 4.17(a)
Environmental Conditions 4.25(a)(v)
Environmental Laws 4.25(a)(iv)
Excluded Subsidiaries 4.5
Excluded Contracts 4.13(c)
Expenses 14.2
Extended Initial Period 6.3(c)
Final NWC 3.3(e)
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Final Closing Date Statement 3.3(c)
Financial Statements 4.9
Government Contracts 10.13
GSA Period 6.3(c)
Hazardous Substance 4.25(a)(iii)
HSR Act 4.7
Inbound License Agreements 4.15(b)
Indemnified Party 11.2(c)
Indemnified Tax Liabilities 12.1(a)
Indemnifying Party 11.2(c)
Initial Period 6.3(b)
Liquidity Resolution Period 10.6(c)
Liquidity Statement 10.6(b)
Material Contracts 4.13
Membership Interests Recitals
MTI Recitals
MTI Agreements Recitals
MTI Lease Agreement 10.15
MTI Transaction 13.1
Notice of Acquisition Proposal 13.2
Objection Notice 3.3(c)
Operating Agreement 2.1
Other Filings 6.9
Outbound License Agreements 4.15(b)
Owned Real Property 4.12
Patents 1.1 (Intellectual Property)
Purchaser Introduction
Release 4.25(a)(ii)
Retained Liabilities 2.4
Return Amount 10.6(d)
Sale 3.4
Seller Introduction, 4.25(a)(i)
Site 4.25(a)(vi)
Subcontracting Arrangement 6.3(b)
Subsidiary or Subsidiaries 4.5
Termination Fee 13.4
Top 25 Entities 4.14
Trademarks 1.1 (Intellectual Property)
Trade Secrets 1.1 (Intellectual Property)
Transition Services Agreement Recitals
Triggering Event 13.3
Unassigned Contract 6.3(a)
W.A.R.N. 4.17(b)
1933 Act 4.24
1934 Act 4.24
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ARTICLE 2
CONTRIBUTION OF THE BUSINESS TO THE COMPANY
2.1 Formation of the Company. On or prior to the Closing Date, Seller
shall (i) form a single member limited liability company under the laws of the
State of Delaware named "MicronPC, LLC" or another mutually acceptable name if
that name is not available, and (ii) enter into a limited liability company
agreement, the form of which is attached hereto as Exhibit D (the "Operating
Agreement"), which shall not be amended prior to the Closing. Seller shall take,
and shall cause the Company to take, any and all action that can be taken prior
to the Closing to ensure that the Company will be treated for all periods from
inception as a disregarded entity for federal and state Tax purposes and that it
shall not be treated as a corporation for federal or state Tax purposes.
2.2 Conversion of the Subsidiaries. On or prior to the date that is two
(2) days prior to the Closing Date, each Subsidiary listed on Schedule 4.5 of
the Disclosure Letter that is incorporated in a State of the United States (and
is not identified on such schedule as an "Excluded Subsidiary") shall be
statutorily converted into a single member Delaware limited liability company
and Seller shall enter into a limited liability company agreement with each such
Converted Company in the form attached hereto as Exhibit D, which shall not be
amended prior to the Closing. Seller shall take, and shall cause each Converted
Company to take, any and all action that can be taken prior to the Closing to
ensure that the Converted Company will be treated for all periods from inception
as a disregarded entity for federal and state Tax purposes and that it shall not
be treated as a corporation for federal or state Tax purposes.
2.3 Contribution of Certain Assets to the Company. On or prior to the
Closing Date, Seller shall enter into a contribution agreement with the Company
in the form of Exhibit A attached hereto (the "Contribution Agreement") and,
pursuant thereto, (i) Seller shall contribute to the Company the Contributed
Assets, free and clear of all Encumbrances other than Permitted Encumbrances,
(ii) Seller shall assign to the Company the Assumed Liabilities, and (iii) the
Company shall assume the Assumed Liabilities. The Contribution Agreement shall
not be amended prior to the Closing.
2.4 Retained Liabilities; Excluded Contracts. On or prior to the Closing
Date, each Subsidiary or Converted Company, as the case may be, shall enter into
an assignment and assumption agreement with Seller, in the form of which is
attached hereto as Exhibit E (the "Assignment and Assumption Agreement")
pursuant to which Seller will assume and agree to perform the liabilities listed
and described on Schedule 2.4 of the Disclosure Letter (the "Retained
Liabilities") and the Excluded Contracts.
ARTICLE 3
PURCHASE AND SALE
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3.1 Purchase of the Membership Interests. On the terms and subject to the
conditions of this Agreement, at the Closing, Seller shall sell, assign and
deliver the Membership Interests to Purchaser, and Purchaser shall purchase and
acquire the Membership Interests from Seller, free and clear of all
Encumbrances.
3.2 The Purchase Price. On the Closing Date, Purchaser shall pay to
Seller $100 (the "Cash Purchase Price") in consideration of the transfer of the
Membership Interests.
3.3 Required Minimum Net Working Capital and Cash at Closing.
(a) As of the Closing Date, the Company and the Converted
Companies shall have combined Net Working Capital of no less than the Minimum
NWC, and, in addition, cash equal to the Cash Contribution; provided, however,
that in the event that Net Working Capital is less than the Minimum NWC, then,
in addition to the Cash Contribution, Seller shall contribute to the Company in
cash the Initial NWC Adjustment. No cash held outside the United States shall be
included in the calculation of the Cash Contribution.
(b) No later than two (2) business days prior to the Closing Date,
Seller shall deliver to Purchaser a good faith estimate, reasonably acceptable
to Purchaser, of a statement of the Net Working Capital of the Company and the
Converted Companies as of the Closing Date and the Cash Contribution,
substantially in the form of Exhibit B attached hereto (the "Closing Date
Statement"), together with the detailed work papers which support such
statement. Seller shall determine the amounts of the assets and liabilities in
the Closing Date Statement in accordance with GAAP applied consistently with the
Balance Sheet furnished pursuant to Section 4.9 (provided that, to the extent
that the Balance Sheet was not in accordance with GAAP, GAAP shall apply).
(c) As soon as practicable, but in no event later than thirty (30)
days after the Closing Date (unless Seller and Purchaser otherwise agree in
writing), the Company shall prepare a final statement of the Net Working Capital
of the Company and the Converted Companies as of the Closing Date, and of the
Cash Contribution, substantially in the form of the Closing Date Statement (the
"Final Closing Date Statement"), determining the amounts for assets and
liabilities in the Final Closing Date Statement in accordance with GAAP and in a
manner consistent with the Balance Sheet furnished pursuant to Section 4.9, and
deliver to Seller and Purchaser the Final Closing Date Statement together with
the detailed work papers which support such statement. Each of Seller and
Purchaser shall have the right to review the books and records of the Company
and the Converted Companies for a period of forty-five (45) days after the
delivery of the Final Closing Date Statement (the "Delivery Date") to verify and
confirm the accuracy thereof. If, after such review, Seller or Purchaser agrees
with the Final Closing Date Statement, such agreeing party shall promptly (and
in any event within forty-five (45) days after the Delivery Date) notify the
other party of its agreement. If, after such review, Seller or Purchaser objects
to the Final Closing Date Statement, such objecting party shall promptly (and in
any event within forty-five (45) days after the Delivery Date) provide the other
party with a statement indicating the basis for its objections (the "Objection
Notice"), and Purchaser and Seller shall meet and confer in an effort to resolve
such disagreement in good faith.
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(d) In the event Purchaser and Seller are unable to resolve a
disagreement with respect to the Final Closing Date Statement within twenty (20)
days following the date of an Objection Notice (or such longer period as
Purchaser and Seller may agree), the Net Working Capital and the Cash
Contribution shall be determined by Deloitte & Touche LLP or such other
independent firm of certified public accountants mutually agreeable to Purchaser
and Seller (the "Accountants"). If issues in dispute are submitted to the
Accountants for resolution, (i) each party shall furnish to the Accountants such
work papers and other documents and information relating to the disputed issues
as the Accountants may reasonably request and are available to that party, and
shall be afforded the opportunity to present to the Accountants any material
relating to the determination and to discuss the determination with the
Accountants; (ii) the determination by the Accountants of the Net Working
Capital and the Cash Contribution as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties; and
(iii) the fees and expenses of the Accountants for such determination shall be
paid by the parties based upon the degree to which the Accountants accept the
respective positions of the parties. For example, if it is Purchaser's position
that the Net Working Capital is $100, Seller's position that the Net Working
Capital is $300 and the Accountants' finding that the Net Working Capital is
$250, then Purchaser shall pay 75% (250-100/300-100) of the Accountants' fees
and expenses and Seller shall pay 25% (300-250/300-100) of the Accountants'
fees and expenses. Other than the expense of retaining the Accountants, the
expense of preparing the Closing Date Statement shall be borne by Seller and the
expense of preparing the Final Closing Date Statement shall be borne by the
Company.
(e) Upon the determination of the Net Working Capital pursuant to
either the agreement of the parties or the determination of the Accountants, the
parties shall recompute the Net Working Capital as of the Closing Date using the
Net Working Capital as so agreed or determined (the "Final NWC"). Within three
(3) business days of such agreement or determination, (i) if the sum of the
Final NWC plus the Initial NWC Adjustment is less than the Minimum NWC, then
Seller shall contribute to the Company in cash the Final NWC Adjustment; (ii) if
the sum of the Final NWC plus the Initial NWC Adjustment is greater than the
Minimum NWC, then Purchaser shall refund to Seller in cash the Final NWC
Adjustment; provided, however, that in no event shall any Final NWC Adjustment
paid by Purchaser exceed the Initial NWC Adjustment, if any, paid by Seller
under Section 3.3(a).
3.4 Income Tax Treatment of the Purchase and Sale of the Membership
Interests. The parties agree (i) to treat the sale of the Membership Interests
by Seller to Purchaser in accordance with this Agreement (the "Sale") as a
purchase and sale of the Combined Assets for federal income Tax purposes and
(ii) to treat the Sale as a closed transaction for federal income Tax purposes.
The Seller shall in good faith and after consultation with the Purchaser
determine the value of the Contingent Payment Right as of the Closing Date (the
"Agreed Value") prior to or within ninety (90) days after the Closing Date and
the parties shall use such Agreed Value for all federal and state Tax reporting
purposes. The parties shall file all Tax Returns, make or refrain from making
all elections necessary for and (except as otherwise required pursuant to a
"determination" within the meaning of Section 1313(a) of the Code) take no
position inconsistent with the tax treatments set forth above in this Section.
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3.5 Allocation of the Purchase Price. The Cash Purchase Price and the
Assumed Liabilities that are capitalized for federal income tax purposes and all
other capitalizable costs shall, for income tax purposes, be allocated among the
Combined Assets in accordance with the principles set forth in Schedule 3.5
hereto and with the principles of Section 1060 of the Code and the regulations
promulgated thereunder. Such allocation shall be used by the parties for all
federal and state tax reporting purposes.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that, except as disclosed in
the Disclosure Letter (the "Disclosure Letter") (which Disclosure Letter shall
be deemed to be representations and warranties to Purchaser by Seller under this
Article 4), the following statements are true and complete and not misleading as
of the date hereof and as of the Closing Date:
4.1 Organization and Existence. Each of Seller and the Subsidiaries is a
corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, as listed on Schedule 4.1(a) of
the Disclosure Letter. Each of the Company and the Converted Companies, when
organized, will be a limited liability company, duly organized, validly existing
and in good standing under the laws of the State of Delaware. Seller and as of
the date hereof the Subsidiaries have, and the Company and the Converted
Companies will have, all requisite power and authority to own and operate the
Business and to carry on the Business in substantially the manner as it is
presently conducted. Seller and, as of the date hereof and immediately prior to
the conversion of the Subsidiaries into the Converted Companies, the
Subsidiaries are qualified to do business as foreign entities in the
jurisdictions listed on Schedule 4.1(b) of the Disclosure Letter and in all
other jurisdictions in which each is required to be qualified to conduct the
Business as currently conducted, except for jurisdictions in which the failure
to so qualify would not reasonably be expected to result in a Material Adverse
Change. On the Closing Date the Company and each of the Converted Companies will
be duly organized and existing under the laws of its jurisdiction of formation.
On the Closing Date the Company and each of the Converted Companies will have
submitted applications to qualify to do business in each of the jurisdictions
listed on Schedule 4.1(b) of the Disclosure Letter with respect to such entity's
predecessor.
4.2 Authorization. Seller has the requisite corporate power and authority
to enter into this Agreement, the Operating Agreement, the Transition Services
Agreement and the Contribution Agreement (each, an "Ancillary Agreement" and
collectively, the "Ancillary Agreements"), to perform each of its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and the
Ancillary Agreements by Seller have been duly authorized by all necessary
corporate action on the part of Seller.
4.3 Due Execution and Delivery; Binding Obligations. This Agreement has
been duly executed and delivered by Seller, and each of the Ancillary Agreements
will be, at Closing, duly executed and delivered by Seller and the Company, as
the case may be. Assuming the due
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authorization, execution and delivery of this Agreement and the Ancillary
Agreements by the parties thereto (other than Seller and the Company), this
Agreement constitutes, and each of the Ancillary Agreements will constitute at
Closing, a legal, valid and binding agreement of Seller and the Company (with
respect to the Ancillary Agreements only), enforceable against Seller and the
Company in accordance with their respective terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium or similar Laws relating to or limiting creditors' rights generally;
by equitable principles relating to enforceability; or by applicable federal or
state securities laws with respect to the indemnification provisions contained
in this Agreement and the Ancillary Agreements, as the case may be.
4.4 The Company.
(a) Sufficiency of the Assets. The assets described on Schedule
4.4(a) of the Disclosure Letter, the Contributed Assets, the assets owned by the
Converted Companies, the Intellectual Property and the real property assets to
be licensed or leased, as the case may be, to the Company pursuant to the MTI
Agreements and the Excluded Assets constitute all of the assets used by Seller
and the Subsidiaries that are related primarily to the Business or that are
required for the continued operation of the Business following the Closing in
substantially the same manner as the Business is conducted as of the date of
this Agreement. Schedule 6.3 of the Disclosure Letter identifies all of the
Mission Critical Contracts.
(b) Ownership of the Contributed Assets. The Company is a newly
formed entity that shall have no assets, liabilities or operations prior to the
consummation of the transactions contemplated under the Contribution Agreement.
Except as set forth on Schedule 4.4(b) of the Disclosure Letter, as of the
Closing Date, the Company will have good and indefeasible title to the
Contributed Assets free and clear of all Encumbrances, other than Permitted
Encumbrances. As of the Closing Date, the Company shall have no assets or
liabilities other than those related to the Business. Except as set forth on
Schedule 4.4(b) of the Disclosure Letter, the Contributed Assets and the assets
owned by the Converted Companies are owned free and clear of all Encumbrances,
other than Permitted Encumbrances, and are in reasonably good repair and
operating condition (subject to reasonable wear and tear).
(c) Ownership of the Company and Converted Companies. As of the
Closing Date, the Membership Interests will be the only outstanding membership
interests of the Company and the Converted Companies, as the case may be, and
will be owned, of record and beneficially, by Seller, free and clear of all
Encumbrances. There will be no outstanding subscription, option, warrant, call,
right, preemptive right or other agreement or commitment obligating the Company
and any Converted Company to issue, sell, deliver or transfer (including any
right of conversion or exchange under any outstanding security or other
instrument) any economic, voting or any other type of membership or other
interest in the Company or any Converted Company.
4.5 Subsidiaries and Joint Ventures. Schedule 4.5 of the Disclosure
Letter sets forth a complete and accurate list of each subsidiary of Seller that
operates any part of the Business that will be converted pursuant to Section 2.2
of the Agreement (each, a "Subsidiary" and
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collectively, the "Subsidiaries"), and each other subsidiary that operates any
part of the Business (the "Excluded Subsidiaries"), indicating in each case the
ownership of such Subsidiary and the jurisdiction of formation for such
Subsidiary. Except as set forth on Schedule 4.5 of the Disclosure Letter,
neither the Company nor any Converted Company will have any direct or indirect
ownership interest or investment of any kind in any subsidiary or in any other
corporation or other entity as of the Closing Date and will not be a party to
any joint venture with any other entity or person, whether or not structured as
a subsidiary, other than interests in indirect wholly owned subsidiaries. As of
the Closing Date the Converted Companies will be engaged in no operations other
than the Business and have no assets or obligations other than those used in or
arising from the operation of the Business.
4.6 No Conflict or Violation. Except as set forth on Schedule 4.6 of the
Disclosure Letter, neither the execution and delivery of this Agreement by
Seller and the Ancillary Agreements by Seller or the Company, nor the
consummation of the transactions contemplated hereby or thereby (including,
without limitation, the contribution of the Contributed Assets to the Company as
contemplated hereby), will result in (i) a violation of, or a conflict with, the
charter documents of Seller, any Subsidiary or any Converted Company or of any
subscription, shareholders', members' or similar agreement or understanding to
which Seller, any Subsidiary or any Converted Company is a party; (ii) assuming
the procurement of all consents listed on Schedule 4.7 of the Disclosure Letter,
a breach of, or a default (or an event which, with notice or lapse of time or
both would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or create a right of termination or
acceleration under, any Material Contract, Permit or Encumbrance to which
Seller, any Subsidiary or any Converted Company is a party or by which Seller,
any Subsidiary or any Converted Company is bound and which is material to the
operation of the Business; (iii) the payment by, or the creation of any
obligation (absolute or contingent) to pay on behalf of, Seller, any Subsidiary
or any Converted Company of any severance, termination, "golden parachute," or
other similar payment, whether pursuant to a Material Contract or under
applicable law; (iv) a material violation by Seller, any Subsidiary or any
Converted Company of any Law applicable to the operation of the Business; (v) a
violation by Seller, any Subsidiary or any Converted Company of any order,
judgment, writ, injunction, decree or award to which Seller, any Subsidiary or
any Converted Company is a party or is subject; or (vi) an imposition of an
Encumbrance on the Membership Interests or the Contributed Assets.
4.7 Consents and Approvals. Except for (i) the notification requirements
of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act"), (ii) the requirements of
antitrust, competition or other similar laws of any applicable foreign
jurisdiction, (iii) compliance with applicable securities laws, (iv) as set
forth on Schedule 4.7 of the Disclosure Letter, and (v) and with respect to
Contracts that are not Material Contracts or Permits that are not material, no
consent, Permit, approval or authorization of, or declaration, filing,
application, transfer or registration with, any Governmental Authority, or any
other Person or entity is required to be made or obtained by Seller, any
Subsidiary, any Converted Company or the Company (a) by virtue of the execution,
delivery or performance of this Agreement or any Ancillary Agreement or the
consummation of the transactions contemplated hereby (including, without
limitation, the contribution of Contributed Assets to the
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Company and the conversion of the Subsidiaries into the Converted Companies as
contemplated hereby); (b) to avoid the loss of any Permit or the breach of any
Contract or the creation of an Encumbrance on the Membership Interests or the
Contributed Assets; or (c) to enable Purchaser to own the Membership Interests
and to permit the Company and the Converted Companies to continue the lawful
operation of the Business following the Closing Date in substantially the same
manner as the Business is conducted as of the date of this Agreement.
4.8 Litigation. Except as set forth on Schedule 4.8 of the Disclosure
Letter, there is no Action by or before any Governmental Authority or other
Person pending or, to Seller's knowledge, threatened against Seller, the
Subsidiaries, or the Company and the Converted Companies, as the case may be, or
any of their properties or rights which would materially and adversely affect
(a) the right or ability of the Company and the Converted Companies to carry on
the Business in substantially the same manner as it is conducted as of the date
of this Agreement, (b) the right or ability of Seller to contribute the
Contributed Assets, to convert the Subsidiaries into the Converted Companies, as
contemplated herein, or to consummate the sale of the Membership Interests to
Purchaser or otherwise to perform any of Seller's obligations under this
Agreement or under any of the Ancillary Agreements, or (c) the condition,
whether financial or otherwise, or properties of the Company and the Converted
Companies. Neither Seller nor any of its Subsidiaries or, to Seller's knowledge,
their Affiliated Parties (including the Company and the Converted Companies) is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which would materially and adversely affect any of Seller's or its Subsidiaries'
operations or business practices in connection with the Business, or the ability
of Seller or the Subsidiaries or the Company and the Converted Companies to
conduct the Business in substantially the same manner as the Business is
conducted as of the date of this Agreement.
4.9 Financial Statements. Seller has furnished to Purchaser copies of (i)
the unaudited balance sheets of the Business at August 31, 2000 and 1999, and
the related statements of income for the fiscal years then ended, and (ii) the
unaudited balance sheet of the Business at March 1, 2001 and the related
statements of income for the three-month and six-month periods then ended
(collectively, the "Financial Statements"). The balance sheet of the Business at
March 1, 2001 is referenced to herein as the "Balance Sheet". Except as set
forth on Schedule 4.9(a) of the Disclosure Letter, the Financial Statements are
in accordance with the books, records and accounts of Seller and the
Subsidiaries maintained with respect to the Business, were prepared pursuant to
the related work papers, are complete and correct in all material respects, have
been prepared in accordance with GAAP during the respective periods, and fairly
present the financial condition of the Business at the respective dates thereof
and the results of operations of the Business for the respective periods covered
by the statements of income contained therein, except (x) the Financial
Statements may not contain all of the footnotes required by GAAP and (y) the
Financial Statements do not conform with GAAP in the manner set forth on
Schedule 4.9(b) of the Disclosure Letter. The Financial Statements are attached
hereto as Schedule 4.9(c) of the Disclosure Letter. The statements of operations
included in the Financial Statements do not contain any material items of
special or non-recurring income or other income not earned in the ordinary
course of the Business except as expressly specified therein. The statements of
operations included in the Financial Statements do not reflect the operations of
any entity or business other than the Business, except where specifically
indicated. Neither Seller nor any
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Subsidiary has engaged in any transaction with respect to the Business,
maintained any bank account for the Business or used any of its funds in the
conduct of the Business except for transactions, bank accounts and funds that
have been and are reflected in its normally maintained books and records.
4.10 Additional/Retained Liabilities. Except as set forth as "Additional
Liabilities" on Schedule 4.10 of the Disclosure Letter, and the Retained
Liabilities neither the Company nor any Converted Companies has any material
liabilities or obligations (absolute, accrued, contingent, unmatured or
otherwise) related to the Business other than (i) liabilities reflected on the
Financial Statements, (ii) liabilities or obligations not required to be
included in the Financial Statements under GAAP, and (iii) liabilities incurred
since March 1, 2001 in the ordinary course of business.
4.11 Absence of Certain Changes. Except as set forth on Schedule 4.11 of
the Disclosure Letter, and except for the solicitation and negotiation of a
transaction to dispose of the Business and the actions taken in connection with
the execution of this Agreement, since March 1, 2001, the Business has been
conducted only in the ordinary course of business consistent with past practice
and there has been no Material Adverse Change. Without limiting the foregoing,
since March 1, 2001:
(a) Neither Seller nor any Subsidiary has entered into any
material transaction related to the Business other than in the ordinary course
of business consistent with past practice, other than pursuant to the MTI
Transaction;
(b) Neither Seller nor any Subsidiary has amended, rescinded or
terminated (and not renewed) any existing Material Contract and no such Material
Contract has expired or terminated (and not been renewed) by its terms;
(c) Neither Seller nor any Subsidiary has sold, transferred,
disposed of, or agreed to sell, transfer or dispose of, any material assets,
properties, Intellectual Property or rights related to the Business other than
in the ordinary course of business consistent with past practice, other than
pursuant to the MTI Transaction;
(d) Neither Seller nor any Subsidiary has acquired any material
assets related to the Business, except in the ordinary course of business, nor
acquired or merged with any other business related to the Business;
(e) No Encumbrances have been incurred or created on any of the
Contributed Assets or any of the assets owned by the Converted Companies, other
than Permitted Encumbrances;
(f) No assets or properties that are material, either individually
or in the aggregate, to the conduct of the Business have been destroyed, damaged
or otherwise lost (whether or not covered by insurance);
(g) Neither Seller nor any Subsidiary has increased the level of
benefits under any Employee Benefit Plan, the salary or other compensation
(including severance) payable or to
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become payable to any employee listed on Schedule 4.17 of the Disclosure Letter
or obligated itself to pay any bonus or other additional salary or compensation
to any such employee other than in the ordinary course of business and
consistent with past practice;
(h) Neither Seller nor any Subsidiary has made any material change
related to the Business in any pricing, marketing, purchasing, allowance or tax
or accounting practice, policy or method or any method of calculating any bad
debt, contingency or other reserve for accounting, financial reporting or tax
purposes or made any material tax election or settled or compromised any
material income tax liability with any Governmental Authority;
(i) There has been no waiver or amendment of any material right
relating to Seller or any Subsidiary that would reasonably be expected to be
material to the conduct of the Business;
(j) Neither Seller (with respect to the Business) nor any
Subsidiary has made any capital expenditure (or series of related capital
expenditures) that is either material or outside the ordinary course of
business; and
(k) There has been no agreement by Seller or any Subsidiary to
take, nor has the Company nor any Converted Company taken, any action described
above.
4.12 Real Property. Schedule 4.12 of the Disclosure Letter sets forth a
complete and accurate list of (i) all real property owned by Seller or any
Subsidiary that is used in the Business (the "Owned Real Property"), (ii) all
real property used in the Business that is leased by Seller or a Subsidiary from
an unrelated third party, and (iii) all real property used in the Business that
is leased by Seller or a Subsidiary from a related party. Seller, the applicable
Subsidiary, the Company or the Converted Companies has a valid leasehold
interest in all such leased real property free and clear of all Encumbrances,
other than Permitted Encumbrances. Seller or the applicable Subsidiary has good,
valid, marketable and insurable title in fee simple to all Owned Real Property
free and clear of all Encumbrances, other than Permitted Encumbrances. Each such
real property lease is a legal, valid, binding obligation of Seller, the
Subsidiaries or the Company or the Converted Companies, as the case may be, and
is in full force and effect and the Business enjoys peaceful and undisturbed
possession thereunder. All rents and other payments due to date under each real
property lease have been paid in full, and there is no existing material
default, violation or breach by Seller or its Subsidiaries or the Company or the
Converted Companies or, to Seller's knowledge, by any third party, which affects
the enforceability of any real property lease or any parties' rights thereunder,
nor any event or condition which, after notice or lapse of time or both, would
constitute a material default, violation or breach by Seller or any Subsidiary
or the Company or the Converted Companies. With respect to each real property
lease and each Owned Real Property, neither Seller nor any Subsidiary has
received any notice of any violation of any applicable zoning ordinance,
building code, planning law or regulation, use or occupancy restriction, or
violation of any thereof, or any condemnation action or proceeding with respect
thereto. With respect to the Owned Real Property (i) all of the buildings,
structures and appurtenances situated in whole or in part on any of the Owned
Real Property are in all material respects in good operating condition and in a
state of good
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maintenance and repair, are adequate and suitable for the purposes for which
they are presently being used and, with respect to each Owned Real Property, the
Seller or its Subsidiaries have adequate rights of ingress and egress for
operation of the business in the ordinary course and consistent with past
practice, (ii) to Seller's knowledge, none of such buildings, structures or
appurtenances (or any equipment therein), nor the operation or maintenance
thereof, violates in any material respect any restrictive covenant or any
provision of any federal, state or local law, ordinance, rule or regulation, or
encroaches on any property owned by others, and (iii) the Seller has not, in any
material respect, violated or failed to hold any valid and effective
certificates of occupancy, underwriters' certificates relating to electrical
work, zoning, other permits and license (including building, housing, safety,
fire, health and similar permits and approvals) required by applicable law with
respect to any Owned Real Property or the Business conducted thereat.
4.13 Material Contracts.
(a) Schedule 4.13(a) of the Disclosure Letter sets forth a
complete list of all material contracts relating to the Business in effect on
the date of this Agreement (the "Material Contracts"), including the following
Contracts: all (i) material security agreements and other agreements to which
Seller or any Subsidiary is a party involving the borrowing of money by, or any
extension or credit to, or any guarantee in respect of indebtedness by, Seller
(in connection with the Business) or any Subsidiary (in connection with the
Business); (ii) material agreements or commitments, individually, or in the
aggregate, to make capital expenditures with respect to the Business; (iii)
agreements to sell, lease or otherwise dispose of any assets or properties of
Seller (in connection with the Business) or any Subsidiary (in connection with
the Business) involving more than $500,000 other than in the ordinary course of
business and other than pursuant to the MTI Transaction; (iv) agreements
limiting the freedom of Seller (in connection with the Business) or any
Subsidiary (in connection with the Business) to engage or compete in any line of
business or in any geographic area or with any Person; (v) real property and
material personal property Leases; (vi) joint venture agreements and partnership
agreements to which Seller (in connection with the Business) or any Subsidiary
(in connection with the Business) is a party, including contractual arrangements
with business partners that involve royalty payments or similar revenue sharing
arrangements; (vii) Contracts, if any, of Seller (in connection with the
Business) or any Subsidiary (in connection with the Business) with the fifty
(50) Persons that accounted for the highest dollar amounts paid by Seller or any
Subsidiary, taken as a whole, over the twelve (12) month period ended March 1,
2001 and the Contracts, if any, of Seller (in connection with the Business) or
any Subsidiary (in connection with the Business) with the fifty (50) Persons
that accounted for the highest dollar amounts received by Seller or any
Subsidiary over the twelve (12) month period ended March 1, 2001 except for
contracts involving payment or receipt by Seller and the Subsidiaries taken as a
whole that are less than $100,000 individually; (viii) material agreements
applicable to the Seller (in connection with the Business) or any Subsidiary (in
connection with the Business) that require the payment of commissions or similar
channel expenses such as distribution, sales representative and similar
agreements; (ix) material management service, consulting or similar type
agreements, applicable to the Seller (in connection with the Business) or any
Subsidiary (in connection with the Business); (x) warranties or other similar
undertakings with respect to a contractual performance extended by
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Seller (in connection with the Business) or the Subsidiaries (in connection with
the Business) other than in the ordinary course of business; and (xi) material
agreements or commitments requiring Seller (in connection with the Business) or
any Subsidiary (in connection with the Business) to indemnify or hold harmless
(A) any Person other than purchase orders and revenue earnings contracts entered
into in the ordinary course of business or (B) any purchaser and/or any licensee
with respect to any Intellectual Property related primarily to the Business, and
(xii) any agreements of the type described in items (i)-(xi) to which the
Company or the Converted Companies are party.
(b) Seller has provided Purchaser with access to complete and
accurate copies or descriptions of all such Material Contracts. All of the
Material Contracts are valid and, to Seller's knowledge, in full force and
effect, and Seller and each Subsidiary and the Company and each Converted
Company has duly performed all of their respective obligations under each
Material Contract to which it is a party in all material respects, including to
the extent those obligations have accrued, and, no default, violation or breach
by Seller or any Subsidiary or the Company and each Converted Company under any
Material Contract has occurred which affects the enforceability of such Material
Contract, any party's rights thereunder, or which might give rise to any
Damages, where any of the foregoing would reasonably be expected to result in a
Material Adverse Change. None of the Material Contracts to which Seller or any
Subsidiary or the Company and each Converted Company is a party or by which
Seller or any Subsidiary is bound or pursuant to which any aspect of the
Business is conducted, set forth in clauses (i) through (xi) in Section 4.13(a)
above is an oral contract. Except as described in Schedule 4.13(b) of the
Disclosure Letter, no material purchase contracts or purchase commitments of the
Business continue for a period of more than twelve (12) months (other than those
which may be terminated on thirty (30) days or less notice without additional
cost or penalty) or are in quantities or amounts in excess of the normal,
ordinary, usual and current requirements for the operation of the Business or in
excess of market prices generally available to purchasers of similar quantities;
and to Seller's knowledge, none of the Material Contracts obligate Seller or any
Subsidiary or the Company or the Converted Companies to sell products or to
perform services to third parties which are at a price which would not produce a
positive gross margin on the sale of such products or the provision of such
services, or are pursuant to terms or conditions they cannot reasonably expect
to satisfy or fulfill in their entirety.
(c) The Excluded Contracts are set forth on Schedule 4.13(c) of
the Disclosure Letter.
4.14 Customers, Resellers and Suppliers. Schedule 4.14 of the Disclosure
Letter sets forth a complete and accurate list of the twenty-five (25) largest
government customers of Seller and the Subsidiaries taken as a whole (based on
dollar amounts and as a percentage of revenues), the twenty-five (25) largest
commercial customers and resellers of the Seller and the Subsidiaries taken as a
whole (based on dollars amounts as a percentage of revenues) and the twenty-five
(25) largest suppliers of Seller and the Subsidiaries taken as a whole (based on
dollar amounts and as a percentage of payments to such suppliers) relating
primarily to the Business as of the date of this Agreement together, the "Top 25
Entities"). Except as disclosed on Schedule 4.14 of the Disclosure Letter, there
are no outstanding material disputes with any of the Top 25 Entities and
▇▇
▇▇
▇▇▇▇ of such Top 25 Entities have indicated that they will not do business with
(or that they will change their relationship or arrangements in any material
respect with respect to their business with) Seller or any Subsidiary (or the
Company or the Converted Companies) in the future or following the consummation
of the transactions contemplated hereby.
4.15 Intellectual Property.
(a) Generally.
(i) Schedule 4.15(a)(i)(A) of the Disclosure Letter sets
forth a complete and accurate list of the Intellectual Property that constitute
Patents, Copyrights or Trademarks as to which Seller has obtained or applied for
registration ("Registered IP"), indicating for each the applicable jurisdiction,
registration number (or application number) and date issued (or date filed).
Schedule 4.15(a)(i)(B) of the Disclosure Letter sets forth a complete and
accurate list of all Trademarks for which no registration or application
therefor has been issued by or filed with the United States Patent and Trademark
Office.
(ii) All Intellectual Property transferred to the Company
under the Contribution Agreement or owned by the Converted Companies
("Transferred Intellectual Property"), to the extent constituting Registered IP,
is currently in compliance with all legal requirements regarding the timely
payment of any and all fees and all filings, other than any requirement that, if
not satisfied, would not result in the cancellation, revocation or lapse of all
or any portion of the registration or recordation thereof, or otherwise affect
the use, priority or enforceability of any of the Transferred Intellectual
Property in question. Seller and the Subsidiaries have used in commerce all
Trademarks that do not constitute Registered IP. Except as set forth on Schedule
4.15(a)(ii) of the Disclosure Letter, the Trademarks registered in the United
States, since registration thereof, have been continuously used in the form
appearing in, and in connection with the goods and services listed in, their
respective registration certificates or renewal certificates, as the case may
be. Seller or the Subsidiaries, as applicable, have a bona fide intent to use
any product- or service- identifiers (which if registered would constitute
Trademarks) for which an intent-to-use application is currently on file by any
of them with the United States Patent and Trademark Office.
(iii) The Transferred Intellectual Property that
constitutes Registered IP is validly filed or issued, as applicable, and is not
now involved in any proceeding (including without limitation, any interference,
reissue, reexamination, opposition or cancellation proceeding) in the United
States Patent and Trademark Office or any foreign patent office (other than, as
to applications for registration, the customary application process itself).
Neither Seller nor any Subsidiary has received any written notice or claim
challenging the validity or enforceability of any of the Transferred
Intellectual Property or indicating an intention on the part of any Person to
bring a claim that any Transferred Intellectual Property is invalid,
unenforceable or has been misused and Seller is not aware of circumstances that
would reasonably be expected to form the basis to make such a challenge with
respect to any Transferred Intellectual Property. Neither Seller nor any
Subsidiary has taken any action or failed to take any action (including an
intentional nondisclosure of material prior art in
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connection with the prosecution of any Registered IP), or knowingly used or
enforced any of the Transferred Intellectual Property (other than Trademarks) in
a manner that would result in the abandonment or unenforceability thereof.
(iv) Seller and the Subsidiaries have taken all
commercially reasonable steps to protect their respective rights in the Trade
Secrets, and have complied in all material respects with obligations to protect
confidential information of third parties under their agreements with such
parties.
(v) Except as set forth on Schedule 4.15(a)(v) of the
Disclosure Letter, Seller and the Subsidiaries are the owners of all right,
title and interest in and to all of the Transferred Intellectual Property and
inventions primarily related to the Business or required for the continued
operation of the Business in substantially the same manner as the Business is
conducted on the date of this Agreement free and clear of any and all
Encumbrances other than Permitted Encumbrances and third-party rights held under
Outbound License Agreements (as defined below), and neither Seller nor any
Subsidiary has received any written notice or claim challenging Seller's or the
Subsidiaries' complete and exclusive ownership of such Transferred Intellectual
Property (or any element thereof) and Seller is not aware of circumstances that
would reasonably be expected to form the basis to make such a challenge. There
is no decree or arbitral award that obligates Seller or any Subsidiary, with or
without notice or lapse of time, to grant licenses in such Transferred
Intellectual Property (or any element thereof) or to publish or make available
to any third parties any source code constituting such Transferred Intellectual
Property.
(b) License Agreements. Schedule 4.15(b)(i) of the Disclosure
Letter sets forth a complete and accurate list of all license agreements
granting to Seller or any Subsidiary any right to use or practice any
third-party rights constituting intellectual property related primarily to the
Business or required for the continued operation of the Business in
substantially the same manner as the Business is conducted on the date of this
Agreement (other than "off-the-shelf" shrink wrap licensed software commercially
available) that will not terminate upon the Closing (collectively, the "Inbound
License Agreements"), indicating for each the title and the parties thereto.
Schedule 4.15(b)(ii) of the Disclosure Letter sets forth a complete and accurate
list of all license agreements that will not terminate upon the Closing under
which Seller and the Subsidiaries have granted or promised to grant licenses of
Transferred Intellectual Property, other than any non-exclusive licenses granted
in the ordinary course of business to customers (collectively, the "Outbound
License Agreements"), indicating for each the title and the parties thereto.
Except as set forth in Schedule 4.15(b)(iii) of the Disclosure Letter, the
Inbound Licenses do not require payment of royalties or any other amount for the
continued use thereof, other than such amounts as do not exceed a total of
$250,000 on an annual basis. Schedule 4.15(b)(iv) of the Disclosure Letter sets
forth a complete and accurate list of all license agreements granting to Seller
or any Subsidiary any right to use or practice any third-party rights
constituting intellectual property related primarily to the Business or required
for the continued operation of the Business in substantially the same manner as
the Business is conducted on the date of this Agreement (other than
"off-the-shelf" shrink wrap licensed software commercially available that is not
material in the aggregate) that will terminate upon the Closing.
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(c) Future Licenses; Software. Neither Seller nor any Subsidiary
is subject to any agreement with standards bodies or other entities that
obligates the Company or the Converted Companies to grant licenses to third
parties that would impair the ability to operate the Business after the Closing
in substantially the same manner as the Business has been operated by Seller and
the Subsidiaries prior thereto. Except as set forth on Schedule 4.15(c) of the
Disclosure Letter, the Software related primarily to the Business or required
for the continued operation of the Business in substantially the same manner as
the Business is conducted on the date of this Agreement is owned or properly
licensed to Seller and/or Subsidiaries.
(d) Protection of Intellectual Property. Seller and the
Subsidiaries have taken reasonable steps in accordance with normal industry
practice to protect the rights in and to the Transferred Intellectual Property.
Without limiting the generality of the above, except as set forth on Schedule
4.15(d) of the Disclosure Letter, Seller and the Subsidiaries enforce a policy
of requiring each employee, consultant and contractor to execute proprietary
information, confidentiality and assignment agreements substantially in the
Seller's and the Subsidiaries' standard forms that assign to Seller or the
applicable Subsidiary all rights to any Intellectual Property or inventions
relating to the Business that are developed in the course of performing such
agreements by the employees, consultants and contractors to the fullest extent
allowed by law, and that otherwise appropriately protect the Intellectual
Property of Seller and the Subsidiaries, and, to Seller's knowledge, except
under confidentiality obligations, there has been no disclosure by Seller or any
Subsidiary of their Trade Secrets.
(e) No Infringement by Seller or any Subsidiary. To Seller's and
the Subsidiaries' knowledge, except as set forth on Schedule 4.15(e) of the
Disclosure Letter, neither any of the products nor processes used, manufactured,
marketed, sold or licensed by Seller or any Subsidiary, and all Intellectual
Property, inventions, developments and/or processes used in the conduct of the
Business as currently conducted, infringe upon, violate or constitute the
unauthorized use of any rights owned or controlled by any third party, including
any intellectual property of any third party.
(f) No Pending or Threatened Infringement Claims. Except as set
forth on Schedule 4.15(f) of the Disclosure Letter, no Action is now pending and
no written notice or other claim has been received by Seller or any Subsidiary
alleging that Seller or any Subsidiary has engaged in any activity or conduct
that infringes upon, violates or constitutes the unauthorized use of the
intellectual property rights of any third party, including any misappropriation
of trade secrets claims. Except as specifically disclosed in one or more
Schedules pursuant to this Section 4.15, no Intellectual Property is subject to
any outstanding agreement, order, judgment, decree or arbitral award restricting
the use thereof by Seller or any Subsidiary or, in the case of rights in
Intellectual Property licensed by Seller or any Subsidiary to third parties
under Outbound License Agreements, restricting the sale, transfer, assignment or
licensing thereof under the terms of such Outbound License Agreement by Seller
or such Subsidiary to such party.
(g) No Infringement by Third Parties. To the knowledge of Seller
and the Subsidiaries, except as set forth on Schedule 4.15(g) of the Disclosure
Letter, no third party is
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infringing any Patents, Copyrights or inventions used in the conduct of the
Business, infringing or diluting any Trademarks or misappropriating any Trade
Secrets, and no claims for any of the foregoing have been brought against any
third party by Seller or any Subsidiary.
4.16 Books and Records. Each of the Seller and the Subsidiaries, the
Company and the Converted Companies (as of the Closing), has made and kept (and
given Purchaser access to) the Books and Records which, in reasonable detail,
accurately and fairly reflect the assets, obligations, and transactions of the
Business.
4.17 Employees.
(a) Schedule 4.17 of the Disclosure Letter sets forth a complete
and accurate list of the names and current compensation levels of all employees
(i) who are employed by Seller or any Subsidiary as of the date of this
Agreement and (ii) whose primary employment is with the Business as of the date
of this Agreement (the "Employees"), indicating in each case (A) such Employee's
date of hire, (B) such Employee's current position, (C) such Employee's salary
level if applicable, (D) whether such Employee is employed by Seller or by a
Subsidiary, (E) whether such Employee is employed on an at-will basis or is
subject to contractual limitations on the employer's ability to terminate such
employment, (F) whether such Employee is on any type of leave of absence, (G)
whether such Employee has the right to receive any severance pay or other
compensation from Seller or any Subsidiary upon the termination of his or her
employment, or upon the sale of the Business, whether pursuant to a written or
oral agreement or arrangement, any policy of Seller or any Subsidiary or by
operation of Law (including, without limitation, the Laws of any foreign country
in which any such Employee is employed), or in the form of a retention or a
change of control bonus, and (H) whether such Employee has a written or oral
employment agreement providing for employment for any specified period of time
or providing for any benefits (other than health, life and disability
insurance), profit sharing, equity incentives or other rights.
(b) Except as set forth in Schedule 4.17(b) of the Disclosure
Letter, Seller and the Subsidiaries are, and the Company and the Converted
Companies will be, in compliance in all material respects with all applicable
Laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and the Worker Adjustment and Retraining
Notification Act ("W.A.R.N."), including, without limitation, any W.A.R.N.
notification requirements and occupational safety and health, and neither Seller
nor any Subsidiary nor the Company nor any Converted Company has engaged in any
unfair labor practice within the meaning of Section 8 of the National Labor
Relations Act or, to Seller's knowledge, any other Law (including, without
limitation, the Laws of any foreign country in which Seller or any Subsidiary
has any employees). There is no unfair labor practice, charge, complaint,
decision or any other matter against or involving Seller or any Subsidiary or
the Company or any Converted Company pending or, to the knowledge of Seller,
threatened before the National Labor Relations Board or any Governmental
Authority (including, without limitation, Governmental Authorities in any
foreign country in which Seller or any Subsidiary or the Company or any
Converted Company has any employees) pertaining to the Business or the employees
involved in the Business. There is no labor strike, dispute, slowdown, or
stoppage
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pending or to the Seller's knowledge threatened against Seller or any Subsidiary
or the Company or any Converted Company pertaining to the Business or the
employees employed in the Business. To the Seller's knowledge, no demand for
union representation, certification question or organizational drive exists or
has existed within the past two (2) years with respect to the employees of the
Business. There are no charges, investigations, administrative proceedings or
formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, religion, sexual preference,
disability or handicap, or veteran status) pending or to the Seller's knowledge
threatened before the Equal Employment Opportunity Commission or, to Seller's
knowledge, any other Governmental Authority (including, without limitation,
Governmental Authorities in any foreign country in which Seller or any
Subsidiary has any employees) against Seller or any Subsidiary or the Company or
any Converted Company pertaining to employees employed in the Business, and
Seller has no knowledge of any such charge, investigation, administrative
proceeding or complaint.
4.18 Employee Benefits. Schedule 4.18 of the Disclosure Letter sets forth
a complete and correct list of all Employee Benefit Plans. Seller has made
available to Purchaser true, complete and correct copies of all such Employee
Benefit Plans. All Employee Benefit Plans are administered by Seller, and no
Subsidiary offers nor does any employee of a Subsidiary participate in, any
Employee Benefit Plan, excepting those administered by Seller. Each Employee
Benefit Plan substantially complies in all material respects with the provisions
of and has been administered in compliance with the provisions of ERISA and all
other applicable Laws. Without limiting the generality of the foregoing, no
"prohibited transaction" (as such term is defined in Section 4975 of the Code,
or in Part 4 of Subtitle B of Title I of ERISA) has occurred with respect to any
Employee Benefit Plan that could result in the imposition of material Taxes or
material penalties on the Company or any Converted Company, and neither Seller
nor any Subsidiary has failed to make any contribution to, or to make any
payment under, any Employee Benefit Plan that it was required to make pursuant
to the terms of such Employee Benefit Plan or pursuant to applicable Law that
could result in any material liability to the Company or any Converted Company.
There is no pending or, to Seller's knowledge, threatened Action against or
involving any Employee Benefit Plan (other than routine claims for benefits)
that could result in the imposition of any material liability on the Company or
any Converted Company.
4.19 Taxes.
(a) All Tax Returns relating to the Business that are required by
Law to be filed by Seller or, to the knowledge of Seller, any Converted Company
have been duly filed on a timely basis and all amounts set forth thereon have
been paid in full. All such Tax Returns are correct and complete in all material
respects. All Taxes that are due and payable by Seller with respect to the
operations of the Business or, to the knowledge of Seller, by the Company or any
Converted Company, have been paid in full and all deposits required by Law to be
made with respect to any such Taxes have been duly made. The Contributed Assets
and, to the knowledge of Seller, the assets of the Company and the Converted
Companies are and will be as of the Closing Date, free and clear of any
Encumbrances arising out of any unpaid Taxes and there are no grounds for the
assertion or assessment of any Encumbrances against the Contributed Assets
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or the assets of the Company or any Converted Company in respect of any Taxes
(other than Encumbrances for Taxes if payment thereof is not yet required, and
which are included as a tax liability on the Financial Statement, if such Taxes
accrued before or as of the date thereof). From inception through the Closing
Date, the Company and the Converted Companies will each be treated as a
disregarded entity for federal income Tax purposes and will not be treated as a
corporation for federal income Tax purposes. The transactions contemplated by
this Agreement will not give rise to the assertion of any additional Taxes
against the Contributed Assets, the Purchaser, the Company or any Converted
Company.
(b) Except as set forth on Schedule 4.19(b) of the Disclosure
Letter, to the knowledge of Seller, there is no action or proceeding or
unresolved claim for assessment or collection, pending or threatened, by, or
present or expected dispute with, any Governmental Authority for assessment or
collection from the Company or any Converted Companies of any Taxes of any
nature and there is no basis for any Governmental Authority to assert that
additional Taxes are due with respect to the Company or any Converted Company
for any period prior to the Closing Date.
(c) To the knowledge of Seller, no powers of attorney or other
authorizations are in effect that grant to any person the authority to represent
the Company or any Converted Companies in connection with any Tax matter or
proceeding, or any such powers of attorney or other authorizations shall be
revoked as of the Closing Date.
(d) To the knowledge of Seller, neither the Company nor any
Converted Company is liable for any Taxes in any jurisdiction other than that
jurisdiction in which such entity is organized. To the knowledge of Seller, none
of the respective operations of Seller, the Company or any Converted Company (in
connection with the Business) constitutes a permanent establishment in any
country other than the country in which such entity is organized.
(e) To the knowledge of Seller, all documents in the possession or
under the control of Seller (in connection with the Business), the Company or
any Converted Company which attract any stamp or other transfer duty or tax have
been properly stamped or taxed, other than documents pertaining to the
transactions contemplated by this Agreement.
(f) Except as set forth on Schedule 4.19(f) of the Disclosure
Letter, to the knowledge of Seller, the Company and each Converted Company has
neither waived nor has been requested to waive any statute of limitations in
respect of Taxes.
(g) To the knowledge of Seller, all Taxes which the Company and
each Converted Company is required by law to withhold or to collect for payment
have been duly withheld and collected, and have been paid or accrued, reserved
against and entered on the books of the Company or each Converted Company in
accordance with GAAP.
(h) To the knowledge of Seller, all Tax deficiencies determined as
a result of any past completed audit relating to the Business, the Company or
any Converted Company have been satisfied.
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(i) To the knowledge of Seller, neither the Company nor any
Converted Company is a party to or bound by any closing agreement or offer in
compromise with any taxing authority.
(j) To the knowledge of Seller, neither Seller nor the Company nor
any Converted Company has taken any action that is not in accordance with past
practice that could defer a liability for Taxes of the Company or any Converted
Company from any taxable period ending on or before the Closing Date to any
taxable period ending after the Closing Date.
(k) To the knowledge of Seller, all related party transactions
conducted by the Company, Seller, any Converted Company and/or other affiliates
of Seller have been on an arms' length basis in accordance with Section 482 of
the Code.
(l) To the knowledge of Seller, neither the Company nor any
Converted Company has been or will be required to include any material
adjustment in taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or Section 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.
4.20 Compliance. Except as set forth on Schedule 4.20 of the Disclosure
Letter, (i) Seller and the Subsidiaries are currently, and have been at all
times, and the Company and the Converted Companies will at the Closing be, in
material compliance with and (ii) have no material liability under, any and all
Laws in their conduct of the Business. Except as set forth on Schedule 4.20 of
the Disclosure Letter, neither Seller nor any Subsidiary nor the Company nor any
Converted Company has received any notice from, or otherwise been advised that,
any Governmental Authority or, to Seller's knowledge, other Person is claiming
any violation or potential violation of any Law with respect to the conduct of
the Business. Neither Seller nor any Subsidiary nor the Company nor any
Converted Company is in default with respect to any order, writ, injunction or
decree of any Governmental Authority with respect to the Business.
4.21 Permits. Schedule 4.21 of the Disclosure Letter sets forth a list of
all Permits. True and complete copies thereof have been furnished to Purchaser.
Except as set forth on Schedule 4.21 of the Disclosure Letter, Seller and the
Subsidiaries hold, and the Company and the Converted Companies will at Closing
have applied for, all Permits necessary for the lawful operation of the Business
as presently conducted, and all such Permits are in full force and effect except
where such failure would not constitute a Material Adverse Change.
4.22 Insurance. Schedule 4.22(a) of the Disclosure Letter contains an
accurate list of all insurance policies, letters of credit and surety bonds
maintained by Seller and the Subsidiaries (indicating in each case which entity
holds such policy) covering or affecting any Subsidiary or the Business, or
Seller in connection with the Business. All such policies are valid, outstanding
and enforceable, and neither Seller nor any Subsidiary has agreed to modify or
cancel any of such insurance policies prior to the Closing, nor has Seller or
any Subsidiary received notice of any actual or threatened modification or
cancellation of any such insurance. Purchaser acknowledges that Seller has no
obligation to provide or arrange for any insurance for Purchaser relating to the
period from and after the Closing. There are no pending claims against such
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insurance by Seller or the Subsidiaries as to which the insurers have denied
coverage or otherwise reserved rights. Except as set forth on Schedule 4.22(b),
there are no risks with respect to the Business which Seller or the Subsidiaries
or the Company or the Converted Companies have designated as being self-insured.
Schedule 4.22(c) lists all claims of Seller and the Subsidiaries or the Company
or the Converted Companies primarily related to the Business exceeding
deductible amounts which are currently pending or which have been made with an
insurance carrier, and all losses incurred with respect to self-insured risks,
since September 1, 1999.
4.23 Brokers and Finders. Except as set forth on Schedule 4.23 of the
Disclosure Letter, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of Seller or any Subsidiary in such manner as to
give rise to any claim against Purchaser for any brokerage or finders'
commission, fee or similar compensation. Seller shall indemnify Purchaser for
any claims brought by any person for any brokerage or finders' commission, fee
or similar compensation on account of this transaction.
4.24 SEC Filings, Full Disclosure. Seller's Annual Report on Form 10-K
for the fiscal year ended August 31, 2000 as filed with the Securities and
Exchange Commission, (ii) Seller's Quarterly Reports on Form 10-Q for the
quarters ended November 30, 2000 and ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇▇) Seller's proxy
statement relating to the 2000 annual meeting of shareholders and (iv) all other
reports, statements and registration statements, including Current Reports on
Form 8-K, if any, filed by Seller after August 31, 2000 with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "1934 Act"), or the Securities Act of 1933, as amended (the "1933 Act"),
when filed, complied as to form and content, in all material respects with the
requirements of the 1934 Act and the 1933 Act, as the case may be, and the rules
and regulations of the Securities and Exchange Commission applicable to such
documents, and, taken as a whole, as they relate to the Business or the conduct
thereof, did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No representation, warranty or other statement of Seller
relating to the Business or the conduct thereof contained in this Agreement, the
Disclosure Letter or any certificate furnished to Purchaser in connection with
the transactions contemplated by this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
4.25 Environmental Matters.
(a) Definitions. The following terms, when used in this Section
4.25 shall have the following meanings:
(i) "Seller" for purposes of this Section 4.25 includes (A)
Seller and the Subsidiaries, the Company and the Converted Companies, (B) all
partnerships, joint ventures and other entities or organizations in which Seller
or any of its Subsidiaries was at anytime or is a partner, joint venturer,
member or participant, and (C) all predecessor or former corporations,
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partnerships, joint ventures, organizations, businesses or other entities,
whether in existence as of the date hereof or at any time prior to the date
hereof, the assets or obligations of which have been acquired or assumed by
Seller or any of its Subsidiaries or to which Seller or any of its Subsidiaries
has succeeded.
(ii) "Release" means any release, threatened release,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment or the workplace
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
(iii) "Hazardous Substance" means any pollutants,
contaminants, chemicals, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical compound or
hazardous substance, material or waste, whether solid, liquid or gas, including
any quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas, crude
oil or any fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives, radioactive substance, waste waters, sludges, slag
and any other substance, material or waste that is subject to regulation,
control or remediation under any Environmental Law.
(iv) "Environmental Laws" mean all Laws which regulate or
relate to (A) the protection or clean-up of the environment, (B) the use,
treatment, storage, transportation, generation, manufacture, processing,
distribution, handling, or Release of Hazardous Substances, (C) the preservation
or protection of waterways, groundwater, drinking water, air, wildlife, plants
or other natural resources, or (D) the health and safety of persons or property,
including, without limitation, protection of the health and safety of employees.
Environmental Laws include, without limitation, the Federal Water Pollution
Control Act, Resource Conservation & Recovery Act, Clean Water Act, Safe
Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic
Substances Control Act, Clean Air Act, Comprehensive Environmental Response,
Compensation and Liability Act, Hazardous Materials Transportation Act and all
analogous or related federal, state or local law.
(v) "Environmental Conditions" mean the Release or presence
of any Hazardous Substance (whether or not such Release or presence constituted
at the time thereof a violation of any Environmental Law) as a result of which
Seller or any of its Subsidiaries has or may become liable to any Person or by
reason of which the Business or any of the Contributed Assets may suffer or be
subjected to any Encumbrance or liability.
(vi) "Site" means any real property now or previously owned
or operated by Seller and used in the Business.
(b) Compliance and Liability. Seller and each Site are in
compliance with all, and Seller has no liability under any, Environmental Laws,
except for such noncompliance or liability which, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Change.
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(c) Releases and Environmental Conditions. No Release has occurred
at any Site, and there are no present or past Environmental Conditions in any
way relating to Seller, any Site, or the Business, except for such releases or
conditions which, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Change.
(d) Environmental Audits. Seller has delivered to Purchaser copies
of all environmental audits or other studies or reports relating to any
Environmental Condition at any Site or relating to the Business in the
possession of Seller or reasonably available to Seller.
(e) Notice of Violation. Except as set forth on Schedule 4.25(e)
of the Disclosure Letter, Seller has not received notice of any alleged, actual
or potential responsibility, inquiry, investigation or administrative or
judicial proceeding regarding (x) any Release at any Site or other location, or
(y) any violation of or non-compliance by Seller with the conditions of any
Permit required under any Environmental Law or the provisions of any
Environmental Law. Seller has not received any notice of any other claim, demand
or action by any Person alleging any actual or threatened injury or damage to
any Person, property, natural resource or the environment arising from or
relating to any Release, transportation, disposal or presence of any Hazardous
Substances.
(f) Notices, Warnings and Records. Seller has given all notices
and warnings, made all reports, obtained all Permits, licenses and approvals,
and has kept, maintained and filed all records required by, and in compliance
with, all Environmental Laws, including, without limitation any notices and
consents required under any Environmental Laws in connection with the
consummation of the transaction contemplated by this Agreement, except where the
failure to do any of the above would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change.
(g) No Storage Tanks. Except as set forth on Schedule 4.25(g), to
Seller's knowledge, there are not now and never have been any underground or
above ground storage tanks located at any Site.
4.26 Restrictive Documents and Territorial Restrictions. Except as set
forth on Schedule 4.26 of the Disclosure Letter and except for restrictions
contained in this Agreement, the Ancillary Agreements, and the MTI Agreements,
Seller and the Subsidiaries are not, and the Company and Converted Companies
will not be, subject to, or a party to, any charter, by-law, Encumbrance, lease,
license, Permit, agreement, instrument, judgment or decree which limits the
ability of the Business to compete in any geographic area or with any Person or
which would prevent in any material respect the continued operation of the
Business after the date hereof in substantially the same manner as heretofore
operated.
4.27 Government Contracts. To the knowledge of Seller, the Business has
not been suspended or debarred from bidding on contracts or subcontracts with
any governmental entity and no such suspension or debarment has been initiated
or threatened. To Seller's knowledge, the consummation of the transactions
contemplated by this Agreement will not result in any such suspension or
debarment. To the knowledge of Seller, there is no reasonable basis to conclude
that the Business would become subject to suspension or debarment. Except as set
forth on
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Schedule 4.27(a) of the Disclosure Letter, neither Seller, nor any Subsidiary
nor the Company nor the Converted Companies (in each case in connection with the
Business) has been audited or investigated or is now being audited or
investigated by the U.S. Government Accounting Office, the U.S. Department of
Defense or any of its agencies, the Defense Contract Audit Agency, the U.S.
Department of Justice, the Inspector General of any U.S. governmental entity,
any similar agencies or instrumentalities of any foreign governmental entity, or
any prime contractor with a governmental entity nor, to the knowledge of Seller,
has any such audit or investigation been threatened. Except as set forth on
Schedule 4.27(b) of the Disclosure Letter, the Seller and the Subsidiaries and
the Company and the Converted Companies (as of immediately prior to the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements at the Closing) have no agreements, contracts or
commitments that require them to obtain or maintain a security clearance with
any governmental entity. The Receivables due from government customers are not
subject to offset or reduction for overcharges, cost basis reductions, ▇▇▇▇
backs or other collection disputes, except as reserved for on the Balance Sheet
or the Closing Date Statement, as the case may be.
4.28 Product Liability and Warranties. Except as set forth on Schedule
4.28 of the Disclosure Letter, each Product designed, manufactured, sold,
leased, or delivered in the operation of the Business has been in conformity in
all material respects with all applicable contractual commitments and all
express and any implied warranties, and, to Seller's knowledge, neither Seller
nor any Subsidiary has and the Company and the Converted Companies will not have
any liability for replacement or repair thereof or other damages in connection
therewith, other than in the ordinary course of business consistent with
historical replacements, repairs and damages associated with the Products and
subject only to the reserve for product warranty claims in the Financial
Statements or the Closing Date Statement as applicable. Except as set forth on
Schedule 4.28 of the Disclosure Letter, to the knowledge of Seller, there is no
reasonable basis to conclude that the Business would have any such material
liability, subject to applicable reserves. The Business maintains in all
material respects sufficient personnel, facilities, third party service
Contracts and capabilities to satisfy its liabilities and obligations with
respect to product warranties, subject to the transactions contemplated hereby
and other actions taken after the date hereof at the written request of
Purchaser. No Product or service designed, manufactured, sold, leased, or
delivered in the operation of the Business is subject to any guaranty, warranty,
or other indemnity beyond the applicable standard terms and conditions of sale
or lease for such Product.
4.29 Inventory. After considering reserves, all Inventory (a) was
acquired in the ordinary course of business, (b) consists substantially of a
quality, quantity and condition useable, leasable or saleable in the ordinary
course of business and (c) is valued at the lower of cost or market value.
Neither Seller nor any Subsidiary nor the Company nor the Converted Companies is
under any liability or obligation with respect to the return of finished goods
inventory in the possession of distributors, wholesalers, retailers or other
customers in excess of established reserves. Except as set forth on Schedule
4.29 of the Disclosure Letter, neither Seller nor any Subsidiary nor the Company
nor the Converted Companies holds any Inventory on consignment, or holds title
to or ownership of any Inventory in the possession of others.
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4.30 Receivables. All Receivables are (a) valid, bona fide claims against
debtors for sales or other charges, and (b) to Seller's knowledge and net of
reserves, not subject to any defenses, set-offs or counterclaims. Seller or the
appropriate Subsidiary or the Company or the appropriate Converted Company (as
of the Closing) has fully performed in all material respects its obligations
with respect to such Receivables that were obligated to be performed to the date
of this Agreement. Except as set forth on Schedule 4.30 of the Disclosure
Letter, the Receivables (net of any reserves reflected in the Financial
Statements or in the Closing Date Statement, as the case may be) are valid and,
to Seller's knowledge, are collectible in all material respects when due in the
ordinary course of the Business. The write-offs for uncollectible accounts
receivable reflected in the Financial Statements have been established in the
ordinary course of the Business, in accordance with principles consistently
applied since September 1, 1999.
4.31 Transactions with Affiliated Parties. Schedule 4.31(a) of the
Disclosure Letter sets forth a true and complete list and description of all
transactions primarily related to the Business engaged in between Seller and the
Subsidiaries and any director, executive officer or holder of five percent (5%)
or more of the Seller's equity securities or other Person (the "Affiliated
Parties") that would be required to be reported under Item 404 of Regulation S-K
under the 1933 Act since September 1, 2000. To the knowledge of Seller, all
Contracts and commitments with Affiliated Parties listed on Schedule 4.31(a)
that are being assigned to Purchaser are on terms no less favorable to Seller
and the Subsidiaries than would have been available from an unaffiliated third
party at the time such Contract or commitment was entered into. In addition,
Schedule 4.31(b) of the Disclosure Letter sets forth all loans to employees of
the Seller and the Subsidiaries.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that the following statements
are true and complete and not misleading as of the date hereof and as of the
Closing Date:
5.1 Organization. Purchaser is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, with the
power and authority to own and operate its business as presently conducted.
Purchaser is qualified to do business as a foreign entity in all jurisdictions
in which it is required to be qualified to conduct its business as currently
conducted except for jurisdictions in which the failure to so qualify would not
reasonably be expected to have a material adverse effect on Purchaser. Purchaser
has previously made available to Seller true and correct copies of its
organizational documents including its limited liability company agreement. As
of immediately prior to the Closing, Purchaser has not engaged in any
transaction other than transactions in connection with this Agreement.
5.2 Authorization. Purchaser has the requisite corporate power and
authority to enter into this Agreement and the Ancillary Agreements, as the case
may be, to perform each of its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary
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Agreements by Purchaser, have been duly authorized by all necessary corporate
action on the part of Purchaser.
5.3 Due Execution and Delivery; Binding Obligations. This Agreement has
been duly executed and delivered by Purchaser, and each of the Ancillary
Agreements will be, at Closing, duly executed and delivered by Purchaser.
Assuming the due authorization, execution and delivery of this Agreement and the
Ancillary Agreements by the parties thereto (other than Purchaser), this
Agreement constitutes, and each of the Ancillary Agreements will constitute at
Closing, a legal, valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with their respective terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium or similar Laws relating to or limiting creditors' rights generally,
by equitable principles relating to enforceability, or by applicable federal or
state securities laws with respect to the indemnification provisions contained
in this Agreement and the Ancillary Agreements, as the case may be.
5.4 No Conflict or Violation. Neither the execution and delivery of this
Agreement and the Ancillary Agreements by Purchaser, nor the consummation of the
transactions contemplated hereby or thereby, will result in (a) a violation of,
or a conflict with, either Purchaser's organizational documents or of any
subscription, members' or similar agreement or understandings to which Purchaser
is a party; (b) a violation by Purchaser of any applicable Law; (c) a violation
by Purchaser of any order, judgment, writ, injunction, decree or award to which
Purchaser is a party or subject; or (d) a breach of, or a default (or an event
which, with notice or lapse of time or both would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
create a right of termination or acceleration under, any Contract, Permit or
Encumbrance to which Purchaser is a party or by which Purchaser is bound.
5.5 Litigation. There is no Action by or before any Governmental
Authority or other Person pending or, to Purchaser's knowledge, threatened
against Purchaser or any of its properties or rights which would materially and
adversely affect the right or ability of Purchaser to perform any of its
respective obligations under this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby.
5.6 Consents and Approvals. Except for the (i) the notification
requirements of the HSR Act, (ii) the requirements of antitrust, competition or
other similar laws of any applicable foreign jurisdiction, and (iii) compliance
with applicable securities laws, no consent, Permit, approval or authorization
of, or declaration, filing, application, transfer or registration with, any
Governmental Authority, or any other person or entity is required to be made or
obtained by Purchaser by virtue of the execution, delivery or performance of
this Agreement, the Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby.
5.7 Purchase of the Membership Interests; Investment Experience;
Restricted Securities.
(a) The Membership Interests to be purchased by Purchaser
hereunder will be acquired for investment for Purchaser's own account, not as a
nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the 1933 Act and
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Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same.
(b) At no time was Purchaser presented with or solicited by any
publicly issued or circulated newspaper, mail, radio, television or other form
of general advertising or solicitation in connection with the offer, sale and
purchase of the Membership Interests. Purchaser has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Membership Interests to be
purchased by Purchaser under this Agreement. Purchaser further has had an
opportunity to ask questions and receive answers from Seller regarding the terms
and conditions of the offering of the Membership Interests and to obtain
additional information (to the extent Seller possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Purchaser or to which Purchaser had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by Seller in Article 4.
(c) Purchaser understands that the purchase of the Membership
Interests involves substantial risk. Purchaser acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the Membership
Interests and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this investment in the
Membership Interests and protecting its own interests in connection with this
investment.
(d) Purchaser understands that the Membership Interests are
characterized as "restricted securities" under the 1933 Act inasmuch as they are
being acquired from Seller in a transaction not involving a public offering, and
that under the 1933 Act and applicable regulations thereunder, such securities
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the 1933 Act, except pursuant
to an exemption from such registration available under the 1933 Act. In this
connection, Purchaser represents and warrants that it is familiar with Rule 144
of the Securities and Exchange Commission, as presently in effect, and
understands the resale limitations imposed thereby and by the 1933 Act.
5.8 Financial Capacity; Ability to Perform. Purchaser shall have at the
Closing cash available or committed for borrowing under duly executed and
delivered agreements in an amount of no less than $50,000,000, of which no less
than $20,000,000 shall be contributed into the Company at the Closing, and which
$50,000,000 amount Purchaser believes is sufficient to satisfy all of
Purchaser's obligations under this Agreement and the Ancillary Agreements and in
connection with the transactions contemplated hereby and thereby on the terms
and conditions set forth herein.
5.9 Tax Liability. Purchaser has reviewed with its own respective tax
advisors the federal, state, local and foreign Tax consequences of the purchase
of the Membership Interests by Purchaser and the transactions contemplated by
this Agreement and the Ancillary Agreements. With respect to the tax
consequences of the purchase of the Membership Interests, Purchaser
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relies solely on such advisors and not on any statements, representations or
warranties of Seller, the Subsidiaries, or any of their respective affiliates,
officers, directors, members, employees, representatives or agents. Purchaser
understands that it (and not Seller) shall be responsible for its own respective
Tax liability that may arise as a result of the purchase of the Membership
Interests or the transactions contemplated by this Agreement and the Ancillary
Agreements.
5.10 No Ownership of Seller Securities. As of the date of this Agreement,
neither Purchaser nor, to its knowledge, any of its Affiliates owns or possesses
any interest in, legally or beneficially (within the meaning of the 1934 Act),
any capital stock or security convertible into capital stock of Seller. As of
the date of this Agreement, neither Purchaser nor, to Purchaser's knowledge, any
of its Affiliates owns or has the right to acquire any options, warrants or
other rights (including, without limitation, any convertible or exchangeable
securities) to acquire any capital stock or security convertible into capital
stock of Seller or any interest therein (whether legally or beneficially).
5.11 Full Disclosure. No representation, warranty or other statement of
Purchaser contained in this Agreement or any other document or certificate
furnished to Seller, the Subsidiaries or the Company in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
5.12 Brokers and Finders. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of Purchaser in such manner as to
give rise to any claim against Seller or any Subsidiary for any brokerage or
finders' commission, fee or similar compensation. Purchaser shall indemnify
Seller and the Subsidiaries for any claims brought by any person for any
brokerage or finders' commission, fee or similar compensation on account of this
transaction.
5.13 No Additional Representations and Warranties. Notwithstanding
anything to the contrary contained in this Agreement, it is the express intent
of each party hereto that none of Seller, the Subsidiaries or any of their
respective affiliates, officers, directors, members, employees, representatives
or agents is making or has made any representation or warranty whatsoever,
express or implied, statutory or otherwise, beyond those expressly stated in
Article 4 of this Agreement, including, without limitation, any representation
or warranty as to condition, fitness for a particular purpose, merchantability
or suitability as to any of the assets or properties of the Business; it is
understood and agreed that any estimates, projections or other predictions that
have been disclosed to Purchaser and its affiliates are not and shall not be
deemed to be representations or warranties of Seller or the Subsidiaries
hereunder.
ARTICLE 6
COVENANTS
6.1 Access to Information. From the date hereof through the Closing Date,
Purchaser and its Representatives and Purchaser's lenders and financial sources
shall have reasonable
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access during normal business hours to all properties, Books and Records,
Contracts, Permits and other documents of or relating to the Business in order
to make such investigation as they shall deem desirable in connection with this
Agreement and the Ancillary Agreements; provided, however, that the activities
of Purchaser and its Representatives shall be conducted in such a manner as not
to unreasonably interfere with the business operations of Seller and the
Subsidiaries. Without limiting the generality of the foregoing, from and after
the date hereof through the Closing Date, Purchaser, upon reasonable notice,
shall have the right to have a Representative be present on any premises from
which the Business is operated on a full time basis. Seller shall furnish or
cause to be furnished to Purchaser and its Representatives all data, information
and reports concerning the Business including without limitation, access to
officers and employees as may reasonably be requested. No such investigation
performed or information received by Purchaser or any Representative shall
affect in any way the liability of Seller for the breach of any representation
or warranty contained herein. Seller and Purchaser shall, as promptly as
possible, inform the other in writing of any change or event which renders any
representation or warranty by that party in or any Schedule to this Agreement
inaccurate or incomplete in any material respect.
6.2 Conduct of the Business. Except as specifically contemplated by this
Agreement and the Ancillary Agreements, except as set forth on the Schedule 6.2
of the Disclosure Letter, and except as requested by or consented to by
Purchaser in writing, from the date hereof through the Closing Date, Seller
shall use commercially reasonable efforts to conduct (and shall cause the
Subsidiaries to conduct) the Business in the ordinary course and consistent with
past practice in all material respects, shall pay all accounts payable when and
as due, and shall use its (and shall cause each Subsidiary to use its)
commercially reasonable efforts to preserve intact the business relationships of
the Business, keep available the service of the employees of the Business and
maintain satisfactory relationships with the suppliers to and customers of and
other persons having a business relationship with the Business. Without limiting
the generality of the foregoing, without the prior written consent of Purchaser,
Seller shall not (and shall not permit any Subsidiary to) (a) take or undertake
or incur or permit to exist any of the acts, transactions, events or occurrences
specified in Section 4.11 (with the understanding that the expiration of any
Contract by its terms shall not constitute a violation of this clause (a),
except that Seller shall promptly notify Purchaser of the expiration of any
Material Contract and promptly upon Purchaser's request, use its commercially
reasonable efforts to renew or extend any Material Contract), (b) enter into, or
commit to enter into, any material contract or agreement, or amend any existing
Material Contract in such a way, that will materially increase the amount of the
Assumed Liabilities or (c) sell, transfer, dispose of, or agree to sell,
transfer or dispose of, any assets, properties, Intellectual Property or rights
related to the Business other than in the ordinary course of business consistent
with past practice. Seller shall keep intact all insurance existing as of the
date hereof that is material to the Business until the Closing and any
entitlement to the proceeds thereof to the extent relating to FF&E shall be
contributed to the Company prior to the Closing. Seller shall cause the Business
not to engage in any transaction with any of its Affiliated Parties (other than
transactions between Seller and the Subsidiaries, transactions contemplated
herein and in the Ancillary Agreements and the MTI Transaction) without the
prior written consent of Purchaser, except for transactions under existing
agreements disclosed on Schedules 4.31(a) and 4.31(b) of the Disclosure Letter
or previously disclosed in Seller's Form
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10-K for fiscal 2000 or Seller's proxy statement for its 2000 annual meeting of
shareholders and transactions in the ordinary course consistent with past
practice; provided, however, that any purchase orders issued to Affiliated
Parties pending as of the Closing Date will be on commercially reasonable terms.
6.3 Third Party Consents.
(a) Except with respect to the Excluded Assets, Seller and
Purchaser will use commercially reasonable efforts to obtain all waivers,
consents, novations, approvals, authorizations and clearances and to effect all
registrations, filings and notices with or to third parties or Governmental
Authorities which are reasonably necessary or desirable in connection with the
assignment of the Contracts to the Company and obtaining consent to a change of
control. Any Contract or Lease (other than the GSA Contract) that has not been
so assigned or novated to the Company by the Effective Time under the
Contribution Agreement shall be deemed an "Unassigned Contract".
(b) Notwithstanding anything in this Agreement to the contrary, if
the consent or novation of any third party required for the assignment of any
Contract or Lease (other than the GSA Contract) has not been obtained by the
Closing Date, Seller and Purchaser will cooperate in a commercially reasonable
manner, which shall not include the payment of money to a third party by Seller,
to obtain such consent or novation for such Unassigned Contract, and will and
hereby does grant the Company the exclusive right to perform all obligations
under and receive the benefits of such Unassigned Contract on behalf of Seller
(unless prohibited by law or by the terms of such Unassigned Contract and
subject to the Company and/or the Converted Companies assuming and performing
all obligations and liabilities of Seller and/or the Subsidiaries under such
Unassigned Contract) (collectively, the "Subcontracting Arrangement"), until the
earlier of (i) the date that is six (6) months after the Closing Date (the
"Initial Period"), (ii) the replacement of such Unassigned Contract with a
substantially equivalent contract from the same party (a "Replacement Contract")
or (iii) the receipt of a consent or novation required for the assignment of
such Unassigned Contract. Purchaser shall cause the Company to, and the Company
shall use commercially reasonable efforts to, assist Seller in obtaining the
necessary consents or novations, but if following Seller's commercially
reasonable efforts to obtain such consents or novations, Seller certifies to
Purchaser in writing that it appears that a third party consent or novation
cannot be obtained for any Unassigned Contract prior to the end of the Initial
Period, Purchaser shall cause the Company to, and the Company shall use
commercially reasonable efforts to, obtain a Replacement Contract for such
Unassigned Contract. After the date hereof, Seller shall, prior to contacting
any third party regarding a consent or novation, provide Purchaser with the
right to review the form of communication to be used by Seller to obtain
consents and novations and shall include any reasonable modification to such
form requested by Purchaser within two (2) business days of submission to
Purchaser. With respect to Material Contracts, Purchaser shall be promptly
provided upon receipt or delivery thereof a copy of all correspondence with
third parties regarding consents and novations and a copy of all written
replies. In seeking such consents and novations, Seller shall not agree to any
amendment of any Contract or Lease, or to any other adverse modification of the
relationship between the
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Company and any third party, without the prior written consent of Purchaser
(which consent shall not be unreasonably withheld).
(c) If a third party consent or novation or Replacement Contract
for any Mission Critical Contract (other than the GSA Contract) has not been
obtained prior to the end of the Initial Period, the Initial Period and the
Subcontracting Arrangement with respect to such Mission Critical Contracts only
shall be extended for up to three (3) additional months (the "Extended Initial
Period").
(d) The Company shall have no obligation under, or receive any
benefits of, any Unassigned Contract after the expiration of the Initial Period,
except for (i) any Unassigned Contract for which a consent or novation required
for the assignment of such Unassigned Contract to the Company has been obtained
and (ii) any Mission Critical Contract until the expiration of the Extended
Initial Period.
(e) Seller shall terminate any Unassigned Contract for which a
consent or novation required for such Unassigned Contract's assignment has not
been obtained upon the earlier of (i) the expiration of the Initial Period or
(ii) the execution and delivery of a Replacement Contract, or, with respect to
any Unassigned Contract that is a Mission Critical Contract, upon the earlier of
(x) the expiration of the Extended Initial Period or (y) the execution and
delivery of a Replacement Contract; provided, however, that if the termination
of any Unassigned Contract would result in a penalty or other extra expense to
Seller, then such termination shall be solely in the discretion of Seller and
Seller shall be responsible for any liabilities arising under or related to such
Unassigned Contract after the Subcontracting Arrangement.
(f) Subject to the terms and conditions of this Agreement and the
Ancillary Agreements, all obligations and liabilities arising under the
Unassigned Contracts during the Initial Period, or to the extent the Unassigned
Contract is a Mission Critical Contract, the Extended Initial Period, if
applicable, shall be deemed to constitute Assumed Liabilities. Notwithstanding
any of the foregoing, from and after the date of this Agreement, Seller shall
have no obligation to renew any Contract that comes up for renewal or that will
expire in accordance with its own terms.
6.4 Confidentiality.
(a) Each of Seller and Purchaser will, and will cause their
respective Representatives to, hold in strict confidence using measures that are
at least equal to the standard of care used by it to safeguard its own
Confidential Information, and not to use to the detriment of the other party,
any Confidential Information. No party to this Agreement shall, without the
prior written consent of the other(s), disclose any Confidential Information of
the other party to any Person other than a director, officer, employee,
contractor or an advisor who has a bona fide need to know such information and
who agrees to be bound by confidentiality agreements containing provisions no
less protective than this Section 6.4 or as expressly contemplated by this
Agreement, make any unauthorized copies of Confidential Information, or use any
Confidential Information of the other party for any purpose except to implement
its rights and
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obligations under this Agreement and as otherwise expressly contemplated by this
Agreement; provided, however, that if any party or its Representatives is
required or requested to disclose any Confidential Information by a Governmental
Authority or court order, that party will promptly notify the other(s) of such
request or requirement in writing so that the other(s) may seek an appropriate
protective order or other appropriate relief and/or waive compliance with the
provisions of this Section 6.4, and if, in the absence of such relief or waiver,
any party or its Representatives are, in the opinion of such party's counsel,
legally compelled to disclose Confidential Information, then that party may
disclose such of the Confidential Information to the entity compelling
disclosure as is, according to such opinion, required, without liability
hereunder. After the Closing Date, Seller shall not, and shall cause its
representatives not to, at any time disclose to any person other than Purchaser
or the Company any Confidential Information. At Closing, Seller shall promptly
deliver to the Company all Confidential Information.
(b) Each of Seller and Purchaser acknowledges that breach of the
foregoing obligations may cause irreparable injury to the party whose
Confidential Information is disclosed and that such party may seek and obtain
injunctive relief against such breach or threatened breach without prejudice to
any other remedies that may be available to such party.
(c) In the event that the transactions contemplated by this
Agreement are not consummated, Seller will return to Purchaser, and Purchaser
will return to Seller, all Confidential Information received from the other(s),
including, but not limited to, worksheets, memoranda and other documents
prepared or made available in connection with this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby, and will not
retain any copy or record of the same.
(d) The confidentiality provisions of this Section 6.4 shall
commence on the date of this Agreement and shall survive the termination of this
Agreement.
6.5 Publicity. It is anticipated that Seller will make a public
announcement of the execution of this Agreement concurrently with or promptly
following the execution hereof. Seller shall provide Purchaser with a copy of
the relevant portions of such press release for review and approval prior to the
release thereof, such approval by Purchaser not to be unreasonably withheld. The
relevant portions of any other press release or similar announcement concerning
this Agreement or any of the transactions contemplated hereby by either party,
whether prior to or subsequent to the Closing, shall be provided to the other
party for review and approval, which approval shall not be unreasonably
withheld; provided, however, that customary tombstone advertisements by either
party may be made without the requirement for any such approval.
6.6 Commercially Reasonable Efforts. Upon the terms and subject to the
conditions of this Agreement, each party will use their commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to satisfy the conditions set
forth herein as soon as practicable, including without limitation, commercially
reasonable efforts to take all actions under applicable laws and regulations to
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consummate the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, (a) Seller shall use its commercially reasonable
efforts to take, or cause to be taken, all necessary action to (i) form the
Company under Delaware Law in a timely manner, (ii) form each Converted Company
in a timely manner, (iii) cause the Company and each Converted Company to be
treated for all periods from inception as a disregarded entity for federal and
state Tax purposes, and (iv) not take any action that would cause the Company or
any Converted Company to be treated as a corporation for federal or state Tax
purposes on or after the Closing Date, and (b) in the event the Permits listed
on Schedule 4.21 cannot be transferred to the Company or the Converted Companies
prior to the anticipated Closing Date, Purchaser shall take, or shall cause the
Company or the Converted Companies to take, all action necessary to (w) apply
for and obtain similar permits in Purchaser's or the Company's name, (x) license
the use of such Permits from Seller or a Subsidiary, (y) provide for the sale
and distribution through Seller or a Subsidiary of any products that can only be
sold by a party holding such Permits or (z) enter into such other lawful
arrangement with Seller as shall permit the Closing to occur without undue
delay, recognizing the need for the Company and the Converted Companies to be
able to continue to operate the Business without limitation in a lawful manner
from and after the Closing. In case at any time before or after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will cooperate with the other and take such
further action (including the execution and delivery of such further instruments
and documents) as the other party reasonably may request, all at the sole cost
and expense of the requesting party (unless the requesting party is entitled to
indemnification therefor under Article 11 hereof).
6.7 Employees.
(a) Seller and Purchaser agree to implement the employee
restructuring plan set forth on Schedule 6.7 of the Disclosure Letter in
accordance with the terms and conditions set forth on such Schedule 6.7. The
employees who accept employment by the Company and who report for duty on or
promptly after the Closing Date and the employees of the Converted Companies who
continue to be employed by their respective employers on and after the Closing
are collectively referred to as "Company Employees". No employment related
liabilities arising prior to the Closing Date with respect to any Company
Employees or any other employees of Seller or any Subsidiary will be assigned to
or assumed by the Company, except for liabilities for salaries, commissions,
vacation, comp time and other non-equity based benefits accrued as of the
Closing Date that are reflected on the Final Closing Date Statement in
accordance with GAAP, excluding the items described in clauses (i) through (iii)
below (the "Balance Sheet Employee Liabilities"), and Seller shall indemnify the
Company and Purchaser from and against any and all such pre-Closing employment
related liabilities (other than the Balance Sheet Employee Liabilities),
including, but not limited to, (i) any liabilities arising from the termination
of employees by Seller or any Subsidiary who do not become Company Employees,
(ii) any payments due to any Company Employees at any time pursuant to any
retention bonus arrangement or severance program or similar arrangement subject
to Schedule 6.7 of the Disclosure Letter to which Seller or any Subsidiary is a
party that is in effect on or prior to the Closing Date, and (iii) any and all
obligations under any stock option, stock purchase, phantom stock or similar
equity incentive plan operated by Seller or any Subsidiary.
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(b) In connection with the termination of employees by Seller
described on Schedule 6.7 of the Disclosure Letter, Seller shall provide written
notice sufficient to comply with W.A.R.N. as provided in Schedule 4.17(b) of the
Disclosure Letter. This notice shall, at a minimum include (i) a statement that
the planned action is expected to be permanent, (ii) the expected date of the
employee's termination, (iii) an indication of whether the employee has bumping
rights, and (iv) the name and telephone number of the Seller's official to
contact for further information. Upon receipt of such notification, Seller
agrees to provide written notice sufficient to comply with W.A.R.N. to (i) the
state dislocated worker unit designated under the Job Training Partnership Act
in each state in which the Seller terminates any employees, and (ii) the chief
elected official of the local government unit within which any terminations
occur. The notices to the state dislocated worker unit(s) and chief elected
official(s), shall at a minimum, include (i) the name and address of the
employment site where the termination(s) will occur, and the name and telephone
number of the Seller's official to contact for further information, (ii) whether
the planned terminations are permanent and whether the entire employment site is
to be closed, (iii) the expected date of the first termination and the
anticipated schedule for the terminations, (iv) the job titles of positions to
be terminated and the number of affected employees in each job classification,
(v) whether there are any applicable bumping rights, and (vi) the name of each
labor organization representing the employees who are being terminated and the
name and address of the chief elected official of each such labor organization.
As to any terminated employees who are represented by a labor organization, upon
receipt of such notification, Seller shall provide written notice sufficient to
comply with W.A.R.N. to chief elected officer of the employee's labor
organization. This notice shall, at a minimum, contain the same information as
set forth in romanettes (i) - (iv) above of the notice sent to the state
dislocated worker unit and chief elected official of local government.
6.8 Updates to Schedules. Seller shall provide to Purchaser such updates
to the Disclosure Letter as shall be necessary to ensure that such Disclosure
Letter reflects events that occur subsequent to the date hereof.
6.9 Filings. Promptly after the date of this Agreement, each of Seller
and Purchaser will prepare and file (a) with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
Notification and Report Forms relating to the transactions contemplated by this
Agreement as required by the HSR Act, as well as comparable pre-merger
notification forms required by the merger notification, competition or other
similar control laws and regulations of any applicable jurisdiction, as agreed
to by the parties (the "Antitrust Filings") and (b) any other filings required
to be filed by it under any other federal, state or foreign laws relating to the
transactions contemplated by this Agreement (the "Other Filings"). Each of
Seller and Purchaser shall promptly supply the other with any information that
may be required in order to effectuate any filings pursuant to this Section 6.9.
Each of Seller and Purchaser, as the case may be, will notify the other promptly
upon the receipt of any comments from any government officials in connection
with any filing made pursuant hereto and of any request of any government
official for amendments or supplements to any Antitrust Filings or Other Filings
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and any government officials, on the other hand, with respect to any
Antitrust Filing or Other Filing.
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Each of Seller and Purchaser will cause all documents that it is responsible for
filing with any regulatory authorities under this Section 6.9 to comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs that is required
to be set forth in an amendment or supplement to any Antitrust Filing or Other
Filing, each of Seller and Purchaser, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the any government
officials such amendment or supplement.
ARTICLE 7
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligation of Purchaser to consummate the transactions contemplated
by this Agreement is subject to the satisfaction, at or before the Closing Date,
of each of the following conditions, unless waived in writing by Purchaser:
7.1 Seller's Performance of Covenants. Except for breaches of the
following covenants, agreements and obligations that would not result in a
Material Adverse Change, the following covenants, agreements and obligations
shall have been duly and properly performed in all material respects, at or
before the Closing Date: (a) Seller shall have formed the Company, as required
by Section 2.1, (b) Seller shall have entered into the Operating Agreement and
the Contribution Agreement with the Company, (c) Seller shall have taken all
reasonable action that can be taken prior to the Closing to ensure that the
Company will be treated for all periods from inception as a disregarded entity
for federal and state Tax purposes and shall not have taken any action to cause
it to be treated as a corporation for federal or state Tax purposes, (d) Seller
shall have converted the Subsidiaries to Converted Companies in accordance with
Section 2.2, and entered into an operating agreement with each Converted
Company, (e) Seller shall have taken all action that can be taken prior to the
Closing to ensure that each Converted Company will be treated as of immediately
prior to the Closing Date as a disregarded entity for federal and state Tax
purposes and shall not have taken any action to cause it to be treated as a
corporation for federal or state Tax purposes, (f) the transactions contemplated
by the Contribution Agreement shall have been consummated and the Contributed
Assets shall have been duly contributed to the Company, free and clear of all
Encumbrances, other than Permitted Encumbrances, and (g) Seller shall have
assumed the Retained Liabilities and Excluded Contracts in accordance with
Section 2.4.
7.2 Officer's Certificate. Purchaser shall have received a certificate,
dated the Closing Date, signed by an authorized executive officer of Seller,
certifying that the conditions specified in Section 7.1 above have each been
fulfilled.
7.3 No Injunction, etc. There will not be any order of any court or
governmental agency restraining or invalidating the transactions which are the
subject of this Agreement.
7.4 HSR. The waiting period under the HSR Act shall have expired or been
earlier terminated.
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7.5 Opinions of Counsel. Purchaser shall have received from counsels for
Seller, opinions dated the Closing Date substantially in the form of Exhibit C
hereto.
7.6 Net Working Capital and Cash. The Company and Converted Companies
shall have Net Working Capital and the Cash Contribution in amounts sufficient
to satisfy Section 3.3(a).
7.7 Secretary's Certificate. Purchaser shall have received from Seller,
the Company and Converted Companies good standing certificates from the
jurisdiction of organization of each and a customary Secretary's Certificate and
a customary Incumbency Certificate.
ARTICLE 8
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, unless waived in writing by Seller:
8.1 Purchaser's Performance of Covenants. All covenants, agreements and
obligations required by the terms of this Agreement to be performed, satisfied
or complied with by Purchaser at or before the Closing Date shall have been duly
and properly performed in all material respects.
8.2 Officer's Certificate. Seller shall have received a certificate,
dated the Closing Date, signed by an authorized officer of Purchaser, certifying
that the conditions specified in Section 8.1 above have each been fulfilled.
8.3 HSR. The waiting period under the HSR Act shall have expired or been
earlier terminated.
8.4 No Injunction, etc. There will not be any order of any court or
governmental agency restraining or invalidating the transactions which are the
subject of this Agreement.
8.5 Financing Commitments. Purchaser shall contribute or shall cause to
be contributed into the Company no less than $20,000,000 in cash at the Closing,
of which at least $10,000,000 shall be an equity contribution, and at the
Closing, Purchaser shall have no less than an additional $30,000,000 in cash
available or committed for borrowing for the purposes of funding the Company.
Any amounts to be borrowed shall be under duly executed and delivered agreements
entered into by Purchaser, and at Closing there shall be no unsatisfied
conditions for the borrowing of any amounts under such agreements.
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ARTICLE 9
THE CLOSING
9.1 Closing. The closing of the sale and purchase of the Membership
Interests (the "Closing") shall take place at 10:00 a.m. Los Angeles time no
later than three (3) business days after all of the conditions to Closing have
been satisfied or waived, or on such other date as may be mutually agreed to by
the parties. The Closing shall be deemed effective as of the close of business
of such date (the "Closing Date").
9.2 Seller's Obligations. At the Closing, in addition to the documents
required to be delivered pursuant to Article 7, Seller shall deliver to
Purchaser a certificate representing the Membership Interests, duly endorsed or
with duly endorsed membership interest transfer powers or assignments and such
other instruments of transfer which may be reasonably necessary to transfer to
Purchaser all of Seller's right, title and interest in and to the Membership
Interests, all in a form acceptable for transfer on the books of the Company or
Converted Company, as the case may be, together with such other instruments and
documents as Purchaser reasonably deems necessary to effect the transactions
contemplated hereby. The certificates representing the Membership Interests
shall bear the legends required by all applicable securities plus notice of
rights of Seller in the event of a Liquidity Event.
9.3 Purchaser's Obligations. At the Closing, in addition to the documents
required to be delivered pursuant to Article 8, Purchaser shall deliver to
Seller the Purchase Price to be paid to Seller by wire transfer to Seller's
account as required by Section 3 above.
ARTICLE 10
POST CLOSING COVENANTS
10.1 Satisfaction of Obligations to Company Employees Under Seller's
Stock Option Plans. From and after the Closing, Seller shall promptly perform
all of its obligations to Company Employees under all stock option, stock
purchase, phantom stock and other similar equity incentive plans.
10.2 Further Assurances; Transition Assistance. Seller shall (and
Purchaser shall cause the Company and the Converted Companies to), at any time
and from time to time following the Closing, promptly execute and deliver, or
cause to be executed and delivered all such further instruments and take all
such further actions as may be reasonably necessary or appropriate to (w)
transfer to the Company, or to perfect or record the Company's title to or
interest in, the Contributed Assets, (x) transfer to the Company, and effect the
Company's assumption of, the Assumed Liabilities, (y) cause the Seller to retain
the Retained Liabilities or (z) otherwise confirm or carry out the purposes and
intent of this Agreement. If, at any time after the Closing, either party
receives any payment, correspondence or other property that is intended for or
belongs to the other party, or to which the other party is legally entitled,
then the party receiving such payment, correspondence or other property shall
hold it in trust and promptly pay over such payment or deliver such
correspondence or other property to the other party. Seller shall
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promptly provide, upon request, access to or copies of book and records
reasonably related to the Business as the Company or Purchaser may reasonably
request from time to time, subject to the confidentiality provisions contained
herein. In addition, following the Closing Date Purchaser shall cause the
Company and each of the Converted Companies to promptly provide Seller, upon
request, access to and the right to make copies of Books and Records transferred
to the Company or in the possession of any of the Converted Companies that are
relevant to the operations of Seller other than the Business, or are relevant to
the Retained Liabilities or the Excluded Contracts or are necessary for the
preparation and/or defense of matters pertaining to Seller's and Subsidiaries'
liability for taxes or for the preparation of financial statements.
10.3 Non-Solicitation of Employees.
(a) Promptly following the Closing Date, Seller and its
subsidiaries shall not retain, without Purchaser's consent, any person
identified to Seller by Purchaser as a Company Employee. From and after the
Closing Date, and for a period of two (2) years following the Closing Date,
Seller and its subsidiaries shall not (i) hire any Company Employee within six
(6) months following the termination of his or her employment with the Company
or a Converted Company unless the Company or a Converted Company has terminated
such Company Employee's employment, or (ii) encourage, solicit, induce or
attempt to encourage, solicit or induce any employee of the Company or any
Converted Company who has been an employee of Seller or any Subsidiary at any
time within the one (1) year period preceding the Closing, to leave his or her
employment with the Company or any Converted Company, terminate his or her
relationship with the Company or any Converted Company or to devote less than
his or her full-time efforts to the Business for any reason, other than as
contemplated by Section 6.7 of this Agreement.
(b) From and after the Closing Date, and for a period of two (2)
years following such date, each of the Company, the Converted Companies and
Purchaser shall not, except with respect to Company Employees, (i) hire any
employee of Seller within six (6) months following the termination of his or her
employment with Seller unless Seller has terminated such employee's employment,
or (ii) encourage, solicit, induce or attempt to encourage, solicit or induce
any employee of Seller, to leave his or her employment with Seller, terminate
his or her relationship with Seller or to devote less than his or her full-time
efforts to Seller for any reason.
10.4 Covenant Not to Compete.
(a) From and after the Closing Date, and for a period of three (3)
years following the Closing Date, Seller shall not directly or indirectly own,
manage, operate or meaningfully participate in the ownership, management or
operation of, any business that competes or intends to compete with the Business
as conducted on the Closing Date. Notwithstanding the foregoing, Purchaser
acknowledge and agree that (i) Seller, from time to time, may sell, lease or
otherwise operate as a retailer or retail lessor, but not a manufacturer,
assembler or wholesaler, of computer hardware and software in conjunction with
Seller's Web hosting business as presently conducted and as proposed to be
conducted including logical
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extensions thereof, and such sale or lease of computer hardware and software
shall not constitute a violation of Seller's obligations under this Section
10.4(a), and (ii) Seller shall be entitled in its sole discretion to sell,
dispose of, or otherwise deal with, the assets and liabilities not contributed
to, or assumed by, the Company or the Converted Companies without violation of
Seller's obligations under this Section 10.4(a). Successors to the Business are
intended beneficiaries of this provision. Seller and its subsidiaries may not
sell or lease (but may resell) products using the "Micron" name unless
manufactured by the Company or its designee or MTI.
(b) From and after the Closing Date, and for a period of three (3)
years following the Closing Date, each of the Company, the Converted Companies
and Purchaser shall not directly or indirectly own, manage, operate or
meaningfully participate in the ownership, management or operation of, any
business that competes or intends to compete with the Web hosting business as
conducted by the Seller. Notwithstanding the foregoing, Seller acknowledges and
agrees that each of the Company, the Converted Companies and Purchaser shall be
permitted to resell (but not originate) Web hosting services. Successors to
Seller are intended beneficiaries of this provision.
10.5 Litigation Support. In the event and for so long as either party to
this Agreement is actively contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand in
connection with (a) any transaction contemplated under this Agreement or (b) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction prior to or
following the Closing Date involving the Business, the other party will
cooperate with it and its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party,
including, without limitation, reimbursement of the reasonable cost of time
spent by the employees of the party making such employees available in excess of
an aggregate of five (5) employee full workdays for all matters (unless the
contesting or defending party is entitled to indemnification therefor under
Article 11 below).
10.6 Liquidity Event.
(a) In the event that a binding agreement with respect to a
Liquidity Event is executed at any time before the third anniversary of the
Closing Date, the Net Proceeds from that Liquidity Event, when and as received,
shall be applied as follows:
(i) First, to the repayment of all funded debt relating to
the Company's business, provided that the assumption of debt by the acquiror
shall be regarded as a repayment of indebtedness hereunder;
(ii) Next, to the repayment of all capital provided to the
Company and the Converted Companies by Purchaser and its members to the extent
such capital has not already been repaid or otherwise distributed to Purchaser
and its members;
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(iii) Next, $25,000,000 to Purchaser to the extent that
such amount has not already been distributed to Purchaser;
(iv) Next, to the satisfaction of all obligations triggered
by or arising in connection with the Liquidity Event under employee incentive
programs established by Purchaser; provided, however, that no more than fifteen
percent (15%) of the Net Proceeds shall be used to satisfy such obligations; and
(v) Then, of the remaining Net Proceeds, (A) fifty percent
(50%) shall be paid to Seller if a binding agreement with respect to a Liquidity
Event is executed at any time before the first anniversary of the Closing Date,
(B) twenty-five percent (25%) shall be paid to Seller if a binding agreement
with respect to a Liquidity Event is executed at any time from the first
anniversary of the Closing Date until the second anniversary of the Closing Date
or (C) fifteen percent (15%) shall be paid to Seller if a binding agreement with
respect to a Liquidity Event is executed at any time from the second anniversary
of the Closing Date until the third anniversary of the Closing Date, provided
that all such payments to Seller shall be made by wire transfer of immediately
available funds to an account designated by Seller;
provided, however, that no payments, distributions or transfers of any Net
Proceeds from a Liquidity Event to any Person shall be made until any dispute
pursuant to this Section 10.6 has been resolved in accordance with the
procedures set forth in this Section 10.6.
Notwithstanding the foregoing, in the event of the consummation of an initial
public offering of the securities of the Company and/or any of the Converted
Companies, the Net Proceeds of such Liquidity Event shall be applied as follows:
(u) First, to the payment of all expenses of the issuer
incurred in connection with the offering;
(w) Next, to the repayment of all capital provided to the
Company and the Converted Companies by Purchaser and its members to the extent
such capital has not already been repaid or otherwise distributed to Purchaser
and its members, and to the repayment of all funded debt relating to the
Company's business that is required by the terms of such debt to be paid in
connection with the offering;
(x) Next, $25,000,000 to Purchaser to the extent that such
amount has not already been distributed to Purchaser;
(y) Next, to the satisfaction of all obligations arising in
connection with the initial public offering under employee incentive programs
established by issuer, including but not limited to net exercises of employee
stock options, if any; and
(z) Then, of the remaining Net Proceeds, (A) fifty percent
(50%) shall be paid to Seller if the initial public offering takes place before
the first anniversary of the Closing Date, (B) twenty-five percent (25%) shall
be paid to Seller if the initial public offering takes place at any time from
the first anniversary of the Closing Date until the second
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anniversary of the Closing Date, or (C) fifteen percent (15%) shall be paid to
Seller if the initial public offering takes place at any time from the second
anniversary of the Closing Date until the third anniversary of the Closing Date.
provided, however, that no payments, distributions or transfers of any Net
Proceeds from a initial public offering to any Person shall be made until any
dispute pursuant to this Section 10.6 has been resolved in accordance with the
procedures set forth in this Section 10.6.
(b) As promptly as practicable, but in any event, within ten (10)
business days following the closing of an agreement with respect to a Liquidity
Event, Purchaser shall deliver to Seller a statement ("Liquidity Statement")
showing the calculations of the payments described above, accompanied by a
certification thereof by the Company's chief financial officer to the accuracy
of such calculations. During the preparation of such calculation and the period
of any dispute within the contemplation of this Section 10.6, Purchaser shall
(i) provide Seller and Seller's Representatives, upon reasonable notice,
reasonable access during normal business hours to the Company's and Purchaser's
books and records, financial, accounting and management employees and their
independent accountants and their respective work papers, and any definitive
documentation and/or related agreements containing the terms of the Liquidity
Event in a manner that does not unreasonably interfere with the Company's
business; and (ii) cooperate with Seller and Seller's Representatives, including
the provision on a timely basis of all information reasonably requested by
Seller and Seller's Representatives and necessary or useful in reviewing the
preparation of the Liquidity Statement. After receipt of the Liquidity
Statement, Seller shall have thirty (30) days to review it and unless Seller
delivers written notice to Purchaser on or prior to the 30th day after Seller's
receipt of the Liquidity Statement a notice specifying in reasonable detail all
disputed items and the basis therefor, Seller shall be deemed to have accepted
and agreed to the Liquidity Statement (such thirty (30) day period to be
extended for any period of time during which Seller shall not have had
reasonable access to such books, records, employees, independent accountants,
work papers and documentation as described in the preceding sentence).
(c) If Seller so notifies Purchaser of its objection to the
Liquidity Statement, Seller and Purchaser shall, within thirty (30) days
following such objection notice (the "Liquidity Resolution Period"), attempt to
resolve their differences and any resolution by them as to any disputed amounts
shall be final, binding and conclusive. If at the conclusion of the Liquidity
Resolution Period amounts shall remain in dispute then all disputes shall be
submitted to the Accountants. All fees and expenses relating to the work, if
any, to be performed by the Accountants shall be borne by Purchaser or Seller
according to the degree to which their respective positions are accepted, as
more fully set forth in Section 3.3. The Accountants shall act as an arbitrator
to determine only those issues still in dispute. The Accountant's determination
shall be made within thirty (30) days of their selection, shall be set forth in
a written statement delivered to Seller and Purchaser and shall be final,
binding and conclusive.
(d) Notwithstanding anything to the contrary in this Agreement,
if, following the distribution of Net Proceeds with respect to a Liquidity
Event, Purchaser or an Affiliated Party is required to make payments to the
party that had paid the Net Proceeds in connection
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with such Liquidity Event as a result of a purchase price adjustment or
indemnification obligations assumed by the Company or the Purchaser (or similar
adjustment to the proceeds received) in connection with such Liquidity Event
(the amount of such payments, the "Return Amount"), then each of Seller and
Purchaser shall promptly pay or cause to be paid to the entity paying the Return
Amount such amounts as is necessary to put the parties in the same economic
position as if the Return Amount had never been received.
(e) In the event that the net present value as of the Closing Date
of all Net Proceeds ultimately determined to be payable to Seller pursuant to
Section 10.6(a)(v) or Section 10.6(a)(z) as of the second anniversary of the
Closing Date is less than $10,000, Purchaser shall pay to Seller on the second
anniversary of the Closing Date an additional amount such that the net present
value as of the Closing Date of all Net Proceeds otherwise payable as of the
second anniversary of the Closing Date plus the net present value as of the
Closing Date of such additional amount shall equal $10,000. For purposes of the
preceding sentence, net present value shall be determined using an annual
discount rate of five percent (5%).
10.7 Product Warranty and Support Obligations. Purchaser shall cause the
Company to, and the Company shall, assume and be responsible and liable for all
warranty, returns, customer service, technical support or similar obligations
with respect to the Business, the Products, derivatives of such Products or out
of any agreements or contracts related thereto whether arising prior to or after
the Closing Date.
10.8 Assumed Obligations. Purchaser will, and agrees to cause each of the
Company and the Converted Companies to, satisfy all of its respective
obligations and commitments under the Assumed Liabilities.
10.9 Capital Commitments. Purchaser shall contribute, through its own
funds or borrowed capital to the Company from time to time after the Closing
Date an amount of cash that is required to perform Purchaser's obligations under
this Agreement and the Ancillary Agreements and in connection with the
transactions contemplated hereby and thereby on the terms and conditions
thereof, including (but not limited to) the Assumed Liabilities up to a maximum
of an additional $30,000,000 beyond the amounts contributed to the Company at
the time of Closing.
10.10 Sole Remedy for Section 4.4(a). With respect to the first sentence
of Section 4.4(a), if Purchaser discovers after the Closing that the Company and
the Converted Companies do not possess all of the information or assets
primarily related to the Business or required to operate the Business in
substantially the same manner as the Business is conducted as of the date of
this Agreement and provides written notice thereof to Seller on or before the
later of August 31, 2001 or ninety (90) days after the Closing, Seller will use
commercially reasonable efforts to promptly provide such information or assets
held by the Seller or the Subsidiaries or that were held by the Seller or the
Subsidiaries prior to the Closing Date to the Company and the Converted
Companies or assist the Company and the Converted Companies in obtaining such
information or assets. With respect to the second sentence of Section 4.4(a), if
Purchaser discovers after the Closing that a Contract or Lease which qualifies
as a Mission Critical
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Contract was omitted from Schedule 6.3 of the Disclosure Letter and promptly
provides written notice thereof to Seller on or before the end of the Initial
Period, Seller will place such Contract or Lease on Schedule 6.3 of the
Disclosure Letter. The obligations of Seller in this Section 10.10 shall be
Purchaser's sole and exclusive remedy for any breach by Seller of the
representations and warranties in Section 4.4(a).
10.11 Indemnification of Directors and Officers. For the length of
Purchaser's obligations hereunder, Purchaser agrees to cause the Company and the
Converted Companies to indemnify the directors and officers of the Company and
the Converted Companies to the fullest extent allowed by Delaware law against
any Action arising out of or related to the operation of the Business following
the Closing, and to maintain at all times a commercially reasonable level of
directors and officers insurance (taking into account, without limitation, the
premiums payable for such insurance) for all such directors and officers,
consistent with the past practice of Purchaser's Affiliates. Notwithstanding
Section 11.4 hereof, no claim for indemnification paid or expenses advanced by
the Company or the Converted Companies (or their respective insurers) under this
Section or the Operating Agreements shall be deemed to limit the indemnification
obligations of Seller under this Agreement, and instead such payments or
advances shall be treated as Damages to the extent they arise out of a matter
for which Purchaser and the other indemnified parties under Section 11.2(a)
would otherwise be entitled to indemnification hereunder.
10.12 Standstill; Covenant Not to ▇▇▇. During the period commencing on
the date of this Agreement and ending six (6) months following the Closing Date,
neither Purchaser nor its Affiliates will, directly or indirectly, nor will
either Purchaser or its Affiliates authorize or direct any of its
Representatives or agents to: (i) acquire or agree, offer, seek or propose to
acquire, or cause to be acquired, legal or beneficial ownership of any capital
stock of Seller or any of its subsidiaries, or any options, warrants or other
rights (including, without limitation, any convertible or exchangeable
securities) to acquire any such capital stock of Seller or any of its
subsidiaries; (ii) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the SEC) with respect to
the voting of any securities of Seller or any of its subsidiaries; (iii) form,
join, or in any way become a member of a 13D group with respect to any voting
securities of Seller or any of its subsidiaries; (iv) seek to propose or
propose, whether alone or in concert with others, any tender offer, exchange
offer, merger, business combination, restructuring, liquidation,
recapitalization, or similar transaction involving Seller or any of its
subsidiaries; (v) nominate any person as a director of Seller who is not
nominated by the then incumbent directors of Seller, or propose any matter to be
voted on by the stockholders of Seller; (vi) publicly announce or disclose any
intention, plan or arrangement inconsistent with the foregoing clauses (i)
through (v); or (vii) take any action that would require Seller to make a public
announcement regarding any of the matters prohibited by the foregoing clauses
(i) through (v). In addition, Purchaser hereby covenants to refrain, and shall
cause each of its Affiliates (including those who may own securities or the
right to acquire securities of Seller) to refrain, from bringing, commencing,
instituting, maintaining, prosecuting or voluntarily aiding any action at law,
proceeding in equity, or otherwise prosecuting or suing the Seller or its
Affiliates in any court on any alleged claims, demands, liabilities, causes of
action, suits, promises, lawsuits, damages of any nature whatsoever, known or
unknown, fixed or
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contingent, arising out of or related to or based upon, in whole or in part,
ownership of the securities of Seller at any time prior to the date that is six
(6) months following the Closing Date.
10.13 Performance of Government Contracts. In performing any of the
Contracts that constitute contracts and subcontracts with any Government
Authority (the "Government Contracts"), Purchaser shall cause the Company and
the Converted Companies, as the case may be, to comply in all material respects
with all requirements of such Government Contracts. In addition, Purchaser
agrees that Purchaser shall cause each of the Company and the Converted
Companies, as the case may be, to: (a) maintain internal systems for tracking
cost and sales data that are adequate for purposes of complying, and
demonstrating compliance, with its obligations under the Government Contracts,
(b) maintain accurate and complete records relating to its performance of each
Government Contract for such period as required by law and the applicable
Government Contract, and (c) establish and maintain programs sufficient to
comply with any equal employment opportunity, affirmative action and similar
obligations under the Government Contracts. Seller represents and warrants to
Purchaser that (i) the procedures described in (a) -- (c) above are in use by
Seller and the Subsidiaries, (ii) the assets as to (a) and (b) above (other than
personnel) necessary to conduct such procedures will be held by the Company and
the Converted Companies as of the Closing and (iii) as to (c) above, if the
Company and the Converted Companies establish programs substantially similar to
those in use by Seller and the Subsidiaries at the Closing, such programs will
comply herewith. Purchaser shall, and shall cause the Company to, notify Seller
within ten (10) business days in the event that the Company or any Converted
Company receives notice or is advised that any Government Authority claims any
material breach or potential breach of any Government Contract or intends to
initiate any audit, investigation, debarment, suspension proceeding, termination
for default, negative responsibility determination or any other material adverse
action with respect to the Government Contracts, provided that the failure to
give notice shall not be deemed a breach of this Agreement unless Seller is
prejudiced thereby.
10.14 GSA Contract. Purchaser agrees that Purchaser shall, and shall
cause each of the Company and the Converted Companies to, use commercially
reasonable efforts to negotiate, execute and deliver an agreement with the
General Services Administration in which Seller and its Affiliates are not a
party thereto on similar terms with the GSA Contract as soon as possible and to
have the GSA Contract terminate on the earlier of (i) the execution and delivery
of such similar agreement or (ii) the GSA Contract's current expiration date of
March 31, 2002.
10.15 MTI Lease Payments. Seller agrees to pay to MTI, on behalf of the
Company, the Base Rent (as such term is defined in that certain lease agreement
between MTI and the Company relating to the lease of the manufacturing
facilities for the Business (the "MTI Lease Agreement")) on a monthly basis in
accordance with the payment requirements of the MTI Lease Agreement for a period
not to exceed eighteen (18) months beginning on the Commencement Date (as such
term is defined in the MTI Lease Agreement); provided, however, that Seller's
obligation to make such payments shall terminate upon the termination of the MTI
Lease Agreement.
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10.16 Future Payments to Purchaser and its Affiliates. Except as set
forth in Section 10.6, for a period of twelve (12) months following the Closing
Date, Purchaser shall cause each of the Company and the Converted Companies not
to, and each of the Company and the Converted Companies shall not, make any
payments or distributions to Purchaser, any equity holders of the Company, any
equity holders of the Converted Companies or any of their respective Affiliates
or any employees of any such Affiliates other than (a) the payment of a
transaction fee not to exceed $3,000,000 in connection with the Closing, (b) the
payment of reasonable expenses incurred in connection with the transactions
contemplated by this Agreement up to a maximum of $1,000,000, (c) the payment of
a management fee plus expenses not to exceed in the aggregate $250,000 per
month, (d) the payment of reasonable compensation to any employees of or
consultants to the Company who would be deemed to be an Affiliate or an employee
of an Affiliate, and (e) the repayment of equity capital contributed into the
Company by Purchaser to the extent such equity capital is replaced with debt
capital and the Company has at least $50,000,000 in borrowing availability
(including amounts drawn) at the time of repayment.
ARTICLE 11
INDEMNIFICATION
11.1 Survival. All representations and warranties made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
survive the Closing through the date which is two (2) years after the Closing
Date, except all representations and warranties with respect to Tax matters
shall survive through the applicable statute of limitations or the applicable
assessment or reassessment period, as the case may be; provided, however that as
to any matters with respect to which a bona fide written claim shall have been
made or an action at law or in equity shall have commenced before the end of
such period, survival shall continue (but only with respect to, and to the
extent of, such claim) until the final resolution of such claim or action,
including all applicable periods for appeal. Any right to assert a claim for
indemnification under this Article 11 shall expire two (2) years following the
Closing Date; provided, however, that with respect to representations and
warranties related to Tax matters and statutory penalties or fines relating to
the performance of Government Contracts, a claim for indemnification under this
Section 11.2(a)(ii) and 11.2(b)(ii) or a claim for indemnification under Section
12.1 may be brought until the expiration of the applicable statute of
limitations or the applicable assessment or reassessment period, as the case may
be.
11.2 Indemnification Obligations.
(a) Indemnification by Seller. Seller shall indemnify, defend and
hold harmless, Purchaser, the Company, the Converted Companies, and their
respective affiliates, officers, directors, members, employees and agents, and
shall reimburse each such person on demand for any Damages resulting from any of
the following:
(i) any breach or default in the performance by Seller of
any covenant or agreement contained herein or in any Ancillary Agreement or any
other agreement
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contemplated hereby or executed in connection herewith, or in any certificate or
other instrument delivered or to be delivered by or on behalf of Seller pursuant
hereto or thereto;
(ii) any breach of warranty or inaccurate representation
made by Seller herein or in any Ancillary Agreement or any other agreement
contemplated hereby or executed in connection herewith, or in any certificate or
other instrument delivered or to be delivered by or on behalf of Seller pursuant
hereto or thereto;
(iii) any liabilities related to the operation of the
Business through and including the Closing Date (except to the extent such
Damages arise out of matters for which Seller is indemnified under subsection
(b) below), other than the Assumed Liabilities;
(iv) the Retained Liabilities and the Excluded Contracts;
(v) any violation or infringement of the intellectual
property rights of any third party by the Products prior to the Closing Date or
the use of any of the Contributed Assets or assets of the Converted Companies
prior to the Closing Date;
(vi) any and all liabilities and obligations related to any
business other than the Business conducted by Seller whether before or after the
Closing Date;
(vii) any liabilities or obligations to or claims by any
stockholders of Seller arising from or related to the consummation of the
transactions contemplated hereby; and
(viii) if Seller is required to give a W.A.R.N. notice as
contemplated by Section 6.7, any and all liabilities, including without
limitation, wages, benefits, fines, or penalties relating to or arising out of
Seller's failure to so provide sufficient and timely W.A.R.N. notices;
provided, however, that with respect to clause (ii) above (A) Seller shall not
be required to pay any Damages to any indemnified party unless the aggregate
amount of all such Damages exceeds $250,000, in which case all Damages shall be
paid, including such $250,000, and (B) in no event shall the aggregate amount of
Damages payable by Seller arising out of this Agreement or the Ancillary
Agreements exceed $10,000,000; provided, however, that if a breach of warranty
or inaccurate representation would result in a Material Adverse Change and a
claim for such breach or inaccuracy is made by Purchaser before the Closing
Date, in no event shall the aggregate amount of Damages payable by Seller
arising out of this Agreement or any Ancillary Agreement exceed $30,000,000.
(b) Indemnification by Purchaser. Purchaser shall, and shall cause
the Company and the Converted Companies from and after the Closing Date to,
indemnify, defend and hold harmless Seller and any of its affiliates, officers,
directors, members, employees and agents and shall reimburse each such person on
demand for any Damages resulting from any of the following:
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(i) any breach or default in the performance by Purchaser
of any covenant or agreement of Purchaser contained herein or in any Ancillary
Agreement or any agreement contemplated hereby or executed in connection
herewith, or in any certificate or other instrument delivered or to be delivered
by or on behalf of Purchaser pursuant hereto or thereto;
(ii) any breach of warranty or inaccurate representation
made by Purchaser herein or in any Ancillary Agreement or any other agreement
contemplated hereby or executed in connection herewith, or in any certificate or
other instrument delivered or to be delivered by or on behalf of Purchaser
pursuant hereto or thereto;
(iii) the Assumed Liabilities (except to the extent such
Damages arise out of matters for which Purchaser and the Company are indemnified
under subsection (a) above);
(iv) the operation of the Business (including the
development, manufacturing, marketing, distribution, sale, use or other
commercial exploitation of the Products and the employment of employees and
consultants) after the Closing Date, including any liabilities and Taxes related
to the operation of the Business after the Closing Date and all Actions relating
to the operation of the Business after the Closing Date (except to the extent
such Damages arise out of matters for which Purchaser and the Company are
indemnified under subsection (a) above); or
(v) any and all liabilities and obligations related to any
business other than the Business conducted by Purchaser or any of Purchaser's
affiliates whether before or after the Closing Date.
provided, however, that with respect to clause (ii) above, (A) Purchaser shall
not be required to pay Damages to any indemnified party unless the aggregate
amount of all such Damages exceeds $250,000, in which case all Damages shall be
paid, including such $250,000, and (B) in no event shall the aggregate amount of
Damages payable by Purchaser arising out of this Agreement or the Ancillary
Agreements exceed $10,000,000.
(c) Claims for Indemnity. Whenever a claim for Damages shall arise
for which one party ("Indemnified Party") shall be entitled to indemnification
hereunder, the Indemnified Party shall notify the other party ("Indemnifying
Party") in writing within thirty (30) days of the first receipt of notice of
such claim, and in any event within such shorter period as may be necessary for
the Indemnifying Party to take appropriate action to resist such claim; provided
that the failure to give notice as herein provided shall not relieve the
Indemnifying Party of its obligation to indemnify the Indemnified Party except
to the extent that the Indemnifying Party shall have been prejudiced in its
ability to defend such claim. Such notice shall specify with reasonable
particularity the facts known to the Indemnified Party giving rise to such
indemnity rights and shall estimate the amount of the liability arising
therefrom. The right of the Indemnified Party to indemnification, as set forth
in this notice, shall be deemed agreed to by the Indemnifying Party unless,
within fifteen (15) days after the mailing of such notice, the Indemnifying
Party shall notify the Indemnified Party in writing that it disputes the right
of the Indemnified Party to indemnification. If the Indemnified Party shall be
duly notified of such
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dispute, the parties shall attempt to settle and compromise the same, or if
unable to do so within thirty (30) days (or such longer period as they may
agree) of the Indemnifying Party's delivery of notice of a dispute, such dispute
shall be resolved in the manner set forth in Section 14.15 hereto.
(d) Defense of Third Party Claims. For purposes of this Section
11.2, any assertion of fact and/or law by a third party which, if true, would
constitute a breach of a representation or warranty made by a party to this
Agreement shall, on the date that assertion is made, be deemed a breach of such
representation or warranty and immediately invoke that party's obligation to
protect, defend, hold harmless and indemnify the other party to this Agreement.
Upon receipt by the Indemnifying Party of a notice from the Indemnified Party
with respect to any claim of a third party against the Indemnified Party, and
acknowledgment by the Indemnifying Party (whether after resolution of a dispute
or otherwise) of the Indemnified Party's right to indemnification hereunder with
respect to such claim, the Indemnifying Party shall assume the defense of such
claim with counsel reasonably satisfactory to the Indemnified Party and the
Indemnified Party shall cooperate to the extent reasonably requested by the
Indemnifying Party in defense or prosecution thereof, provided that the
Indemnified Party is reimbursed by the Indemnifying Party for its costs in
connection therewith, including the reasonable cost of time spent by employees
of the Indemnified Party in respect of all such claims in excess of five (5)
employee full work days. If the Indemnifying Party shall acknowledge the
Indemnified Party's right to indemnification and elects to assume the defense of
such claim, the Indemnified Party shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party, unless there is, under applicable standards of
conduct, a conflict on any significant issue between Indemnifying Party and the
Indemnified Party, in which case the fees and expenses of one counsel shall be
at the expense of the Indemnifying Party. If the Indemnifying Party has assumed
the defense of any claim against the Indemnified Party, the Indemnifying Party
shall have the right to settle any claim for which indemnification has been
sought and is available hereunder; provided that, to the extent that such
settlement requires the Indemnified Party to take, or prohibits the Indemnified
Party from taking, any action or purports to obligate the Indemnified Party, or
would establish a precedential custom or practice adverse to the Business then
the Indemnifying Party shall not settle such claim without the prior written
consent of the Indemnified Party, such consent not to be unreasonably withheld.
If the Indemnifying Party does not assume the defense of a third party claim and
disputes the Indemnified Party's right to indemnification, the Indemnifying
Party shall have the right to participate in the defense of such claim through
counsel of its choice, at the Indemnifying Party's expense, and the Indemnified
Party shall have control over the litigation and authority to resolve such claim
subject to this Section 11.2.
11.3 Exclusive Remedy. Following the Closing Date, notwithstanding
anything in this Agreement to the contrary and except as set forth in Sections
10.10 and 12.1, and except for claims for fraud or claims for specific
performance or injunctive relief, the indemnification provisions contained in
this Agreement shall be the exclusive remedy for any breach or nonfulfillment of
any of the representations, warranties, covenants or agreements made by the
parties in this Agreement or any of the Ancillary Agreements or any facts or
circumstances constituting such an inaccuracy, breach or nonfulfillment.
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11.4 Limitation on Indemnification. No claim for indemnity under this
Agreement shall be asserted by, and no liability for such indemnity shall be
enforced against, any party to the extent the Indemnified Party has theretofore
received indemnification or insurance proceeds related to such claim.
ARTICLE 12
TAX MATTERS
12.1 Tax Matters.
(a) All Taxes of the Company and Converted Companies and all Taxes
related to the Business for taxable periods beginning before the Closing Date
and ending on or after the Closing Date will be allocable between the partial
taxable period ending on the Closing Date and the partial period beginning on
the day after the Closing Date and ending at any time thereafter by means of
closing the books and records for each of the Company, the Converted Companies
and the Business on the Closing Date, provided that any such Taxes that are
calculated on an annual basis shall be based upon the assessment in place as of
the Closing Date and shall be allocated between the partial taxable period
ending on the Closing Date and the partial taxable period beginning on the day
after the Closing Date in proportion to the number of days in each such partial
taxable period. Taxes allocated to the partial taxable period ending on the
Closing Date, including, without limitation, any and all Taxes payable as a
result of the transactions contemplated by this Agreement (the "Indemnified Tax
Liabilities") shall be paid by Seller. Taxes allocable to the partial taxable
periods beginning on the day after the Closing Date and ending at any time
thereafter are the responsibility of Purchaser and Purchaser shall pay such
Taxes or cause such Taxes to be paid and shall indemnify and hold Seller and its
Affiliates harmless from and against any and all such Taxes.
(b) Purchaser agrees to keep and, except to the extent books and
records have been transferred to Purchaser, Seller agrees to keep, or require
any successor to keep, all books and records required to be maintained by any
Converted Company under the Laws of any applicable Governmental Authority until
at least December 31, 2008 and thereafter, each party shall first notify the
other party of its intent to destroy such books and records and give such other
party the opportunity to take the books and records before they are destroyed.
Each party agrees to furnish or cause to be furnished to the other party, upon
request, as promptly as practicable, such information and assistance (including
access to books and records) relating to any Converted Company as is reasonably
necessary for the preparation of any Tax Return for Taxes, claims for refund or
audit or prosecution or defense of any claim, suit or proceeding relating to any
proposed adjustment of Taxes paid.
(c) Seller shall be liable for, shall pay or cause to be paid and
shall indemnify and hold Purchaser and its Affiliates, including, after the
Closing, the Company, the Converted Companies and all of their officers,
directors and agents, harmless from and against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees and
the cost and expenses of enforcing such indemnification against the Seller),
interest and penalties, if any, arising out of or based upon or for or in
respect of each of the following: (i) any and all
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Taxes with respect to the Business, the Company or the Converted Companies for
any taxable period (or any partial period) ending on or before the Closing Date;
(ii) any and all Taxes resulting solely from the Company or the Converted
Companies having been included in any consolidated, combined or unitary tax
return that included the Seller, the Company or the Converted Companies for any
taxable period (or portion thereof) ending on or before the Closing Date
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or similar
state, local or foreign law or regulations (other than any liability arising
under such Treasury Regulation or analogous law by reason of the Company or the
Subsidiaries becoming a member of the consolidated, combined or unitary group of
which Buyer is a member); (iii) any and all other Taxes with respect to the
Business, the Company or, the Converted Companies for any Tax period ending on
or prior to the Closing Date or with respect to periods beginning before the
Closing Date and ending after the Closing Date to the extent allocated to the
Company or the Converted Companies or to the Seller pursuant to Section 12.1(a)
hereof and not previously paid. Such indemnity shall be in addition to the
indemnification provided under Section 11.2(a) and shall be provided in the
manner set forth in Sections 11.2(c) and (d).
(d) The Seller will be responsible for the preparation and filing
of all Tax Returns for the Seller and the Subsidiaries for all periods as to
which Tax Returns are due after the Closing Date (including the consolidated,
unitary, and combined Tax Returns for the Seller or any Subsidiary which include
the operations of the Business, the Company, the Subsidiaries and the Converted
Companies for any period ending on or before the Closing Date). The Purchaser
will be responsible for the preparation and filing of all Tax Returns for the
Business, the Company, and the Converted Companies for all periods as to which
Tax Returns are due after the Closing Date (other than for Taxes with respect to
periods for which the consolidated, unitary, and combined Tax Returns of the
Seller or any Subsidiary will include the operations of the Business, the
Company, and the Converted Companies).
ARTICLE 13
NO SOLICITATION, FIDUCIARY DUTY OUT, TERMINATION
13.1 No Solicitation. From and after the date of this Agreement until the
Closing Date or termination of this Agreement pursuant to Section 13.3, Seller
agrees that neither Seller nor any of its directors, officers, employees,
agents, representatives or affiliates will seek, encourage, solicit, assist or
consider any third party proposals relating to the sale or other disposition of
all or substantially all of the assets of the Business (notwithstanding the
foregoing, Purchaser recognizes that Seller has entered into arrangements to
transfer Seller's SpecTek operations, certain Intellectual Property and real
property to MTI (the "MTI Transaction") or furnish any non-public information to
any other party relative to the Business other than in the ordinary course, as
required by law in accordance with the next sentence, or in connection with the
MTI Transaction. Notwithstanding the foregoing, prior to the Closing Date, this
Section 13.1 shall not prohibit Seller from furnishing nonpublic information
regarding Seller, the Subsidiaries and the Business to, or entering into
discussions or negotiations with, any Person who has submitted (and has not
withdrawn) to Seller an unsolicited, written, bona fide Acquisition Proposal (as
defined below) with no financing contingency as a condition to close that the
Board of Directors
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of Seller determines, in its reasonable judgment to be more favorable from a
financial point of view than the terms of this Agreement if (a) neither Seller
nor any Representative of Seller or the Subsidiaries shall have violated any of
the restrictions set forth in this Section 13.1, (b) the Board of Directors of
Seller concludes in good faith, after consultation with its outside legal
counsel, that such action is required in order for the Board of Directors of
Seller to comply with its fiduciary obligations under applicable law, (c) prior
to furnishing any such nonpublic information to, or entering into any such
discussions with, such Person, Seller gives Purchaser written notice of the
material terms and conditions of such Acquisition Proposal and of Seller's
intention to furnish nonpublic information to, or enter into discussions with,
such Person, and Seller receives from such Person an executed confidentiality
agreement containing terms at least as restrictive with regard to Seller's
confidential information as the confidentiality provisions in this Agreement,
(d) Seller gives Purchaser at least three (3) business days advance notice of
its intent to furnish such nonpublic information or enter into such discussions,
and (e) contemporaneously with furnishing any such nonpublic information to such
Person, Seller furnishes such nonpublic information to Purchaser (to the extent
such nonpublic information has not been previously furnished by Seller to
Purchaser). Seller and the Subsidiaries, upon execution of this Agreement, will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" shall mean any offer or
proposal by a third party relating to any sale, lease (other than in the
ordinary course), exchange, transfer, license (other than in the ordinary
course), acquisition, or disposition of all or substantially all of the assets
of the Business.
13.2 Fiduciary Duty Out. Nothing in this Agreement shall prevent the
Board of Directors of Seller from withdrawing, amending or modifying its
recommendation in favor of this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby if (a) an unsolicited, written,
bona fide Acquisition Proposal with no financing contingency as a condition to
close that the Board of Directors of Seller determines, in its reasonable
judgment to be more favorable from a financial point of view than the terms of
this Agreement is made to Seller and is not withdrawn, (b) Seller shall have
provided written notice to Purchaser (a "Notice of Acquisition Proposal")
advising Purchaser that Seller has received such a proposal, specifying all of
the material terms and conditions of such proposal, (c) Purchaser shall not
have, within five (5) business days of Purchaser's receipt of the Notice of
Acquisition Proposal, made an offer that Seller's Board of Directors by a
majority vote determines in its reasonable judgment to be at least as favorable
as such proposal (it being agreed that the Board of Directors of Seller shall
convene a meeting to consider any such offer by Purchaser promptly following the
receipt thereof), and (d) the Board of Directors of Seller concludes in good
faith, after consultation with its outside counsel, that, in light of such
proposal, the withdrawal, amendment or modification of such recommendation is
required in order for the Board of Directors of Seller to comply with its
fiduciary obligations under applicable law. Seller shall provide Purchaser with
at least three (3) business days prior notice (or such lesser prior notice as
provided to the members of Seller's Board of Directors but in no event less than
twenty-four (24) hours) of any meeting of Seller's Board of Directors at which
Seller's Board of Directors is reasonably expected to consider any Acquisition
Proposal to determine whether such Acquisition Proposal is more favorable than
the terms of this Agreement.
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13.3 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing (a) by
mutual written agreement of Purchaser and Seller, (b) by Purchaser or Seller
upon written notice to the non-terminating party by the terminating party at any
time after the later of (i) August 1, 2001 or (ii) ten (10) days following the
expiration of the waiting period or early termination under the HSR Act, if the
Closing has not been consummated and such failure to consummate the Closing is
not caused by a breach of this Agreement by the terminating party, (c) by Seller
if there has been a material breach of any representation, warranty, covenant or
agreement on the part of Purchaser that would prevent the consummation of the
Closing, (d) by Purchaser if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Seller that would
prevent the consummation of the Closing, (e) by Purchaser or Seller if a
Governmental Authority shall have issued an order, decree or ruling or taken any
other action, in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, which order, decree, ruling or other action is final and
nonappealable, or (f) by Purchaser or Seller if a Triggering Event (as defined
below) shall have occurred. Upon termination pursuant hereto, this Agreement
shall become void and of no further force or effect, provided that Section 6.4
and Article 14 shall survive the termination of this Agreement, and neither
party shall have any liability to the other in connection therewith, except that
the foregoing shall not relieve either party of any liability for willful breach
of this Agreement. For the purposes of this Agreement, a "Triggering Event"
shall be deemed to have occurred if the Board of Directors of Seller shall have
withdrawn its recommendation in favor of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby and (i) the
Board of Directors of Seller shall have approved any Acquisition Proposal or
(ii) Seller's Board of Directors shall have determined, in its reasonable
judgment, that the winding down and termination of the Business is more
favorable to Seller than consummating the transactions contemplated by this
Agreement; provided, however, that with respect to the Triggering Event
described in clause (ii) of this sentence, Seller may not make such a
determination until the earlier of (A) thirty (30) days after the date of this
Agreement or (B) four (4) business days following the expiration of the waiting
period or early termination under the HSR Act.
13.4 Termination Fee. In the event that this Agreement is terminated by
Purchaser or Seller pursuant to Section 13.3(f), Seller shall promptly, but in
no event later than two (2) days after the date of such termination, pay
Purchaser a fee in immediately available funds in an amount equal to $4,000,000
plus reasonable Expenses (the "Termination Fee"). Seller shall not be obligated
to pay a Termination Fee if this Agreement is terminated for any other reason.
Seller's obligation to pay the Termination Fee pursuant to Section 13 is in lieu
of any damages or any other payment which Seller might otherwise be obligated to
pay Purchaser as a result of any termination for which payment is due under
Section 13.3(f). Seller and Purchaser agree that, in view of the nature of the
issues likely to arise in the event of such a termination, it would be
impracticable or extremely difficult to fix the actual damages resulting from
such termination and proving actual damages, causation and foreseeability in the
case of such termination would be costly, inconvenient and difficult. In
requiring Seller to pay the Termination Fee as set forth herein, it is the
intent of the parties to provide, as of the date of this Agreement, for a
liquidated amount of damages to be paid by Seller to Purchaser. Such liquidated
amount shall be deemed
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full and adequate damages for such termination and is not intended by either
party to be a penalty.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Further Assurances. The parties hereto, at any time before or after
the Closing, will execute, acknowledge and deliver any further documents and
instruments reasonably requested by any party, and will take any other action
consistent with the terms of this Agreement that may reasonably be requested by
any party, for the purpose of giving effect to the transactions contemplated by
this Agreement.
14.2 Expenses. All costs and expenses, including, without limitation,
fees and disbursements of counsel, financial advisors and accountants, incurred
in connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby (collectively, "Expenses") shall be paid by the
party incurring such costs and expenses, whether or not the Closing shall have
occurred; provided, however, that Seller shall pay the reasonable costs and
expenses of Purchaser's affiliates related to this Agreement, as set forth in
that certain Letter Agreement dated March 9, 2001 by and between Seller and
Gores Technology Group, including $447,313 that were submitted for payment on
April 9, 2001. Seller shall pay any and all transfer taxes, sales taxes, stamp
taxes or other duties or taxes or recording or filings fees (other than HSR
fees) that may be imposed in connection with the contribution of the Contributed
Assets and the sale of the Membership Interests as contemplated by this
Agreement.
14.3 Entire Agreement. This Agreement, together with the agreements
referred to herein and the Schedules and Exhibits hereto and thereto and other
documents and instruments delivered in connection herewith, and set forth the
entire agreement between the parties with regard to the subject matter hereof
and thereof.
14.4 Governing Law. The validity, construction and performance of this
Agreement, and any Action arising out of or relating to this Agreement shall be
governed by the Laws of the State of Delaware, without regard to the Laws of the
State of Delaware as to choice or conflict of Laws. Each party hereby consents
to service of process by mail at the address to which notices are to be given.
14.5 Attorneys' Fees. If any claim or Action is commenced by either party
concerning this Agreement, the prevailing party shall recover from the losing
party reasonable attorneys' fees and costs and expenses, including those of
appeal and not limited to taxable costs, incurred by the prevailing party, in
addition to all other remedies to which the prevailing party may be entitled. If
a claim or Action asserted by a third party against either party arises from an
action or omission by the other, the party responsible for the action or
omission shall be the losing party, and the other party shall be the prevailing
party, for purposes of the foregoing sentence.
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14.6 Interest. Any amounts not paid under this Agreement when due shall
be subject to interest accruing from the applicable due date, at 1.5% per month,
or the lawful rate, whichever is lower.
14.7 Interpretation. The language in all parts of this Agreement and the
Ancillary Agreements shall be in all cases construed simply according to its
fair meaning and not strictly for or against any party. The captions of the
Sections and Subsections of this Agreement are for convenience only and shall
not affect the construction or interpretation of any of the provisions of this
Agreement.
14.8 Waiver and Amendment. This Agreement may be amended, supplemented,
modified and/or rescinded only through an express written instrument signed by
the parties or their respective successors and permitted assigns. Any party may
specifically and expressly waive in writing any portion of this Agreement or any
breach hereof, but only to the extent such provision is for the benefit of the
waiving party, and no such waiver shall constitute a further or continuing
waiver of any preceding or succeeding breach of the same or any other provision.
The consent by one party to any act for which such consent was required shall
not be deemed to imply consent or waiver of the necessity of obtaining such
consent for the same or similar acts in the future, and no forbearance by a
party to seek a remedy for noncompliance or breach by another party shall be
construed as a waiver of any right or remedy with respect to such noncompliance
or breach.
14.9 Assignment. Except as specifically provided otherwise in this
Agreement, neither this Agreement nor any interest herein shall be assignable
(voluntarily, involuntarily, by judicial process, operation of Law, or
otherwise), in whole or in part, by any party without the prior written consent
of the other party. Notwithstanding the foregoing, Purchaser may, without the
consent of Seller, assign its rights under this Agreement in connection with the
assignment of a security interest to any lender of Purchaser, provided that
Purchaser remains liable for all of its obligations and liabilities hereunder.
14.10 Successors and Assigns; No Third Party Beneficiary; No Joint
Venture. Each of the terms, provisions, and obligations of this Agreement shall
be binding upon, shall inure to the benefit of, and shall be enforceable by the
parties and their respective legal representatives, successors and permitted
assigns. Nothing in this Agreement will be construed as giving any person, firm,
corporation or other entity, other than the parties to this Agreement and their
successors and permitted assigns, any right, remedy or claim under, or in
respect of, this Agreement or any provision hereof. Nothing contained in this
Agreement shall be deemed or construed as creating an agency, partnership, joint
venture or other joint relationship. No party is by virtue of this Agreement
authorized as an agent, partner, employee or legal representative of any other
party.
14.11 Notices. All notices, requests, demands and other communications
made under this Agreement shall be in writing, correctly addressed to the
recipient as follows:
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If to Seller: Micron Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
And to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: GTG PC Holdings, LLC
c/o Gores Technology Group
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
And to: care of: Gores Technology Group
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Loss, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Notices, requests, demands and other communications made under this Agreement
shall be deemed to have been duly given (i) upon delivery, if served personally
on the party to whom notice is to be given, (ii) on the date of receipt, refusal
or non-delivery indicated on the receipt if mailed to the party to whom notice
is to be given by first class mail, registered or certified, postage prepaid, or
by air courier, or (iii) upon confirmation of transmission, if sent by
telecopier. Any party may give written notice of a change of address in
accordance with the
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provisions of this Section and after such notice of change has been received,
any subsequent notice shall be given to such party in the manner described at
such new address.
14.12 Severability. Each provision of this Agreement is intended to be
severable. Should any provision of this Agreement or the application thereof be
judicially declared to be or become illegal, invalid, unenforceable or void, the
remainder of this Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties.
14.13 Pre-Closing Remedies. Except as provided in Section 13.4 of this
Agreement and solely with respect to a failure by one party to close the
transactions contemplated by this Agreement in breach of the terms hereof, no
remedy made available hereunder with respect to such failure to close and
consummate this Agreement is intended to be exclusive of any other remedy, and
each and every remedy with respect to such failure to close the transactions
contemplated by this Agreement in breach of the terms hereof shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at Law or in equity or by statute or otherwise with respect
to such failure to close the transactions contemplated by this Agreement in
breach of the terms hereof.
14.14 No Right of Offset. Neither Seller nor Purchaser shall have any
right to set off amounts owed to it by the other party hereunder or under any
Ancillary Agreement against amounts payable to the other party hereunder or
under any Ancillary Agreement.
14.15 Dispute Resolution. Each of Purchaser and Seller shall attempt to
resolve disputes between them arising out of or in connection with this
Agreement through good faith negotiations as provided herein. The parties agree
that disputes shall be fully discussed by the senior management representatives
of each of Purchaser and Seller in an attempt to achieve a prompt resolution of
such dispute. If such dispute is not promptly resolved by the mutual agreement
of such senior management representatives of Purchaser and Seller, each of
Purchaser and Seller shall be free to exercise any of the remedies available to
it pursuant to the terms of this Agreement. Each of Purchaser and Seller agrees
to act reasonably and in good faith in connection with all matters arising out
of or in connection with this Agreement that are submitted to the process set
forth in this Section 14.15.
14.16 Transition Services. Purchaser and Seller agree that the services
to be provided pursuant to the terms and conditions of the Transition Services
Agreement shall be provided by the Provider (as such term is defined in the
Transition Services Agreement) at actual cost equal to the hourly pro rata
salary, benefits and overhead allocation for the personnel providing such
services and related out-of-pocket expenses plus (i) 10% of such actual costs
for the four-month period following the Closing Date and (ii) 25% of such actual
costs for the period beginning on the day after the four month anniversary of
the Closing Date and ending on the termination date for the Transition Services
Agreement. Upon the termination of the Transition Services Agreement, each of
Purchaser and Seller agree to negotiate in good faith the cost and scope of any
additional transition services that may be required by the parties.
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14.17 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
14.18 Facsimile Signatures. This Agreement, any Ancillary Agreement and
any other document or agreement executed in connection herewith (other than any
document for which an originally executed signature page is required by law) may
be executed by delivery of a facsimile copy of an executed signature page with
the same force and effect as the delivery of an originally executed signature
page. In the event any party delivers a facsimile copy of a signature page to
this Agreement, any Ancillary Agreement or any other document or agreement
executed in connection herewith, such party shall deliver an originally executed
signature page within three (3) business days of delivering such facsimile
signature page or at any time thereafter upon request; provided, however, that
the failure to deliver any such originally executed signature page shall not
affect the validity of the signature page delivered by facsimile, which has and
shall continue to have the same force and effect as the originally executed
signature page.
14.19 Warranty of Authority. Each of the individuals signing this
Agreement on behalf of a party hereto warrants and represents that such
individual is duly authorized and empowered to enter into this Agreement and
bind such party hereto.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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[SIGNATURE PAGE TO MEMBERSHIP INTEREST PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first set forth above.
"PURCHASER":
GTG PC Holdings, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Its: Manager
"SELLER":
Micron Electronics, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Sr. Vice President and CFO
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INDEX OF SCHEDULES
Schedule 1.1(a) Description of the Business
Schedule 1.1(b) Excluded Assets
Schedule 1.1(c) Individuals with Actual Knowledge
Schedule 1.1(d) Operating Lease Encumbrances
Schedule 1.1(e) Products
Schedule 2.4 Retained Liabilities
Schedule 3.5 Allocation of Purchase Price
Schedule 4.1(a) Jurisdictions of Incorporation
Schedule 4.1(b) Jurisdictions of Qualification as a Foreign Entity
Schedule 4.4(a) Sufficiency of the Contributed Assets
Schedule 4.4(b) Ownership of Contributed Assets
Schedule 4.5 Subsidiaries
Schedule 4.6 No Conflict or Violation
Schedule 4.7 Consents and Approvals
Schedule 4.8 Litigation
Schedule 4.9(a) Nonconformance with GAAP
Schedule 4.9(b) Financial Statements
Schedule 4.10 Additional Liabilities
Schedule 4.11 Absence of Certain Changes
Schedule 4.12 Real Property
Schedule 4.13(a) Material Contracts
Schedule 4.13(b) Material Purchase Contracts or Commitments
Schedule 4.13(c) Excluded Contracts
Schedule 4.14 Customers, Resellers and Suppliers
Schedule 4.15(a)(i)(A) Registered Intellectual Property
Schedule 4.15(a)(i)(B) Unregistered (Common Law) Trademarks
Schedule 4.15(a)(ii) Variations from Registered Use
Schedule 4.15(a)(v) Encumbrances on Transferred Intellectual Property
Schedule 4.15(b)(i) Inbound License Agreements
Schedule 4.15(b)(ii) Outbound License Agreements
Schedule 4.15(b)(iii) Software Agreements with Annual Payments Above $250,000
Schedule 4.15(b)(iv) License Agreements Terminating on Closing and Nontransferable
Exclusive Licenses
Schedule 4.15(c) Future Licenses; Software
Schedule 4.15(d) Protection of Intellectual Property
Schedule 4.15(e) No Infringement by Seller or Any Subsidiary
Schedule 4.15(f) No Pending or Threatened Infringement Claims
Schedule 4.15(g) No Infringement by Third Parties
Schedule 4.17(a) Employees
Schedule 4.17(b) Employment Practices
Schedule 4.18 Employee Benefits
Schedule 4.19(b) Pending or Threatened Tax Claims
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Schedule 4.19(f) Tax Waivers
Schedule 4.20 Compliance with Laws
Schedule 4.21 Permits
Schedule 4.22(a) Insurance Policies, Letters of Credit, Surety Bonds
Schedule 4.22(b) Self-Insured Risks
Schedule 4.22(c) Pending Claims and Claims Made Since September 1, 1999
Schedule 4.23 Brokers and Finders
Schedule 4.25(e) Notice of Violation
Schedule 4.25(g) Storage Tanks
Schedule 4.26 Restrictions
Schedule 4.27(a) Investigations Surrounding Government Contracts
Schedule 4.27(b) Government Contracts With Security Clearance
Schedule 4.28 Product Liability and Warranties
Schedule 4.29 Inventory
Schedule 4.30 Receivables
Schedule 4.31(a) Transactions with Affiliates
Schedule 4.31(b) Employee Loans
Schedule 6.2 Conduct of Business
Schedule 6.3 Mission Critical Contracts
Schedule 6.7 Restructuring Plan
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EXHIBITS
Exhibit A Form of Contribution Agreement
Exhibit B Form of Closing Date Statement
Exhibit C Forms of Opinions of Counsel of Seller
Exhibit D Forms of Operating Agreements for Company and Converted Companies
Exhibit E Form of Assignment and Assumption Agreement
Exhibit F Form of Transition Services Agreement
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EXHIBIT A
FORM OF CONTRIBUTION AGREEMENT
This Contribution Agreement (this ("Agreement") is entered into by and
between Micron Electronics, Inc., a Minnesota corporation ("Seller"), and
MicronPC, LLC, a Delaware limited liability company (the "Company").
R E C I T A L S
A. The Company was formed under the laws of the State of Delaware on
__________ ___, 2001.
B. Seller desires to contribute certain assets and certain liabilities to
the Company in exchange for the sole membership interest in the Company (the
"Membership Interest") on the terms and subject to the conditions of this
Agreement. The Membership Interest is that interest referred to as the "Drop
Down Membership Interest" in that certain Membership Interest Purchase Agreement
(the "Membership Interest Purchase Agreement"), dated as of April 30, 2001, by
and between Seller and GTG PC Holdings, LLC ("Purchaser").
C. Immediately following the consummation of the transactions
contemplated hereby, Seller intends to sell the Membership Interest in the
Company to Purchaser pursuant to the terms of the Membership Interest Purchase
Agreement.
D. Capitalized terms not otherwise defined in this Agreement shall have
the meanings assigned to them in the Membership Interest Purchase Agreement.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Effective Time. This Agreement shall be deemed effective (the
"Effective Time") immediately prior to the consummation of the transactions
contemplated by the Membership Interest Purchase Agreement; provided, however,
in the event that the transactions contemplated by the Membership Interest
Purchase Agreement are not consummated this Agreement shall be null and void.
2. Contribution of Assets. As of the Effective Time, Seller hereby
contributes, assigns, transfers and conveys to the Company, and the Company
hereby accepts and assumes, all of Seller's right, title and interest in and to
the assets that are related primarily to the Business or are required for the
continued operation of the Business in substantially the same manner as the
Business is conducted as of the date of the Membership Interest Purchase
Agreement, including without limitation the assets listed on Schedule I attached
hereto (the "Contributed Assets"). Notwithstanding the foregoing, the
Contributed Assets shall not in any event include any of the Excluded Assets or
Excluded Contracts and all right, title and interest in and to the Excluded
Assets and the Excluded Contracts shall be retained by Seller. Seller hereby
represents and warrants that the Contributed Assets are free and clear of all
Encumbrances other than
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Permitted Encumbrances and Encumbrances set forth on Schedule 4.4(b) of the
Disclosure Letter. In all cases, the Contributed Assets do not and shall not be
deemed to include any assets of any subsidiary of the Seller.
3. Assumption of Liabilities. As of the Effective Time, Seller hereby
contributes, assigns, transfers and conveys to the Company, and the Company
hereby accepts and assumes and becomes responsible for and agrees to perform and
satisfy the obligations and liabilities listed on Schedule II attached hereto
(the "Assumed Liabilities"). Notwithstanding the foregoing, the Assumed
Liabilities shall not include the Retained Liabilities or liabilities arising
out of any Excluded Contract. Other than the Assumed Liabilities, the Company
shall not be deemed to have assumed any other agreement, liability or obligation
of Seller, known or unknown, fixed or contingent, except as may be specifically
assumed in the Membership Interest Purchase Agreement and/or the Ancillary
Agreements.
4. Issuance of the Membership Interest. In consideration of the
assignment of the Contributed Assets to the Company by Seller, at the Effective
Time the Company shall issue to Seller the Membership Interest.
5. Treatment of Unassigned Contracts and Leases. So long as a Contract
(including any Lease) remains unassigned to the Company, it shall be treated as
provided and have the status accorded to it in Section 6.3 of the Membership
Interest Purchase Agreement. All Unassigned Contracts shall not be deemed to
have been assigned unless and until assigned to the Company pursuant to said
Section 6.3. Seller and the Company shall comply with the provisions of said
Section 6.3 with respect to any Unassigned Contract.
6. Remedies. Any dispute or claim arising out of or related to this
Agreement shall be governed by the terms, conditions and provisions of the
Membership Interest Purchase Agreement, including (but not limited to) the
provisions of Sections 11 and 14 thereto.
7. General Provisions.
(a) Successors and Assigns. This Agreement will be binding on the
parties and their respective legal representatives, successors and permitted
assigns.
(b) No Third Party Beneficiaries. Except as may be expressly
provided in this Agreement, there shall be no third party beneficiaries.
(c) Assignment. Prior to the Closing Date, this Agreement may not
be assigned by the Company without the prior written consent of Seller and
Purchaser. Seller may assign its rights and obligations under this Agreement to
any Person (other than Purchaser) to whom it assigns its Membership Interest,
provided, that such assignment shall not relieve Seller of its obligations
hereunder.
(d) Governing Law. This Agreement will be governed by the laws of
the State of Delaware without regard to any provisions relating to the conflict
of laws.
(e) Further Assurances. Seller and the Company shall, at any time
and from time to time following the Effective Time, promptly execute and
deliver, or cause to be executed
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and delivered, all such further instruments and take all such further actions as
may be reasonably necessary or appropriate to (w) transfer to the Company, or to
perfect or record the Company's title to or interest in, the Contributed Assets,
(x) transfer to the Company, and effect the Company's title to or interest in,
the Contributed Assets, (y) transfer to the Company, and effect the Company's
assumption of, the Assumed Liabilities or (z) confirm or carry out the purposes
and intent of this Agreement. If, at any time after the Closing Date, either
party receives any payment, correspondence or other property that is intended
for or belongs to the other party, or to which the other party is legally
entitled, then the party receiving such payment, correspondence or other
property shall hold it in trust and promptly pay over such payment or deliver
such correspondence or other property to the other party.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
(g) Facsimile Signature. This Agreement may be executed by
delivery of a facsimile copy of an executed signature page with the same force
and effect as the delivery of an originally executed signature page. In the
event any party delivers a facsimile copy of a signature page to this Agreement,
such party shall deliver an originally executed signature page within three (3)
business days of delivering such facsimile signature page or at any time
thereafter upon request; provided, however, that the failure to deliver any such
originally executed signature page shall not affect the validity of the
signature page delivered by facsimile, which has and shall continue to have the
same force and effect as the originally executed signature page.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SELLER: THE COMPANY
Micron Electronics, Inc. MicronPC, LLC,
a Minnesota corporation a Delaware limited liability company
By: By:
------------------------------- ------------------------------------
Title: Title:
---------------------------- ----------------------------------
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SCHEDULE I TO CONTRIBUTION AGREEMENT
CONTRIBUTED ASSETS
Capitalized terms used below shall have the meanings set forth in the
Agreement or the Membership Interest Purchase Agreement, as applicable, and the
Disclosure Letter referred to below is as referenced in the Membership Interest
Purchase Agreement.
(a) All FF&E;
(b) All Inventory;
(c) All Prepaid Items;
(d) All security deposits included within the entry "Other Items"
as reflected on the Final Closing Date Statement in accordance with GAAP that
are assets arising out of Contracts included in the Contributed Assets;
(e) All Receivables;
(f) All of the rights of Seller in, to and under all Contracts
(including Leases) to which Seller is a party, other than Excluded Contracts;
provided, however, that the inclusion of Unassigned Contracts is subject to
compliance with Section 6.3 of the Membership Interest Purchase Agreement and
provided further, that Purchaser may exclude any Material Contract that is
entered into by Seller after the signing of this Agreement or any Material
Contract that is not disclosed on Schedule 4.13 of the Disclosure Letter
(regardless of when signed) if Purchaser reasonably objects to assuming the
liabilities related to such Material Contract;
(g) All claims that Seller may have against any Person relating to
or arising from the Contributed Assets or the Business, including rights to
recoveries for damages for defective goods, claims for patent infringement,
claims for indemnification, claims for refunds, insurance claims, and other
claims for relief under any applicable law;
(h) All outstanding purchase orders issued to Seller for Products;
(i) All of the following to the extent owned or exclusively
licensed to Seller and either related primarily to the Business or required for
the continued operation of the Business in substantially the same manner as the
Business is conducted as of the date of the Membership Interest Purchase
Agreement: trademarks and service marks (whether registered or unregistered),
trade names, trade dress and similar intangible property enforceable under the
laws of non-U.S. jurisdictions, however denominated, together with all goodwill
related to the foregoing; patents (including any continuations,
continuations-part, divisionals, reissues, renewals and applications for patents
or any of the foregoing); copyrights and mask works (including any registrations
and applications for registration thereof); information, including any formula,
pattern, compilation; program, device, method, technique, or process, that: (1)
derives independent economic value from not being generally known to the public
or to other persons
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who can obtain economic value from its disclosure or use; and (2) is the subject
of efforts that are reasonable under the circumstances to maintain its secrecy;
and inventions; except any of the above that is exclusively licensed to Seller
and as to which the exclusive license therefor is otherwise non-transferable or
by its terms terminates upon the Closing, each as set forth on Schedule
4.15(b)(iv) of the Disclosure Letter;
(j) All other owned intangible assets including Software, website
content, customer lists, databases, and other documents or data (with respect to
documents and data, subject to the provisions within the definition of "Books
and Records" regarding the provision of access to and the opportunity to copy)
in whatever form primarily related to the Business or required to conduct the
Business in substantially the same manner as conducted on the date of the
Membership Interests Purchase Agreement;
(k) All Permits, but only to the extent that the transfer of such
Permits is not prohibited by the terms of such Permits or by applicable Laws;
(l) All Books and Records; and
(m) Telephone and facsimile numbers, domain names, IP addresses,
and lock boxes to which payments under Receivables are sent and the bank
accounts that correspond to such lock boxes, post office boxes primarily related
to the Business or required to conduct the Business in substantially the same
manner as conducted on the date of the Membership Interests Purchase Agreement.
Notwithstanding the foregoing, in no event shall the Contributed Assets include
or be deemed to include any Excluded Asset.
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SCHEDULE II
ASSUMED LIABILITIES
Capitalized terms used below shall have the meanings set forth in the
Agreement or the Membership Interest Purchase Agreement, as applicable, and the
Disclosure Letter referred to below is the Disclosure Letter to the Membership
Interest Purchase Agreement. Except as otherwise indicated, the Assumed
Liabilities refer to liabilities on the books and records of Seller at the
Closing Date.
The liabilities, obligations and commitments of Seller (not including any
Retained Liabilities) with respect to:
(a) all Material Contracts (including material Leases) set forth
on Schedule 4.13 of the Disclosure Letter, all Mission Critical Contracts set
forth on Schedule 6.3 of the Disclosure Letter and all other Contracts
(including Leases) that are neither Material Contracts nor Mission Critical
Contracts, but (i) only to the extent that such liabilities, obligations and
commitments arise after the Effective Time, (ii) excluding any liabilities,
obligations and commitments of Seller resulting from or relating to any breach
of any such Contract by Seller occurring prior to the Effective Time, and (iii)
excluding any Excluded Contract;
(b) any Material Contract not set forth on Schedule 4.13 of the
Disclosure Letter that Purchaser elects to have assigned to the Company but (i)
only to the extent that such liabilities, obligations and commitments arise
after the Effective Time, and (ii) excluding any liabilities, obligations and
commitments of Seller resulting from or relating to any breach of any such
Contract by Seller occurring prior to the Effective Time;
(c) outstanding purchase orders and commitments issued by Seller
and the Subsidiaries that are related primarily to the Business or required to
conduct the Business in substantially the same manner as conducted on the date
of this Agreement and listed on Exhibit A to Schedule II attached hereto, and as
such Exhibit A is updated within three (3) business days of the Closing, and in
each case setting forth such information as of the most recent practicable date;
(d) each of the items included within the definition of "Net
Working Capital" as a deduction or reduction, including (i) accounts payable,
(ii) accrued salaries, commissions, payroll and sales Taxes and other accrued
expenses, (iii) accrued product and process technology, (iv) Capital Leases, (v)
Deferred Revenue, and (vi) product warranty claims, all as set forth on the
Final Closing Date Statement;
(e) employees of Seller who accept an offer of employment by the
Company, but only to the extent arising after the Effective Time and consistent
with Schedule 6.7 of the Disclosure Letter;
(f) in addition to the liabilities described in (c)(vi) above, all
product warranty, returns, customer service, technical support or similar
obligations with respect to the Business, the Products, derivatives of the
Products or out of any agreements or contracts related thereto arising prior to
or after the Effective Time;
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(g) all payments due with respect to the July 1, 1996 Agreement
between IBM and MTI, up to $2,000,000, at least $1,500,000 of which shall be
accrued on the Final Closing Date Statement or shall have been paid by Seller at
or prior to the Closing;
(h) Tax liabilities included for the purpose of determining
liabilities for purposes of the Final Closing Date Statement (but no other Tax
liabilities); and
(i) all other liabilities or obligations specifically assigned to
or assumed by the Company or the Converted Companies pursuant to the Membership
Interest Purchase Agreement and/or any of the Ancillary Agreements.
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EXHIBIT B
FORM OF CLOSING DATE STATEMENT
ITEM U.S.$
RECEIVABLES (other than (i) non-current, non-trade Receivables in excess of __________
$100,000 and (ii) non-current, trade Receivables in excess of the lesser of
(A) the amount of such non-current, trade Receivables on the date of the
Agreement or (B) $2,000,000)
Allowance for doubtful accounts and for sales returns and discounts (_________)
INVENTORY (net of reserves accrued) __________
PREPAID ITEMS __________
ACCOUNTS PAYABLE (_________)
ACCRUED SALARIES, COMMISSIONS, PAYROLL, PROPERTY AND SALES TAXES AND OTHER (_________)
ACCRUED EXPENSES
ACCRUED PRODUCT AND PROCESS TECHNOLOGY (_________)
OBLIGATIONS UNDER CAPITAL LEASES (_________)
DEFERRED REVENUE (_________)
ACCRUAL FOR PRODUCT WARRANTY CLAIMS (_________)
OTHER LIABILITIES (to the extent included within the Assumed Liabilities or (_________)
the liabilities of the Converted Companies)
------------
NET WORKING CAPITAL $(_________)
CASH __________
PAYMENTS BY SELLER REQUESTED BY PURCHASER UNDER THE JULY 1, 1996 AGREEMENT
BETWEEN IBM AND MTI (up to $1.5 million) __________
-------------
CASH CONTRIBUTION $70,000,000
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EXHIBIT C
MATTERS TO BE ADDRESSED IN THE
OPINION OF FENWICK & WEST LLP
1. Each of the Company and the Converted Companies is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware. Each of the Company and the Converted Companies has all
requisite limited liability company power and limited liability company
authority to own, lease and operate its properties and to carry out the Business
as currently conducted.
2. The Seller is qualified to do business and is in good standing as a
foreign entity in each jurisdiction identified with respect to such entity in
Schedule 4.1 to the Disclosure Letter. To our knowledge, except as set forth in
the Disclosure Letter, the Seller is not required to be qualified in any other
jurisdiction, except for jurisdictions in which the failure to be so qualified
would not reasonably be expected to result in a Material Adverse Change in the
Business, taken as a whole.
3. The Company has the requisite limited liability company power and
authority to execute, deliver and perform each of the Ancillary Agreements to
which it is a party. The execution, delivery and performance of the Ancillary
Agreements by the Company have been duly authorized by all necessary limited
liability company action on the part of the Company's managing member. Each of
the Ancillary Agreements to which the Company is a party has been validly
executed and delivered by the Company.
4. The execution and delivery of the Ancillary Agreements to which the
Company is a party by the Company and the performance by the Company of its
obligations under the Ancillary Agreements do not conflict with or result in a
violation of (a) the Certificate of Formation or the LLC Agreement of the
Company, (b) the Purchase Agreement among Seller, Micron Technology, Inc. and
MEI California, Inc. and the Agreement and Plan of Merger among Seller,
Interland, Inc. and Imagine Acquisition Corporation, both of which are dated as
of March 22, 2001, or (c) the Delaware Limited Liability Company Act, to the
extent it is applicable to the Company.
5. To our knowledge immediately prior to the Closing, the Drop Down
Membership Interest is the only outstanding membership interest in the Company.
To our knowledge immediately prior to the Closing, the Converted Companies
Membership Interests are the only outstanding membership interests of the
Converted Companies, as the case may be. To our knowledge, the Seller is
reflected in each of the LLC Agreements for the Company and Converted Companies
[and in certificates representing Membership Interests, if any], as the sole
owner of the Membership Interests in the Company and in each of the Converted
Companies. To our knowledge, except as set forth in each of the LLC Agreements,
there are no outstanding rights, options, warrants, conversion rights or
agreements for the purchase or acquisition of any equity interests in the
Company or any Converted Company to which the Company or any Converted Company
is a party.
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6. Except as set forth on Schedule 4.8 of the Disclosure Letter, to our
knowledge, there is no litigation, proceeding or governmental investigation
pending or overtly threatened against the Seller, the Company or any Converted
Company, which questions the validity of the Agreement or the Ancillary
Agreements or the right of the Seller, the Company or any Converted Company to
enter into and perform the Agreement or any Ancillary Agreement.
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MATTERS TO BE ADDRESSED IN THE
OPINION OF MINNESOTA COUNSEL FOR THE SELLER
1. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota.
2. The Seller has all requisite corporate power and authority to own,
lease and operate its properties and to carry out the Business as currently
conducted.
3. The Seller has the requisite corporate power to execute and deliver
the Agreement and, the Ancillary Agreements to which it is a party, to perform
its obligations under the Agreement and the Ancillary Agreements and to
consummate the transactions contemplated thereby.
4. The execution, delivery and performance of the Agreement and the
Ancillary Agreement by the Seller have been duly authorized by all necessary
corporate action on the part of the Board of Directors of the Seller. Each of
the Agreement and the Ancillary Agreements to which the Seller is a party has
been executed and delivered by an officer of the Seller named in the resolutions
adopted by the Board of Directors authorizing execution of the Agreement and the
Ancillary Agreements.
5. The execution and delivery of the Agreement and the Ancillary
Agreements to which the Seller is a party by the Seller and the performance by
the Seller of its obligations under the Agreement and the Ancillary Agreements
do not conflict with or result in a violation of the charter documents of the
Seller.
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EXHIBIT D
LIMITED LIABILITY COMPANY AGREEMENT
OF
______________________, LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
This LIMITED LIABILITY COMPANY AGREEMENT of ______________________, LLC
(this "AGREEMENT") is entered into as of May __, 2001, by Micron Electronics,
Inc., a Minnesota corporation (the "PARENT"), as the sole member of
______________________, LLC, a Delaware limited liability company (the
"COMPANY").
W I T N E S S E T H:
WHEREAS, _____________________ (the "CORPORATION") was formed as a
Delaware corporation on ___________ __, 19__;
WHEREAS, on the date hereof, by unanimous written consent, the board of
directors of the Corporation adopted a resolution (i) adopting and approving the
conversion of the Corporation to a limited liability company, (ii) adopting this
Agreement and (iii) recommending the adoption of such conversion and this
Agreement to the sole stockholder of the Corporation, pursuant to Section 266 of
the General Corporation Law of the State of Delaware (the "GCL");
WHEREAS, on the date hereof, by written consent, the sole stockholder of
the Corporation adopted and approved the conversion of the Corporation to a
limited liability company and the adoption of this Agreement pursuant to Section
266 of the GCL;
WHEREAS, on the date hereof, the Corporation was converted into a limited
liability company pursuant to Section 18-214 of the Delaware Limited Liability
Company Act (6 Del. C. ' 18-101 et seq.), as amended from time to time (the
"ACT") and Section 266 of the GCL by causing the filing of a Certificate of
Conversion to Limited Liability Company and a Certificate of Formation with the
Secretary of State of the State of Delaware (the "CONVERSION"); and
WHEREAS, pursuant to this Agreement and the Conversion, the sole
stockholder of the Corporation became a member of the Company, the shares of
capital stock in the Corporation were converted into Units (as such term is
defined in Section 12 below), and the sole stockholder of the Corporation became
the owner of all of the limited liability company interests in the Company.
NOW THEREFORE, as the sole member of the Company, the Parent hereby
agrees as follows:
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SECTION 1. FORMATION OF THE LLC; CONVERSION OF THE CORPORATION.
(a) Effective as of the date and time of the Conversion, (i) the
Certificate of Incorporation of the Corporation, as amended, and the By-Laws of
the Corporation, as amended, are replaced and superseded in their entirety by
this Agreement in respect of all periods beginning on the Conversion, (ii) the
sole stockholder of the Corporation converted all of the shares of capital stock
in the Corporation held by the Corporation immediately prior to the Conversion
for 100 Units, (iii) all of the shares of capital stock in the Corporation
outstanding immediately prior to the Conversion are canceled on the books and
records of the Corporation, and (iv) the sole stockholder of the Corporation is
automatically admitted to the Company as a member of the Company. All
certificates evidencing shares of capital stock in the Corporation issued by the
Corporation and outstanding immediately prior to the Conversion shall be
surrendered to the Company and shall be canceled on the books and records of the
Corporation.
(b) Effective as of the date and time of the Conversion, the
Parent has formed a limited liability company under the Act. Except as expressly
provided herein, the rights and obligations of the member(s) of the Company in
connection with the regulation and management of the Company shall be governed
by the Act.
SECTION 2. NAME. The name of the Company shall be "_____________________,
LLC." The business of the Company shall be conducted under such name or any
other name or names that the Manager (as such term is defined in Section 9(a)
below) shall determine from time to time.
SECTION 3. REGISTERED OFFICE/REGISTERED AGENT. The Company shall
continuously maintain a registered agent and office in the State of Delaware as
required by the Act. The registered agent and office shall be determined by the
Manager.
SECTION 4. PRINCIPAL BUSINESS OFFICE. The principal office of the Company
shall be as determined by the Manager. At any time, the Manager may change the
location of the Company's principal place of business.
SECTION 5. TERM. The term of the Company will continue and have perpetual
existence until dissolved and its affairs wound up in accordance with the
provisions of this Agreement.
SECTION 6. QUALIFICATIONS. The Manager shall cause the Company to be
qualified, formed or registered under assumed or fictitious name statutes or
similar laws in any jurisdiction in which the Company transacts business in
which such qualification, formation or registration is required or desirable.
The Manager, as an authorized person within the meaning of the Act, shall
execute, deliver and file any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in a
jurisdiction in which the Company may wish to conduct business.
SECTION 7. PURPOSES. The Company is formed for the object and purpose of,
and the nature of the business to be conducted by the Company is, engaging in
any lawful act or
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activity for which limited liability companies may be formed under the Act and
engaging in any and all activities necessary, convenient, desirable or
incidental to the foregoing.
SECTION 8. POWERS. The Company shall have all powers necessary,
appropriate or incidental to the accomplishment of its purposes and all other
powers conferred upon a limited liability company pursuant to the Act.
SECTION 9. MANAGEMENT.
(a) Management by the Manager.
(i) The Parent, as the sole member, hereby elects the
Parent, or any successor-in-interest, as the Company's manager (the "MANAGER").
The Parent or its successor-in-interest shall be the Manager until the member(s)
unanimously elect otherwise. No additional person may be elected as Manager
without the unanimous approval of the member(s). The powers of the Company shall
at all times be exercised by or under the authority of, and the business,
property and affairs of the Company shall be managed by, or under the direction
of, the Manager, provided, however, that the Manager may delegate the exercise
of its power or its authority to act on behalf of the Company to any officer of
the Company. Notwithstanding anything to the contrary in this Agreement, the
Manager is authorized to merge the Company with any direct or indirect corporate
subsidiary of the Parent with the Company as the surviving entity and no
approval of the member(s) shall be required for such transaction.
(ii) Except as otherwise required by applicable law, the
Manager shall be authorized to execute or endorse any check, draft, evidence of
indebtedness, instrument, obligation, note, mortgage, contract, agreement,
certificate or other document on behalf of the Company.
(iii) No annual or regular meetings of the Manager or the
member(s) are required. The Manager may, by written consent, take any action
that it is otherwise required or permitted to take at a meeting.
(b) Consent Required. The affirmative unanimous vote, approval,
consent or ratification of the member(s) shall be required to:
(i) alter the primary purposes of the Company as set forth
in Section 7;
(ii) do any act in contravention of this Agreement or any
resolution of the member(s), or cause the Company to engage in any business not
authorized by the Certificate of Formation of the Company or the terms of this
Agreement or that which would make it impossible to carry on the usual course of
business of the Company;
(iii) amend this Agreement; or
(iv) sell all or substantially all of the assets of the
Company.
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SECTION 10. OFFICERS.
(a) The officers of the Company shall be a president, a chief
financial officer and a secretary. The Company may also have, at the discretion
of the Manager, a chief executive officer, one or more vice presidents, a
corporate controller, one or more assistant vice presidents, one or more
assistant secretaries and such other officers as may be appointed in accordance
with the provisions hereof. One person may hold two or more offices. The
salaries of all officers of the Company shall be fixed by the Manager.
(b) The officers of the Company shall be chosen by the Manager,
each of whom shall have such authority and perform such duties as the Manager
may from time to time specify, and each shall hold his or her office until he or
she shall resign or shall be removed or otherwise disqualified to serve, or his
or her successor shall be elected and qualified.
(c) The Manager may appoint such other officers as the business of
the Company may require, each of whom shall have such authority and perform such
duties as the Manager or the president may from time to time specify, and shall
hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve.
(d) Any officer may be removed, either with or without cause, by
the Manager at any time. Any officer may resign at any time by giving written
notice to the Manager or, if any, the president or the secretary of the Company.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
(e) A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in this Agreement for the regular appointments to such office.
SECTION 11. MEMBERS.
(a) The member(s) of the Company shall be set forth on Schedule A
attached hereto. Subject to the terms of this Agreement, other persons may be
admitted as members from time to time.
(b) Except as otherwise provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be the debts, obligations and liabilities solely of the
Company, and no member shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a member of the
Company.
(c) Neither a member nor any of its affiliates, partners, members,
directors, managers, officers or employees shall be expressly or impliedly
restricted or prohibited by virtue of this Agreement or the relationships
created hereby from engaging in other activities or business ventures of any
kind or character whatsoever. Except as otherwise agreed in writing, each member
and its affiliates, partners, members, directors,
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managers, officers and employees shall have the right to conduct, or to possess
a direct or indirect ownership interest in, activities and business ventures of
every type and description, including activities and business ventures in direct
competition with the Company.
SECTION 12. UNITS; PERCENTAGE INTERESTS. A member's limited liability
company interest in the Company, including such member's right to share in
income, gains, losses, deductions, credits, or similar items of, and to receive
distributions from, the Company pursuant to this Agreement and the Act shall be
represented by "UNITS." As of the date hereof, the number of Units held by the
member(s) shall be as set forth in Schedule A attached hereto. For purposes of
this Agreement, "PERCENTAGE INTEREST" means, with respect to each member as of
any date, the percentage equal to the number of Units then held by such member
divided by the total number of Units then held by all member(s).
SECTION 13. DISTRIBUTIONS. The Company may from time to time distribute
to the member(s) such amounts in cash and other assets as shall be determined by
the Manager. Each such distribution shall be divided among the member(s) in
accordance with their Percentage Interests.
SECTION 14. ALLOCATIONS. The profits and losses of the Company shall be
allocated to the member(s) in accordance with their Percentage Interests.
SECTION 15. DISSOLUTION; WINDING UP.
(a) The Company shall be dissolved upon (i) the adoption of a plan
of dissolution by the member(s) or (ii) the occurrence of any event required to
cause the dissolution of the Company under the Act.
(b) Any dissolution of the Company shall be effective as of the
date on which the event occurs giving rise to such dissolution, but the Company
shall not terminate unless and until all its affairs have been wound up and its
assets distributed in accordance with the provisions of the Act.
(c) Upon dissolution of the Company, the Company shall continue
solely for the purposes of winding up its business and affairs as soon as
reasonably practicable. Promptly after the dissolution of the Company, the
Manager shall immediately commence to wind up the affairs of the Company in
accordance with the provisions of this Agreement and the Act. In winding up the
business and affairs of the Company, the Manager may take any and all actions
that they determine in its sole discretion to be in the best interests of the
member(s), including, but not limited to, any actions relating to (i) causing
written notice by registered or certified mail of the Company's intention to
dissolve to be mailed to each known creditor of and claimant against the
Company, (ii) the payment, settlement or compromise of existing claims against
the Company, (iii) the making of reasonable provisions for payment of contingent
claims against the Company and (iv) the sale or disposition of the properties
and assets of the Company. It is expressly understood and agreed that a
reasonable time shall be allowed for the orderly liquidation of the assets of
the Company and the satisfaction of claims against the Company so as to enable
the Manager to minimize the losses that may result from a liquidation.
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95
SECTION 16. TRANSFER. If the Company has more than one member, no member
shall transfer (whether by sale, assignment, gift, pledge, hypothecation,
mortgage, exchange or otherwise) all or any part of his, her or its limited
liability company interest in the Company to any other person without the prior
written consent of each of the other member(s); provided, however, that this
Section 16 shall not restrict the ability of any member to transfer (at any
time) all or a portion of its limited liability company interest in the Company
to another member. Upon the transfer of a member's limited liability company
interest, the Manager shall provide notice of such transfer to each of the other
members and shall amend Schedule A attached hereto to reflect the transfer.
SECTION 17. ADMISSION OF ADDITIONAL OR SUBSTITUTE MEMBERS. The admission
of additional or substitute members to the Company shall be effective upon the
consent of the person(s) owning more than 50% of the Units.
SECTION 18. EXCULPATION AND INDEMNIFICATION. From and after the closing
of that certain Membership Interest Purchase Agreement by and between Micron
Electronics, Inc., a Minnesota corporation, and GTG PC Holdings, LLC, a Delaware
limited liability company, dated as of April 30, 2001 (the "PURCHASE
AGREEMENT"):
(a) Neither the member(s), the Manager, their affiliates, nor any
person who at any time shall serve, or shall have served, as a director,
officer, employee or other agent of any member, Manager or any such affiliate
and who, in such capacity, shall engage, or shall have engaged, in activities on
behalf of the Company (a "SPECIFIED AGENT") shall be liable, in damages or
otherwise, to the Company or to any member for, and neither the Company nor any
member shall take any action against such member(s), their affiliates or any
Specified Agent, in respect of any loss which arises out of any acts or
omissions performed or omitted by it pursuant to the authority granted by this
Agreement, or otherwise performed on behalf of the Company, if such member, such
affiliate, or such Specified Agent, as applicable, in good faith, determined
that such course of conduct was in the best interests of the Company. Each
member shall look solely to the assets of the Company for return of his, her or
its investment, and if the property of the Company remaining after the discharge
of the debts and liabilities of the Company is insufficient to return such
investment, each member shall have no recourse against the Company, the other
member(s) or their affiliates, except as expressly provided herein; provided,
however, that the foregoing shall not relieve any member of any fiduciary duty
or duty of fair dealing to the other member(s) that it may have under applicable
law.
(b) In any threatened, pending or completed claim, action, suit or
proceeding to which a member, any of such member's affiliates, or any Specified
Agent was or is a party or is threatened to be made a party by reason of the
fact that such person is or was engaged in activities on behalf of the Company,
including without limitation any action or proceeding brought under the
Securities Act of 1933, as amended, against a member, any of such member's
affiliates, or any Specified Agent relating to the Company, the Company shall
indemnify and hold harmless the member(s), any such affiliates, and any such
Specified Agents against losses, damages, expenses (including attorneys' fees),
judgments and amounts paid in settlement actually and reasonably incurred by or
in connection with such claim, action, suit or proceeding; provided, however,
that none of the member(s), any
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96
of their affiliates or any Specified Agent shall be indemnified for actions
constituting bad faith, willful misconduct, or fraud. Any act or omission by any
member, any of such member's affiliates or any Specified Agent, if done in
reliance upon the opinion of independent legal counsel or public accountants
selected with reasonable care by such member(s), such affiliate or such
Specified Agent, as applicable, shall not constitute bad faith, willful
misconduct, or fraud on the part of such member(s), affiliate or Specified
Agent.
(c) The termination of any claim, action, suit or proceeding by
judgment, order or settlement shall not, of itself, create a presumption that
any act or failure to act by a member, such member's affiliate or any Specified
Agent constituted bad faith, willful misconduct or fraud under this Agreement.
(d) Any such indemnification under this Section 18 shall be
recoverable only out of the assets of the Company and not from the member(s).
SECTION 19. MISCELLANEOUS.
(a) The terms and provisions set forth in this Agreement may be
amended, and compliance with any term or provision set forth herein may be
waived, only by a written instrument executed by each member. No failure or
delay on the part of any member in exercising any right, power or privilege
granted hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
granted hereunder.
(b) This Agreement shall be binding upon and inure to the benefit
of the member(s) and their respective successors and assigns.
(c) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to any
conflicts of law principles that would require the application of the laws of
any other jurisdiction.
(d) In the event that any provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable for any reason, the
invalidity, illegality or unenforceability thereof shall not affect any other
provision hereof.
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed on the date first above written.
MICRON ELECTRONICS, INC.,
a Minnesota corporation
By:
Name:
Title:
Accepting its appointment as the Manager of the Company under Section
9(a) of the Agreement.
MICRON ELECTRONICS, INC.,
a Minnesota corporation
By:
Name:
Title:
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SCHEDULE A
MEMBER/ADDRESS; NUMBER OF UNITS
MEMBER/ADDRESS NUMBER OF UNITS
Micron Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
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99
LIMITED LIABILITY COMPANY AGREEMENT
OF
MICRONPC, LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
This LIMITED LIABILITY COMPANY AGREEMENT of MicronPC, LLC (this
"AGREEMENT"), is entered into as of May 22, 2001, by Micron Electronics, Inc., a
Minnesota corporation (the "PARENT"), as the sole member of MicronPC, LLC, a
Delaware limited liability company (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Company was formed under the Delaware Limited Liability
Company Act (6 Del. C. Section 18-101, et. seq.) (the "ACT"); and
WHEREAS, the Certificate of Formation (the "CERTIFICATE") of the Company
was executed and filed in the office of the Secretary of State of the State of
Delaware on May 22, 2001.
NOW THEREFORE, as the sole member of the Company, the Parent hereby
agrees as follows:
SECTION 1. General.
(a) Effective as of the date and time of filing of the Certificate in the
office of the Secretary of State of the State of Delaware, the Parent has formed
a limited liability company under the Act. Except as expressly provided herein,
the rights and obligations of the member(s) of the Company in connection with
the regulation and management of the Company shall be governed by the Act.
(b) The name of the Company shall be "MicronPC, LLC." The business of the
Company shall be conducted under such name or any other name or names that the
Manager (as such term is defined in Section 4(a) below) shall determine from
time to time.
(c) The Company shall continuously maintain a registered agent and office
in the State of Delaware as required by the Act. The registered agent and office
shall be determined by the Manager.
(d) The principal office of the Company shall be as determined by the
Manager. At any time, the Manager may change the location of the Company's
principal place of business.
(e) The term of the Company commenced on the date of the filing of the
Certificate in the office of the Secretary of State of the State of Delaware,
and will continue and have perpetual existence until dissolved and its affairs
wound up in accordance with the provisions of this Agreement.
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(f) The Manager shall cause the Company to be qualified, formed or
registered under assumed or fictitious name statutes or similar laws in any
jurisdiction in which the Company transacts business in which such
qualification, formation or registration is required or desirable. The Manager,
as an authorized person within the meaning of the Act, shall execute, deliver
and file any certificates (and any amendments and/or restatements thereof)
necessary for the Company to qualify to do business in a jurisdiction in which
the Company may wish to conduct business.
SECTION 2. Purposes. The Company is formed for the object and purpose of,
and the nature of the business to be conducted by the Company is, engaging in
any lawful act or activity for which limited liability companies may be formed
under the Act and engaging in any and all activities necessary, convenient,
desirable or incidental to the foregoing.
SECTION 3. Powers. The Company shall have all powers necessary,
appropriate or incidental to the accomplishment of its purposes and all other
powers conferred upon a limited liability company pursuant to the Act.
SECTION 4. Management.
(a) Management by the Manager.
i) The Parent, as the sole member, hereby elects the Parent, or
any successor-in-interest, as the Company's manager (the "MANAGER"). The Parent
or its successor-in-interest shall be the Manager until the member(s)
unanimously elect otherwise. No additional person may be elected as Manager
without the unanimous approval of the member(s). The powers of the Company shall
at all times be exercised by or under the authority of, and the business,
property and affairs of the Company shall be managed by, or under the direction
of, the Manager, provided, however, that the Manager may delegate the exercise
of its power or its authority to act on behalf of the Company to any officer of
the Company. Notwithstanding anything to the contrary in this Agreement, the
Manager is authorized to merge the Company with any direct or indirect corporate
subsidiary of the Parent with the Company as the surviving entity and no
approval of the member(s) shall be required for such transaction.
ii) Except as otherwise required by applicable law, the Manager
shall be authorized to execute or endorse any check, draft, evidence of
indebtedness, instrument, obligation, note, mortgage, contract, agreement,
certificate or other document on behalf of the Company.
iii) No annual or regular meetings of the Manager or the member(s)
are required. The Manager may, by written consent, take any action that it is
otherwise required or permitted to take at a meeting.
(b) Consent Required. The affirmative unanimous vote, approval, consent
or ratification of the member(s) shall be required to:
i) alter the primary purposes of the Company as set forth in
Section 2;
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ii) do any act in contravention of this Agreement or any
resolution of the member(s), or cause the Company to engage in any business not
authorized by the Certificate or the terms of this Agreement or that which would
make it impossible to carry on the usual course of business of the Company;
iii) amend this Agreement; or
iv) sell all or substantially all of the assets of the Company.
SECTION 5. Officers.
(a) The officers of the Company shall be a president, a chief financial
officer and a secretary. The Company may also have, at the discretion of the
Manager, a chief executive officer, one or more vice presidents, a corporate
controller, one or more assistant vice presidents, one or more assistant
secretaries and such other officers as may be appointed in accordance with the
provisions hereof. One person may hold two or more offices. The salaries of all
officers of the Company shall be fixed by the Manager.
(b) The officers of the Company shall be chosen by the Manager, each of
whom shall have such authority and perform such duties as the Manager may from
time to time specify, and each shall hold his or her office until he or she
shall resign or shall be removed or otherwise disqualified to serve, or his or
her successor shall be elected and qualified.
(c) The Manager may appoint such other officers as the business of the
Company may require, each of whom shall have such authority and perform such
duties as the Manager or the president may from time to time specify, and shall
hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve.
(d) Any officer may be removed, either with or without cause, by the
Manager at any time. Any officer may resign at any time by giving written notice
to the Manager or, if any, the president or the secretary of the Company. Any
such resignation shall take effect at the date of the receipt of such notice or
at any later time specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
(e) A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
this Agreement for the regular appointments to such office.
SECTION 6. Members.
(a) The member(s) of the Company shall be set forth on Schedule A
attached hereto. Subject to the terms of this Agreement, other persons may be
admitted as members from time to time.
(b) Except as otherwise provided by the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be the debts, obligations and liabilities solely of the Company, and no
member shall be obligated personally for any
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102
such debt, obligation or liability of the Company solely by reason of being a
member of the Company.
(c) Neither a member nor any of its affiliates, partners, members,
directors, managers, officers or employees shall be expressly or impliedly
restricted or prohibited by virtue of this Agreement or the relationships
created hereby from engaging in other activities or business ventures of any
kind or character whatsoever. Except as otherwise agreed in writing, each member
and its affiliates, partners, members, directors, managers, officers and
employees shall have the right to conduct, or to possess a direct or indirect
ownership interest in, activities and business ventures of every type and
description, including activities and business ventures in direct competition
with the Company.
SECTION 7. Units; Percentage Interests. A member's limited liability
company interest in the Company, including such member's right to share in
income, gains, losses, deductions, credits, or similar items of, and to receive
distributions from, the Company pursuant to this Agreement and the Act shall be
represented by "UNITS." As of the date hereof, the number of Units held by the
member(s) shall be as set forth in Schedule A attached hereto. For purposes of
this Agreement, "PERCENTAGE INTEREST" means, with respect to each member as of
any date, the percentage equal to the number of Units then held by such member
divided by the total number of Units then held by all member(s).
SECTION 8. Distributions. The Company may from time to time distribute to
the member(s) such amounts in cash and other assets as shall be determined by
the Manager. Each such distribution shall be divided among the member(s) in
accordance with their Percentage Interests.
SECTION 9. Allocations. The profits and losses of the Company shall be
allocated to the member(s) in accordance with their Percentage Interests.
SECTION 10. Dissolution; Winding Up.
(a) The Company shall be dissolved upon (i) the adoption of a plan of
dissolution by the member(s) or (ii) the occurrence of any event required to
cause the dissolution of the Company under the Act.
(b) Any dissolution of the Company shall be effective as of the date on
which the event occurs giving rise to such dissolution, but the Company shall
not terminate unless and until all its affairs have been wound up and its assets
distributed in accordance with the provisions of the Act.
(c) Upon dissolution of the Company, the Company shall continue solely
for the purposes of winding up its business and affairs as soon as reasonably
practicable. Promptly after the dissolution of the Company, the Manager shall
immediately commence to wind up the affairs of the Company in accordance with
the provisions of this Agreement and the Act. In winding up the business and
affairs of the Company, the Manager may take any and all actions that they
determine in its sole discretion to be in the best interests of the member(s),
including, but not limited to, any actions relating to (i) causing written
notice by registered or certified mail of the Company's intention to dissolve to
be mailed to each known creditor of and claimant against the Company, (ii) the
payment, settlement or compromise of existing
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103
claims against the Company, (iii) the making of reasonable provisions for
payment of contingent claims against the Company and (iv) the sale or
disposition of the properties and assets of the Company. It is expressly
understood and agreed that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the satisfaction of claims against
the Company so as to enable the Manager to minimize the losses that may result
from a liquidation.
SECTION 11. Transfer. If the Company has more than one member, no member
shall transfer (whether by sale, assignment, gift, pledge, hypothecation,
mortgage, exchange or otherwise) all or any part of his, her or its limited
liability company interest in the Company to any other person without the prior
written consent of each of the other member(s); provided, however, that this
Section 11 shall not restrict the ability of any member to transfer (at any
time) all or a portion of its limited liability company interest in the Company
to another member. Upon the transfer of a member's limited liability company
interest, the Manager shall provide notice of such transfer to each of the other
members and shall amend Schedule A attached hereto to reflect the transfer.
SECTION 12. Admission of Additional or Substitute Members. The admission
of additional or substitute members to the Company shall be effective upon the
consent of the person(s) owning more than 50% of the Units.
SECTION 13. Exculpation and Indemnification. From and after the closing
of that certain Membership Interest Purchase Agreement by and between Micron
Electronics, Inc., a Minnesota corporation, and GTG PC Holdings, LLC, a Delaware
limited liability company, dated as of April 30, 2001 (the "PURCHASE
AGREEMENT"):
(a) Neither the member(s), the Manager, their affiliates, nor any person
who at any time shall serve, or shall have served, as a director, officer,
employee or other agent of any member, Manager or any such affiliate and who, in
such capacity, shall engage, or shall have engaged, in activities on behalf of
the Company (a "SPECIFIED AGENT") shall be liable, in damages or otherwise, to
the Company or to any member for, and neither the Company nor any member shall
take any action against such member(s), their affiliates or any Specified Agent,
in respect of any loss which arises out of any acts or omissions performed or
omitted by it pursuant to the authority granted by this Agreement, or otherwise
performed on behalf of the Company, if such member, such affiliate, or such
Specified Agent, as applicable, in good faith, determined that such course of
conduct was in the best interests of the Company. Each member shall look solely
to the assets of the Company for return of his, her or its investment, and if
the property of the Company remaining after the discharge of the debts and
liabilities of the Company is insufficient to return such investment, each
member shall have no recourse against the Company, the other member(s) or their
affiliates, except as expressly provided herein; provided, however, that the
foregoing shall not relieve any member of any fiduciary duty or duty of fair
dealing to the other member(s) that it may have under applicable law.
(b) In any threatened, pending or completed claim, action, suit or
proceeding to which a member, any of such member's affiliates, or any Specified
Agent was or is a party or is threatened to be made a party by reason of the
fact that such person is or was engaged in activities on behalf of the Company,
including without limitation any action or
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104
proceeding brought under the Securities Act of 1933, as amended, against a
member, any of such member's affiliates, or any Specified Agent relating to the
Company, the Company shall indemnify and hold harmless the member(s), any such
affiliates, and any such Specified Agents against losses, damages, expenses
(including attorneys' fees), judgments and amounts paid in settlement actually
and reasonably incurred by or in connection with such claim, action, suit or
proceeding; provided, however, that none of the member(s), any of their
affiliates or any Specified Agent shall be indemnified for actions constituting
bad faith, willful misconduct, or fraud. Any act or omission by any member, any
of such member's affiliates or any Specified Agent, if done in reliance upon the
opinion of independent legal counsel or public accountants selected with
reasonable care by such member(s), such affiliate or such Specified Agent, as
applicable, shall not constitute bad faith, willful misconduct, or fraud on the
part of such member(s), affiliate or Specified Agent.
(c) The termination of any claim, action, suit or proceeding by judgment,
order or settlement shall not, of itself, create a presumption that any act or
failure to act by a member, such member's affiliate or any Specified Agent
constituted bad faith, willful misconduct or fraud under this Agreement.
(d) Any such indemnification under this Section 13 shall be recoverable
only out of the assets of the Company and not from the member(s).
SECTION 14. Miscellaneous.
(a) The terms and provisions set forth in this Agreement may be amended,
and compliance with any term or provision set forth herein may be waived, only
by a written instrument executed by each member. No failure or delay on the part
of any member in exercising any right, power or privilege granted hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege granted
hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of the
member(s) and their respective successors and assigns.
(c) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to any conflicts of law
principles that would require the application of the laws of any other
jurisdiction.
(d) In the event that any provision contained in this Agreement shall be
held to be invalid, illegal or unenforceable for any reason, the invalidity,
illegality or unenforceability thereof shall not affect any other provision
hereof.
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105
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed on the date first above written.
MICRON ELECTRONICS, INC.,
a Minnesota corporation
By:
Name:
Title:
Accepting its appointment as the Manager of the Company under Section
4(a) of the Agreement.
MICRON ELECTRONICS, INC.,
a Minnesota corporation
By:
Name:
Title:
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SCHEDULE A
MEMBER/ADDRESS; NUMBER OF UNITS
MEMBER/ADDRESS NUMBER OF UNITS
Micron Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
107
EXHIBIT E
FORM OF INSTRUMENT OF ASSIGNMENT AND ASSUMPTION
INSTRUMENT OF ASSIGNMENT AND ASSUMPTION executed and delivered on
________ __, 2001 (this "Instrument") by Micron Electronics, Inc., a Minnesota
corporation ("Seller"), in favor of MicronPC LLC, Micron Commercial Computer
Systems LLC, Micron Government Computer Systems LLC and Micron Computer Services
LLC, each of which is a limited liability company organized under the laws of
Delaware by virtue of being converted from a Delaware corporation into a limited
liability company (collectively, the "Assignors").
WITNESSETH:
WHEREAS, Seller and GTG PC Holdings, LLC entered into a Membership
Interest Purchase Agreement dated as of April 30, 2001 (the "Purchase
Agreement");
WHEREAS, pursuant to the Purchase Agreement, Seller agreed to statutorily
convert each of its Subsidiaries listed on Schedule 4.5 of the Disclosure Letter
into a single member Delaware limited liability company (collectively, the
"Converted Companies");
WHEREAS, each of the Assignors is one of the Converted Companies;
WHEREAS, the Assignors are parties to certain of the Excluded Contracts
set forth on Schedule 4.13(c) of the Disclosure Letter and/or are bound or
otherwise obligated under certain of the Retained Liabilities listed on Schedule
2.4 of the Disclosure Letter;
WHEREAS, pursuant to Section 2.4 of the Purchase Agreement, Seller has
agreed to enter into this Instrument with the Assignors for purposes of Seller's
assumption of the Excluded Contracts set forth on Schedule 4.13(c) of the
Disclosure Letter to which any Assignor is a party (the "Assignors Excluded
Contracts") and the Retained Liabilities listed on Schedule 2.4 of the
Disclosure Letter to which any Assignor is bound or otherwise obligated (the
"Assignors Retained Liabilities");
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meaning ascribed to such terms in the Purchase Agreement.
2. Assignment of Assignors Excluded Contracts. (a) Assignors hereby
assign, transfer and convey to Seller all of their right, title and interest in
and to the Assignors Excluded Contracts, and (b) Seller hereby accepts and
assumes and becomes responsible for and agrees to
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108
perform and satisfy all of the obligations and liabilities with respect to the
Assignors Excluded Contracts.
3. Assignors Retained Liabilities Assumed by the Seller. (a) Assignors
hereby assign, transfer and convey to Seller all of their right, title and
interest in and to the Assignors Retained Liabilities, and (b) Seller hereby
accepts and assumes and becomes responsible for and agrees to perform and
satisfy all of the Assignors Retained Liabilities.
4. Interpretation and Governing Law. This Instrument shall be construed
and interpreted in a manner consistent with the Purchase Agreement and shall be
governed by the Laws of the State of Delaware, without regard to the Laws of the
State of Delaware as to choice or conflict of Laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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109
IN WITNESS WHEREOF, the parties have caused this Instrument to be
executed as of the date first above written.
SELLER:
MICRON ELECTRONICS, INC.,
a Minnesota corporation
By:
------------------------------------
Name:
Title:
ASSIGNORS:
MICRON PC LLC,
a Delaware limited liability company
By:
------------------------------------
Name:
Title:
MICRON COMMERCIAL COMPUTER
SYSTEMS LLC,
a Delaware limited liability company
By:
------------------------------------
Name:
Title:
MICRON GOVERNMENT COMPUTER SYSTEMS LLC,
a Delaware limited liability company
By:
------------------------------------
Name:
Title:
MICRON COMPUTER SERVICES LLC,
a Delaware limited liability company
By:
------------------------------------
Name:
Title:
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110
EXHIBIT F
FORM OF TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this "Agreement") is dated as of
________ __, 2001, by and among Micron Electronics, Inc., a Minnesota
corporation ("Seller"), [MicronPC], LLC, a Delaware limited liability company
("[MicronPC]"), and the limited liability companies set forth on Schedule A
hereto, each a Delaware limited liability company (collectively, the "Converted
Companies" and, together with [MicronPC], the "Company"). Capitalized terms used
herein shall have the meanings given thereto in the Purchase Agreement (as such
term is defined below).
W I T N E S S E T H:
WHEREAS, Seller and the Company are parties to a Membership Interest
Purchase Agreement dated as of April 30, 2001 (the "Purchase Agreement") which
contemplates that Seller and the Company shall contemporaneously enter into this
Agreement;
NOW, THEREFORE, subject to the terms, conditions, covenants and
provisions of this Agreement, each of Seller and the Company mutually covenants
and agrees as follows:
ARTICLE I
SERVICES PROVIDED
1.1 Transition Services.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, Seller will provide each of those services (hereinafter referred to
individually as a "Seller Transition Service", and collectively as the "Seller
Transition Services") set forth in Schedule B hereto to the Company during the
duration specified for each such Seller Transition Service in such Schedule
(hereinafter referred to collectively as the "Time Periods" for all of the
Transition Services, and individually a "Time Period" for a Transition Service).
(b) Upon the terms and subject to the conditions set forth in this
Agreement, the Company will provide each of those services (hereinafter referred
to individually as a "Company Transition Service" and collectively as the
"Company Transition Services" and together with the Seller Transition Services,
the "Transition Services") set forth in Schedule C hereto to Seller during the
Time Period specified for each such Company Transition Service in such Schedule.
(c) In addition to the Transition Services identified in the
Schedules hereto, Seller and the Company agree to negotiate in good faith
regarding the provision of any other services (and the terms and conditions
thereof) as are reasonably requested by either party and are not otherwise
covered by this Agreement. If any agreement is reached regarding such other
services, it shall be evidenced by the parties signing and attaching an amended
Schedule to this
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Agreement, at which time such other services shall be subject to the provisions
of this Agreement.
1.2 Personnel.
(a) In providing the Transition Services, the party providing such
services (the "Provider") may, as it deems necessary or appropriate, (i) use the
personnel of the Provider or its Affiliates, and (ii) employ the services of
third parties to the extent that, and subject to the condition that, such third
party services are routinely utilized to provide similar services to other
businesses of the Provider or are reasonably necessary for the efficient
performance of such Transition Services.
(b) To the extent that a Provider uses its own personnel to
provide Transition Services, such Provider shall be responsible for the payment
of all federal, state and local taxes and withholdings payable with respect to
the wages of such persons, shall maintain workers' compensation insurance
required by applicable statutes with respect to such persons and shall maintain
and provide all applicable employee benefits for such persons.
(c) Notwithstanding anything to the contrary contained herein,
Provider shall not be obligated to retain the services of any specific
individual in connection with performance of its obligations hereunder.
1.3 Representatives. Each of the Provider and the party receiving such
services (the "Recipient") Recipient shall nominate a representative to act as
its primary contact person to coordinate the provision of all of such party's
Transition Services (collectively, the "Primary Coordinators"). Each Primary
Coordinator may designate one or more service coordinators for each specific
Transition Service (the "Service Coordinators"). Each party may treat an act of
a Primary Coordinator or Service Coordinator of another party as being
authorized by such other party without inquiring behind such act or ascertaining
whether such Primary Coordinator or Service Coordinator had authority to so act,
provided, however, that no such Primary Coordinator or Service Coordinator has
any authority to amend this Agreement. Seller and the Company shall advise each
other promptly (in any case no more than five (5) business days) in writing of
any change in the Primary Coordinators or any Service Coordinator for a
particular Transition Service, setting forth the name of the Primary Coordinator
or Service Coordinator to be replaced and the name of the replacement, and
certifying that the replacement Primary Coordinator or Service Coordinator is
authorized to act for such party in all matters relating to this Agreement, in
the case of a Primary Coordinator or, in the case of a Service Coordinator, with
respect to the Transition Service for which such Service Coordinator has been
designated. Seller and the Company each agree that all communications relating
to the provision of the Transition Services shall be directed to the Service
Coordinators for such Transition Service with copies to the Primary
Coordinators. Seller's initial Primary Coordinator shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The
Company's initial Primary Coordinator shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇. For each
Transition Service, the Provider's and Recipient's initial Service Coordinators
are set forth on the Schedules.
1.4 ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
- ▇ -
▇▇▇
(▇) The Transition Services shall be of substantially the same
type, quality and utilization levels, and shall be provided with substantially
the same degree of care and diligence, as if such services had been provided to
the Provider's businesses. Nothing in this Agreement shall require a Provider to
favor the businesses of a Recipient over its own businesses or those of any of
its Affiliates.
(b) A Provider shall not be required to provide a Recipient with
extraordinary levels of Transition Services, special studies, training, or the
like or the advantage of systems, equipment, facilities, training, or
improvements procured, obtained or made after the Closing Date by such Provider.
(c) In addition to being subject to the terms and conditions of
this Agreement for the provision of the Transition Services, Seller and the
Company each agree that the Transition Services provided by third parties
pursuant to the terms of Section 1.2(a) shall be subject to the terms and
conditions of any agreements between the Provider and such third parties, which
agreements shall be on substantially the same conditions as the Provider would
enter into with such third parties for its own account, and no such agreements
shall be binding on the Recipient after the term hereof without the Recipient's
express written consent. The Provider shall consult with the Recipient
concerning the terms and conditions of any such agreements to be entered into,
or proposed to be entered into, with third parties on or after the date hereof.
1.5 Limitation of Liability. The parties hereto acknowledge and agree
that the Transition Services are provided by the Provider: (a) at the request of
the Recipient in order to accommodate it following the Closing, (b) at the costs
set forth on the applicable Schedule hereto and with no expectation of profit
being made by the Provider thereon and (c) with the expectation that the
Provider is not assuming any financial or operational risks, including those
usually assumed by a service provider, except for those risks explicitly set
forth herein. Accordingly, each party agrees that, absent gross negligence or
willful misconduct, the other party, and its Affiliates and their respective
directors, officers, employees, representatives, consultants and agents shall
not be liable for any direct, indirect, special, incidental or consequential
damages, including lost profits or savings, whether or not such damages are
foreseeable, or for any third party claims relating to the Transition Services
or each party's performance under this Agreement. Notwithstanding anything to
the contrary contained herein, in the event any Provider commits an error with
respect to or incorrectly performs or fails to perform any Transition Service,
at the Recipient's request, the Provider shall use reasonable efforts and in
good faith attempt to correct such error, re-perform or perform such Transition
Service at no additional cost to such Recipient; provided, however, absent gross
negligence or willful misconduct, the Provider shall have no obligation to
recreate any lost or destroyed data to the extent the same cannot be cured by
the re-performance of the Transition Service in question.
1.6 Indemnity.
(a) The respective Recipient agrees to indemnify and hold the
respective Provider and its subsidiaries and affiliates and persons serving as
officers, directors, partners or employees thereof harmless from and against any
damages, liabilities, losses, taxes, fines,
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penalties, costs and expenses (each, a "Damage" and, collectively, the
"Damages") (including, without limitation, reasonable fees of counsel) of any
kind or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based on any gross negligence or willful misconduct on the part of the
Recipient.
(b) The respective Provider agrees to indemnify and hold the
respective Recipient and its subsidiaries and affiliates and persons serving as
officers, directors, partners or employees thereof harmless from and against any
Damages (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any gross negligence or willful misconduct on the part of the
Provider.
1.7 Force Majeure. Any failure or omission by a party in the performance
of any obligation under this Agreement shall not be deemed a breach of this
Agreement or create any liability, if the same arises from any cause or causes
beyond the control of such party, including but not limited to, the following,
which, for purposes of this Agreement shall be regarded as beyond the control of
each of the parties hereto: acts of God, fire, storm, flood, earthquake,
governmental regulation or direction, acts of the public enemy, war, rebellion,
insurrection, riot, invasion, strike or lockout; provided, however, that any
failure or omission by a third party employed or engaged by a Provider pursuant
to the terms of Section 1.2(a)(ii) hereof to provide Transition Services shall
not be regarded as beyond the control of any party hereto for purposes of this
Section 1.7; and provided, further, that such party hereto shall resume the
performance whenever such causes are removed.
1.8 Modification of Procedures.
(a) Subject to the procedure set forth in this Section 1.8 to the
extent applicable, the Provider may make changes from time to time in its
standards and procedures for performing the Transition Services; provided,
however, that any such change shall be made with respect to all or a significant
portion of such Provider's business; and provided, further, that Provider uses
commercially reasonable efforts to notify Recipient in advance of such changes.
Notwithstanding the foregoing sentence, unless required by law, the Provider
shall not implement any changes materially affecting any of the Mission Critical
Transition Services unless the Provider gives the Recipient ten (10) business
days (i) to accept, and adapt its operations to accommodate, such changes or
(ii) to reject the proposed changes. In the event that the Recipient rejects any
such proposed change, Provider shall perform the Mission Critical Transition
Services in accordance with the standards and procedures in effect on the date
hereof such that the Mission Critical Transition Services are not affected
thereby. For purposes of this Agreement, "Mission Critical Transition Services"
shall include access to systems for provision of services with respect to the
following IT and telecommunications matters: the Spectek IT transition services,
▇▇▇▇/Oracle Accounts Receivable Processing, IT Network Services Administration
and related IT support, Telecommunications, and the system requirements for
Human Resources, Payroll and Payroll Tax Processing and Reporting, and Benefits
Administration, each as set forth and more particularly described in Schedule C
hereto.
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(b) During the term of this Agreement, the Recipient shall, within
ten (10) business days after such plans are available, provide the Provider with
a plan identifying any material changes in the Recipient's business affecting
any of the Transition Services to the Recipient; provided, however, that the
Provider shall not be required to alter the method in which it provides the
Transition Services or increase the level of such Transition Services in any
material manner except as expressly provided herein; and provided, further,
however, that the failure of the Recipient to provide such notice shall not
alter or diminish the Provider's obligations to provide the Transition Services
on the terms set forth herein except where the failure to provide notice has
materially increased the Provider's cost or burden to provide such Transition
Service.
1.9 No Obligation to Continue to Use Services; Provider to Assist in
Transitioning.
(a) No Recipient shall have any obligation to continue to use any
of the Transition Services and may terminate any Transition Service by giving
the Provider of such Transition Service thirty (30) days prior notice thereof in
accordance with the notice provisions herein.
(b) Notwithstanding the foregoing, each Provider shall assist the
Recipient in the Recipient's efforts in undertaking to provide for itself any
Transition Services, including without limitation giving the Recipient actual
possession of the various documents, data and other records used or useful in
the delivery of such Transition Services and taking such other steps as are
reasonably necessary and without material cost to Provider to assist the
Recipient to provide for itself such Transition Services on a self-sufficient
basis.
1.10 Provider Access. To the extent reasonably required for personnel of
the Provider to perform the Transition Services, the Recipient shall provide
personnel of the Provider with reasonable access during normal business hours
(to the extent practicable) to its equipment, office space, plants,
telecommunications and computer equipment and systems, and any other areas and
equipment.
1.11 Recipient Obligations. During the term of this Agreement, the
Recipient shall (a) comply with any reasonable instructions provided by the
Provider that are necessary for the Provider to adequately provide the
Transition Services, (b) comply with all applicable standards and procedures
applicable to such Transition Service which are in the manner generally applied
by the Provider in its business, and (c) promptly report any operational or
system problem affecting the provision of any Transition Services to the
Provider. Notwithstanding the foregoing, any failure by the Recipient to perform
any of the foregoing shall not alter or diminish the Provider's obligations to
provide the Transition Services on the terms set forth herein except where the
failure to so perform has materially increased the Provider's cost or burden to
provide such Transition Service, or where such failure prevents the provision of
the Transition Service in substantially the same manner as previously provided.
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1.12 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE PROVIDER MAKES
NO REPRESENTATIONS OR WARRANTIES IN RESPECT OF THE TRANSITION SERVICES, EXPRESS
OR IMPLIED.
ARTICLE II
COMPENSATION
2.1 Consideration. As consideration for the provision of the Transition
Services, the Recipient shall pay to the Provider the amounts specified for each
such Transition Service as set forth under the Cost heading in the Schedules.
2.2 Invoices. After the end of each month, the Provider, together with
its Affiliates providing the Transition Services, will submit a single itemized
invoice to the Recipient for all Transition Services provided to the Recipient
during such month that are to be paid monthly. All invoices shall be sent to the
attention of the Primary Coordinator at the address set forth in Section 5.3
hereof or to such other address as the Recipient shall have specified by notice
in writing to the Provider.
2.3 Payment of Invoices.
(a) Payment of all invoices in respect of a Transition Service
shall be made by check or electronic funds transmission in U.S. Dollars, without
any offset or deduction of any nature whatsoever (except that offset or
deduction may be made in regard to other invoiced amounts due under this
Agreement or to the extent of a dispute in good faith pursuant to Section 2.3(b)
hereof concerning amounts due under this Agreement), within thirty (30) days of
the invoice date unless otherwise specified in the Schedule relating to such
Transition Service. All payments shall be made to the account designated by the
Provider to the Recipient. Recipient shall pay all actual and reasonable
attorneys' fees and costs incurred by Provider in connection with collecting any
outstanding amounts due under this Section 2.3(a).
(b) Recipient may take exception to and dispute in good faith any
▇▇▇▇ or invoice in respect of a Transition Service at any time within twenty
(20) days after the furnishing of Provider's ▇▇▇▇ or invoice by providing
written notice thereof to Provider. If any such dispute is not resolved between
Provider and Recipient within twenty (20) days after the date such notice is
given by Recipient, either party may refer such disputed invoice to Deloitte &
Touche LLP or such other independent firm of certified public accountants
mutually agreeable to Provider and Recipient, and the determination of such
accountant shall be final, conclusive and binding upon Provider and Recipient.
Recipient agrees to pay all costs involved in such determination unless it is
determined that Provider has overcharged Recipient by more than five percent
(5%), in which case Provider shall pay such costs.
(c) If any payment is not paid when due (except to the extent
disputed in good faith in accordance with Section 2.3(b) hereof) and the
Recipient does not make such payment
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within twenty (20) days of receiving notice of non-payment from the Provider,
the Provider of the Transition Service(s) that have not been timely paid for
shall have the right, without any liability to the Recipient, or anyone claiming
by or through the Recipient, to, following an additional ten (10) days' prior
written notice from the Provider to the Recipient (the "Service Termination
Notice"), immediately cease providing such Transition Service(s), which right
may be exercised by the Provider in its sole and absolute discretion; provided,
however, that if more than 150 days have elapsed from the Closing Date until the
date of such Service Termination Notice, Provider may also immediately cease
providing any or all of the Transition Services provided by the Provider to the
Recipient and/or terminate this Agreement upon notice set forth in such Service
Termination Notice, which right may be exercised by the Provider in its sole and
absolute discretion. Notwithstanding the foregoing, the Provider shall not cease
providing any Transition Service if such lack of payment is due to a good faith
dispute, the details of which the Recipient has indicated to the Provider in
writing pursuant to Section 2.3(b) hereof.
ARTICLE III
CONFIDENTIALITY
Each party hereto shall keep the other's Confidential Information
confidential in accordance with the terms set forth in the Purchase Agreement.
ARTICLE IV
TERM
4.1 Term. This Agreement shall become effective on the Closing Date and
shall remain in force until the date that is six (6) months from the Closing
Date (the "Expiration Date"), unless all of the Transition Services are
terminated by the Recipient in accordance with Section 1.9 or this Agreement is
terminated under Section 2.3(c) prior to the Expiration Date. Notwithstanding
the foregoing, the Provider and the Recipient agree to use commercially
reasonable efforts in expediting the transition of each of the Transition
Services from the Provider to the Recipient. At the Expiration Date, the parties
agree to negotiate in good faith with respect to the extension of any required
Transition Services and the scope and cost thereof.
4.2 Termination of Obligations. The Recipient specifically agrees and
acknowledges that all obligations of the Provider to provide each Transition
Service shall immediately cease upon the expiration of the Time Period for such
Transition Service, and the Provider's obligations to provide all of the
Transition Services hereunder shall immediately cease upon the termination of
this Agreement. The Recipient shall bear sole responsibility for instituting
permanent services, or obtaining replacement services, in respect of any
Transition Service terminated in accordance with the provisions hereof, and the
Provider shall bear no liability for the Recipient's failure to implement or
obtain such service or for any difficulties in transitioning from the Transition
Service to such permanent or replacement service. Notwithstanding the foregoing,
in connection with the transition to one or more permanent service providers (a
"Transition"), the Provider shall cooperate with all reasonable requests of the
Recipient in order to effect such Transition in a timely and cost-effective
manner.
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4.3 Survival of Certain Obligations. Without prejudice to the survival of
the other agreements of the parties, the following obligations shall survive the
termination of this Agreement: (a) the obligations of each party under Sections
1.5, 1.6, 1.12 and Article III, and (b) the Provider's right to receive the
compensation for the Transition Services provided by it hereunder provided in
Section 2.1 above incurred prior to the effective date of termination.
ARTICLE V
MISCELLANEOUS
5.1 Complete Agreement; Construction. This Agreement, including the
Schedules hereto, and the Purchase Agreement, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. In the event of any inconsistency between this Agreement
and any Schedule hereto, the Schedule shall prevail.
5.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
5.3 Notices. All notices and other communications hereunder shall be in
writing and hand delivered or mailed by overnight courier or registered or
certified mail (return receipt requested) or sent by fax to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To Seller:
Micron Electronics, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company or any Converted Company:
[MicronPC], LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No.:
With a copy to:
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Gores Technology Group
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Gores Technology Group
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
5.4 Waivers. The failure of any party to require strict performance by
any other party of any provision in this Agreement will not waive or diminish
that party's right to demand strict performance thereafter of that or any other
provision hereof.
5.5 Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by each of the parties hereto.
5.6 Assignment. This Agreement shall not be assignable, in whole or in
part, directly or indirectly; provided, however, that (a) either party may
assign this Agreement without the other's consent to any of its direct or
indirect subsidiaries and (b) any party may assign this Agreement to any
successor to its business, whether by merger, reorganization or otherwise;
provided, further, however, that any such assignment shall not relieve the
assignor of its obligations under this Agreement. Any attempt to assign any
rights or obligations arising under this Agreement in contravention with this
paragraph shall be null and void ab initio.
5.7 Successors and Assigns. The provisions to this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.
5.8 Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto and should not be deemed to confer upon third parties any
remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
5.9 Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
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5.10 Schedules. The Schedules to this Agreement shall be construed with
and as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
5.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to its
conflicts of law doctrines). Each of the parties hereto irrevocably and
unconditionally consents to the non-exclusive jurisdiction and venue of the
courts located in the principal place of business of the party against whom the
claim or action was initially commenced.
5.12 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
5.13 Relationship of Parties. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating a partnership or the
relationship of principal and agent or joint venturer between the parties, it
being understood and agreed that no provision contained herein, and no act of
the parties, shall be deemed to create any relationship between the parties
other than the relationship of buyer and seller of services nor be deemed to
vest any rights, interests or claims in any third parties.
5.14 Dispute Resolution. Each of Seller and the Company shall attempt to
resolve disputes between them arising out of or in connection with this
Agreement through good faith negotiations as provided herein. The parties agree
that disputes shall be fully discussed by the Primary Coordinator of each of
Seller and Company in an attempt to achieve a prompt resolution of such dispute.
If such dispute is not promptly resolved by the mutual agreement of such Primary
Coordinator of Seller and Company, each of Seller and Company shall be free to
exercise any of the remedies available to it pursuant to the terms of this
Agreement. Each of Seller and Company agrees to act reasonably and in good faith
in connection with all matters arising out of or in connection with this
Agreement that are submitted to the process set forth in this Section 5.14.
5.15 Audit. Either Recipient may request a certified audit of the
Provider's records pertaining to the Transition Services provided by the
Provider for the preceding twelve (12) full months to be performed by an
independent certified public accountant which (a) shall be reasonably acceptable
to the Provider and (b) may not be compensated on a contingency basis or
otherwise have any financial interest in the outcome of such audit. Any such
audit shall be at the expense of the Recipient. No Recipient may request such an
audit more than one (1) time within any twelve (12) month period with respect to
any particular Transition Service provided by the Provider. The accountant shall
be required to execute a confidentiality and non-disclosure agreement if
requested by the Provider and shall hold all information confidential. The
accountant may reveal to the Recipient only the amounts of any underpayment or
under reimbursement, or overbilling, as applicable. The accountant shall provide
to the Provider a final
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report of its work, including both overbilling and underpayment information. The
audit shall take place during normal business hours and upon reasonable notice.
In the event that the audit reveals that the Provider underpaid or overbilled
the Recipient, as the case may be, the Provider shall promptly pay to the
Recipient the amount of such underpayment or overbilling (to the extent actually
paid) plus 10% interest and, in the event the audit reveals an error of 10% or
more compared to the aggregate amount of Transition Services billed by the
Provider for the applicable 12-month period, the reasonable cost of the audit
(not to exceed $15,000).
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties have executed this Transition Services
Agreement as of the date first above written.
"SELLER": "COMPANY":
MICRON ELECTRONICS, INC. [MICRONPC], LLC
By: By:
Name: Name:
Title: Title:
THE CONVERTED COMPANIES:
[CONVERTED #1]
By:
Name:
Title:
[CONVERTED #2]
By:
Name:
Title:
[CONVERTED #3]
By:
Name:
Title:
[CONVERTED #4]
By:
Name:
Title:
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