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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 13, 1998
INTERGRAPH CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
0-9722
------------------------
(Commission File Number)
Delaware 63-0573222
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation)
Intergraph Corporation
Huntsville, Alabama 35894-0001
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(Address of Principal Executive Offices) (Zip Code)
(256) 730-2000
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(Telephone Number)
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INTERGRAPH CORPORATION
FORM 8-K
November 25, 1998
Item 5: Other Events.
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On November 13, 1998, the Company completed a transaction
with SCI Technology, Inc. (SCI), a wholly owned subsidiary
of SCI Systems, Inc., pursuant to which the Company sold
substantially all of its U.S. manufacturing assets to SCI
and SCI assumed responsibility for the exclusive
manufacturing of the hardware products of Intergraph
Computer Systems (ICS), the Company's wholly owned hardware
subsidiary.
Under the agreement, U.S. manufacturing assets purchased by
SCI from Intergraph consist primarily of the following:
1) All inventories of raw materials, work-in-process,
finished goods, merchandise and other supplies, parts,
packaging materials and other accessories related to the
Company's manufacturing operation.
2) Furniture, fixtures, computers, machinery and
equipment, vehicles, and other tangible personal property
used in the manufacturing operation.
3) Certain business contracts related to the
manufacturing operation.
In addition, the Company licensed certain related
intellectual property to SCI, and SCI employed approximately
300 of the Company's manufacturing employees.
Assets specifically retained by Intergraph and thus not
included in the agreement of sale include cash, real estate,
and notes and accounts receivable related to the
manufacturing operation. Additionally, all claims of
Intergraph related to its litigation with Intel Corporation
(Intel) are specifically excluded from the sale agreement.
The Company's dispute with Intel is fully described in its
Form 10-K annual report for the year ended December 31,
1997, and updated in subsequent Form 10-Q filings.
Liabilities assumed by SCI are limited to those arising on
or after the date of closing under the assumed business
contracts noted above, certain employee benefit obligations
for the former Intergraph employees, and certain obligations
under purchase orders existing as of the closing date. All
liabilities arising from the Company's manufacturing
operations prior to the closing date or relating to any of
the retained assets remain the obligation of Intergraph.
The purchase price for the assets is approximately $64.5
million, subject to adjustment for determination of the
final net book value of the inventory as of the closing
date. At closing, the Company received payment of $25.6
million, with the remainder of the purchase price to be paid
in two equal installments on December 13, 1998 and January
12, 1999. Proceeds to date have been utilized primarily to
retire existing debt, and the Company expects that remaining
proceeds due from SCI will be utilized in a similar fashion.
Contingencies related to the transaction include the right
of SCI to put back to the Company any inventory included in
the initial sale that proves not useable in the
manufacturing of current products, SCI's determination of
the value of certain other inventory items, and the ability
of the Company to meet the volume of purchases from SCI
committed in the agreement. Should SCI make a determination
with respect to the value of the initial inventory that is
adverse to the Company and prevail, and should the Company
fail to meet its purchase volume commitment, respectively,
the purchase price of the initial inventory will be reduced,
and the Company will not receive the most favorable per unit
pricing on its purchases of manufactured products from SCI.
The Company expects to benefit from lower employee
headcount, lower per unit costs for materials and overhead
expenses, and improved cash flow resulting from proceeds of
the sale and from improved inventory management. The Company
is at present unable to quantify these benefits. The
outsourcing to SCI of the Company's manufacturing activities
should also allow ICS to focus on its core competencies of
graphics, workstations, and systems integration.
In connection with this transaction the Company's term loan
and security agreement was amended to incorporate the sale
of the Company's manufacturing assets to SCI and to modify
the borrowing base accordingly. The Company does not
anticipate that this transaction will affect the Company's
remaining credit line availability as the borrowing base
reduction resulting from the sale of assets to SCI is
offset by the cash received from the sale, which has been
used to repay current amounts outstanding under the credit
line.
Item 7: Exhibits.
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Number Description
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99(a) Asset Purchase Agreement by and among
SCI Technology, Inc. as Buyer and Intergraph
Corporation as Seller dated November 13,
1998, with Exhibits and Schedule 1.
99(b) Loan and Security Agreement by and
between Intergraph Corporation and Foothill
Capital Corporation dated December 20, 1996
(1) and amendments dated January 14, 1997
(1), November 25, 1997 (2), and October 30,
1998.
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(1) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1996
under the Securities Exchange Act of 1934, File No. 0-9722.
(2) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997
under the Securities Exchange Act of 1934, File No. 0-9722.
Forward Looking Statements
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Any statement contained in this current report which is not a
historical fact, or which might otherwise be considered an opinion
or projection concerning Intergraph Corporation, whether express or
implied, is meant as and should be considered a forward looking
statement as that term is defined in the Private Securities
Litigation Reform Act of 1996. Forward looking statements are based
on assumptions and opinions concerning a variety of known and
unknown risks, including but not necessarily limited to fluctuations
in customer demand, acceptance of new products, changes in
technology, product introductions by competitors, and general
economic conditions, as well as other risks more completely
described in the Company's filings with the Securities and Exchange
Commission, including its most recent Annual Report on Form 10-K and
its Forms 10-Q for the quarters ended March 31, June 30, and
September 30, 1998. If any of these assumptions or opinions prove
incorrect, any forward looking statements made on the basis of such
assumptions or opinions may also prove materially incorrect in one
or more respects.
INTERGRAPH CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INTERGRAPH CORPORATION
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(Registrant)
By:/s/ John W. Wilhoite
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John W. Wilhoite
Executive Vice President, Finance
Date: November 25, 1998
ASSET PURCHASE AGREEMENT
by and among
SCI TECHNOLOGY, INC.,
as Buyer
and
INTERGRAPH CORPORATION,
as Seller
Dated Effective as of November 13, 1998
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE OF ASSETS 1
1.1 Purchase of the Assets. 1
1.2 Excluded Assets. 2
1.3 Limited Assumption of Liabilities. 2
1.4 Liabilities Not Assumed. 3
ARTICLE 2 PURCHASE PRICE 4
2.1 Purchase Price. 4
2.2 Payment of Purchase Price. 4
2.3 Determination of Final Net Worth, Purchase
Price Adjustment and Inventory Value Protection
Premium. 4
ARTICLE 3 CLOSING 6
3.1 Consummation of Sale. 6
3.2 Closing Date. 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INTERGRAPH 6
4.1 Organization and Qualification. 7
4.2 Subsidiaries and Affiliates Interest in Assets. 7
4.3 Validity and Execution of Agreement. 7
4.4 No Conflict. 7
4.5 Books and Records. 8
4.6 Financial Information. 8
4.7 Undisclosed Liabilities. 8
4.8 No Material Adverse Effect 8
4.9 Tax Matters. 8
4.10 Litigation. 9
4.11 Business Contracts. 9
4.12 Inventory. 9
4.13 Compensation Arrangements: Business Employees and
Contractors. 10
4.14 Tangible Property. 10
4.15 Employee Benefit Plans. 11
4.16 Employee Relations. 13
4.17 Insurance. 13
4.18 Licenses and Business Licenses. 13
4.19 Compliance with Laws. 14
4.20 Title; Liens. 14
4.21 Entire Business. 14
4.22 Environmental Matters. 14
4.23 Brokers. 15
4.24 Product Warranties and Product Liability Claims. 15
4.25 Workers Compensation and Medical Claims. 15
4.26 Disclosure. 15
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER 15
5.1 Organization. 15
5.2 Validity and Execution of Agreement. 16
5.3 No Conflict. 16
5.4 Brokers. 16
5.5 Adequate Financing. 16
5.6 Disclosure. 16
ARTICLE 6 CONDITIONS PRECEDENT TO THE CLOSING 17
6.1 Conditions Precedent to the Obligations of SCI to
Complete the Closing. 17
6.2 Conditions Precedent to the Obligations of Intergraph
to Complete the Closing. 18
ARTICLE 7 POST-CLOSING COVENANTS 20
7.1 Further Information. 20
7.2 Record Retention. 21
7.3 Tax Matters. 21
7.4 No Assignment Causing Breach 22
7.5 Employee Matters. 23
7.6 Exclusive Manufacturing Services. 26
ARTICLE 8 SURVIVAL; INDEMNIFICATION 26
8.1 Survival of Representations and Warranties. 26
8.2 Indemnification of SCI. 26
8.3 Indemnification of Intergraph. 27
8.4 Indemnification Procedure for Third-Party Claims. 27
8.5 Indemnification Procedure for Other Claims. 28
8.6 Limitations on Indemnification. 29
ARTICLE 9 NON-COMPETITION PROVISIONS 29
9.1 Noncompetition. 29
9.2 Non-Solicitation. 30
9.3 Scope, Consideration and Enforcement. 30
ARTICLE 10 INVENTORY MATTERS AND TERMINATION OF MANUFACTURING
SERVICES AGREEMENT 30
10.1 Contract Sales Price Adjustment. 30
10.2 Inventory Put Option. 31
10.3 Payments in Connection with Termination of
Manufacturing Services Agreement. 32
10.4 Post-Closing Purchase of Consigned Tangible Property.33
ARTICLE 11 MISCELLANEOUS 33
11.1 Expenses. 33
11.2 Further Assurances. 33
11.3 Confidentiality. 33
11.4 Notices. 34
11.5 Publicity. 35
11.6 Entire Agreement. 35
11.7 Waivers and Amendments. 35
11.8 Remedies Cumulative. 36
11.9 Binding Effect; No Assignment. 36
11.10 Variations in Pronouns. 36
11.11 Counterparts. 36
11.12 Interpretive Provisions. 36
11.13 Effect of Disclosure on Schedules. 37
11.14 Headings. 37
11.15 Severability of Provisions. 37
11.16 Bulk Sales. 38
11.17 Time is of the Essence. 38
11.18 Choice of Law. 38
11.19 Waiver of Jury Trial. 38
11.20 Resolution of Conflicts. 38
TABLE OF SCHEDULES
Schedule 1 Definitions
Schedule 1.1(a) Inventory
Schedule 1.1(b) Tangible Property
Schedule 1.1(c) Business Contracts
Schedule 1.3(a)(iii) Purchase Orders
Schedule 2.1 Vacation Accrual
Schedule 4.4 No Conflict
Schedule 4.8 Material Adverse Effect
Schedule 4.10 Litigation
Schedule 4.11 Consents for Transfer of Business Contracts
Schedule 4.13(a) Compensation Arrangements - Employees
Schedule 4.13(b) Compensation Arrangements - Contractors
Schedule 4.14(a) Consents
Schedule 4.14(b) Personal Property Leases
Schedule 4.15(a) Employee Benefit Plans
Schedule 4.15(b) Benefit Plans in Effect
Schedule 4.15(g) Benefit Plans Compliance
Schedule 4.16 Employee Claims
Schedule 4.18 Business Licenses
Schedule 4.20 Title; Liens
Schedule 4.21 Shared Properties
Schedule 4.22 Environmental Matters
Schedule 4.24 Product Warranties and Product Liability Claims
Schedule 4.25 Workers Compensation Claims
Schedule 5.3 No Conflict
Schedule 7.6 Existing Outsourcing Arrangements
Schedule 10.3 Examples of Reasonable and Customary Expenses
Schedule 10.4 Consigned Property
Schedule 1-79 Products
EXHIBITS
Exhibit A Opinion of Counsel to Intergraph
Exhibit B Real Estate Lease Agreement
Exhibit C Intellectual Property License Agreement
Exhibit D Manufacturing Services Agreement
Exhibit E Transition Services Agreement
Exhibit F Opinion of Counsel to SCI
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as
of November 13, 1998, by and between SCI TECHNOLOGY, INC., an
Alabama corporation ("SCI") and INTERGRAPH CORPORATION, a
Delaware corporation ("Intergraph").
RECITALS
A. Intergraph is engaged in the businesses (the "Business") of
purchasing, manufacturing and assembling hardware products for
Intergraph Computer System Inc.'s ("ICS") interactive computer
graphics systems and printed circuit boards (the "Products").
The term "Products" includes those products contained on the ICS
price list as of the Closing and attached hereto as Schedule 1-
79.
B. Intergraph wishes to sell and SCI wishes to purchase
substantially all of the assets used in the manufacture and
assembly of the Products upon the terms and conditions set forth
below.
C. SCI and Intergraph mutually desire that, after the Closing,
SCI shall operate Intergraph's manufacturing facility located at
Buildings 14, 21 and 28, Intergraph Corporation, Huntsville,
Alabama 35894-0001 (the "Facility"), and pursuant to the
agreements contemplated hereby, will manufacture and assemble the
Products at the Facility, and such other locations as the Parties
may mutually agree.
D. Capitalized terms used herein that are not otherwise defined
shall have the respective meanings set forth in Schedule 1.
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other agreements set forth herein, SCI and
Intergraph hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase of the Assets.
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On the terms and subject to the conditions set forth in this
Agreement, at the Closing, Intergraph will sell, transfer, assign
and deliver to SCI, and SCI will purchase, acquire and accept
from Intergraph, all of the right, title and interest of
Intergraph in and to the Assets, in each case free and clear of
any Liens. As used herein, the term "Assets" means:
(a) The Inventory listed on Schedule 1.1(a), which Schedule will
be updated upon preparation of the Adjustment Schedule;
(b) The Tangible Property listed on Schedule 1.1(b), which
Schedule will be updated upon preparation of the Adjustment
Schedule;
(c) The Business Contracts identified on Schedule 1.1(c);
(d) The Books and Records of Intergraph used or held for use
exclusively in the conduct of the Business which are separately
identifiable and are not integrated within the other Books and
Records of Intergraph;
(e) The rights of Intergraph under or pursuant to all
warranties, representations and guarantees made by suppliers,
manufacturers and contractors, to the extent such warranties,
representations and guarantees relate to the Assets; and
(f) The Claims of Intergraph, whether arising before or after
the Closing, to the extent such Claims relate to the Assets or
the Business and are necessary to assure to SCI after the Closing
the full title, ownership, possession and benefit of the Assets.
1.2 Excluded Assets.
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Any provision of this Agreement to the contrary
notwithstanding, SCI shall not acquire, and there shall be
excluded from the Assets, Intergraph's interest in the Excluded
Assets. The term "Excluded Assets" means all cash, real estate,
notes, accounts receivable, minute and stock records, Benefit
Plans, and any property of Intergraph which is not specifically
identified in Section 1.1 as an Asset. The term "Excluded
Assets" also includes all Claims of Intergraph related to the
Intel litigation (as described in Section 7.5(h)).
1.3 Limited Assumption of Liabilities.
---------------------------------
(a) Assumed Liabilities. Subject to the terms and conditions
set forth herein, SCI agrees that, on the Closing Date, SCI shall
assume and hereafter pay, perform or discharge when due or
required to be performed, as the case may be, only the following
obligations and liabilities of Intergraph to the extent existing
on the Closing Date (the "Assumed Liabilities"):
(i) Obligations under Business Contracts. Those obligations of
Intergraph under the Business Contracts identified on Schedule
1.1(c) arising and to be performed on or after the Closing Date.
(ii) Employee Obligations. Those liabilities and obligations of
Intergraph expressly assumed by SCI pursuant to Section 7.5.
(iii)Obligations under Existing Purchase Orders.
Notwithstanding the provisions of Section 1.3(a)(i), only those
purchase orders which (a) Intergraph has issued to vendors for
materials and components matching the bills of materials for
Intergraph's Current Products and (b) are in quantities that
support the initial purchase order by Intergraph under the
Manufacturing Services Agreement less any equivalent materials
and components comprising part of the Inventory, such purchase
orders being identified on Schedule 1.3(a)(iii), (which the
Parties acknowledge has not been completed as of the Closing, but
which the Parties agree to use their reasonable best efforts to
agree to in good faith by not later than November 20, 1998 (and
effective as of the Closing Date)).
(b) Assignment of Defenses. In the event of any Claim against
SCI with respect to any of the Assumed Liabilities, SCI shall
have, and Intergraph hereby assigns to SCI, any defense,
counterclaim, or right of setoff which would have been available
to Intergraph if such Claim had been asserted against Intergraph.
(c) Third-Party Rights. The assumption by SCI of the Assumed
Liabilities, and the transfer thereof by Intergraph, shall in no
way expand the rights or remedies of any third party against SCI
or Intergraph or their respective officers, directors, employees,
stockholders and advisors as compared to the rights and remedies
which such third party would have had against such parties had
SCI not assumed such liabilities. Without limiting the generality
of the preceding sentence, the assumption by SCI of the Assumed
Liabilities and the consummation of the transactions contemplated
by the Transaction Documents shall not create any third-party
beneficiary rights. Intergraph shall retain and shall pay and
discharge when due, or contest in good faith, all of those
liabilities of Intergraph which SCI has not specifically agreed
to assume pursuant to the provisions of this Section 1.3.
1.4 Liabilities Not Assumed.
-----------------------
Without limiting the terms of Section 1.3, SCI is expressly
not assuming, and Intergraph shall remain solely liable for, the
following liabilities (the "Excluded Liabilities"): (i) all
environmental liabilities or contamination which arise or result,
directly or indirectly, from contamination existing at any
facility owned, operated, leased or used by Intergraph prior to
the Closing Date; (ii) all warranty Claims and all product
liability Claims for personal injury or property damage which
arise or result, directly or indirectly, from products sold or
delivered prior to the Closing Date; (iii) except to the extent
expressly set forth in Section 7.5, all liabilities of Intergraph
relating in any way to all Benefit Plans, including, without
limitation, post-retirement benefits and post-employment
benefits, if any, for employees of Intergraph who have retired,
resigned, or been terminated prior to the Closing Date; (iv)
except to the extent expressly set forth in Section 7.5, any
Claims or liability relating to employees of Intergraph relating
to the period prior to the Closing Date, including, without
limitation, any Employment Claims; (v) all liabilities for Taxes
(whether assessed or unassessed) applicable to Intergraph, the
Business or the Assets for the period (or portions thereof) prior
to the Closing Date; (vi) all liabilities and Claims related to
the matters identified on Schedule 4.10; (vii) all Intergraph
purchase orders outstanding as of the Closing Date other than
those purchase orders specifically identified on Schedule
1.3(a)(iii); and (viii) without limitation of any of the
foregoing, any other liability of Intergraph not expressly
assumed by SCI pursuant to Section 1.3.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price.
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The aggregate purchase price for the Assets (the "Purchase
Price") will be equal to (a) the combined Agreed to Value of the
Tangible Property plus the Preliminary Net Book Value of the
Inventory (combined, the "Preliminary Net Worth") plus (b)
$5,000,000 (the "Tax Basis Inventory Adjustment") plus (c) the
Contract Sales Price Adjustment plus (d) the amount of the
Inventory Value Protection Premium (if any) determined pursuant
to Section 2.3(e) minus (e) the Net Book Value of the Consigned
Property. The Purchase Price will be subject to the Purchase
Price Adjustment (if any) set forth in Section 2.3 and will be
reduced at Closing by the value of accrued vacation time for
Hired Employees as listed on Schedule 2.1 (the "Vacation
Accrual") and the SCI E&O Offset.
2.2 Payment of Purchase Price.
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(a) At the Closing, SCI shall pay to Intergraph by wire transfer
of immediately available funds to the account specified by
Intergraph cash in an amount equal to the sum of (i) the Tax
Basis Inventory Adjustment, plus (ii) the Agreed to Value of the
Tangible Property, plus (iii) 33.34% of the Preliminary Net Book
Value of the Inventory (the "First Inventory Payment"), minus
(iv) the Net Book Value of the Consigned Property, minus (v) the
amount of the Vacation Accrual, minus (vi) the SCI E&O Offset.
(b) On each of the thirtieth (30th) day following the Closing
Date and the sixtieth (60th) day following the Closing Date, SCI
shall pay to Intergraph an amount equal to one-third of the
Preliminary Net Book Value of the Inventory; provided, however,
that if on or prior to either of such payment dates there has
been a final determination of the Final Net Book Value of the
Inventory under Section 2.3, the amount to be paid under this
Section 2.2(b) shall be adjusted to reflect the then remaining,
unpaid, difference between the Final Net Book Value of the
Inventory and the sum of (i) the amount of the First Inventory
Payment and (ii) the amount of any prior payments pursuant to
this Section 2.2(b).
(c) Following the Closing, SCI shall provide to Intergraph the
Contract Sales Price Adjustment as set forth in Section 10.1.
2.3 Determination of Final Net Worth, Purchase Price Adjustment
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and Inventory Value Protection Premium.
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(a) The Purchase Price due to Intergraph shall be ratably (i)
reduced on a dollar-for-dollar basis to the extent that the Final
Net Worth (as determined below) as of the commencement of
business on the Closing Date is less than the Preliminary Net
Worth, (ii) increased on a dollar-for-dollar basis to the extent
that the Final Net Worth as of the commencement of business on
the Closing Date exceeds the Preliminary Net Worth, and (iii)
increased by the amount, if any, of the Inventory Value
Protection Premium under Section 2.3(e). Any increase or
decrease in the Purchase Price pursuant to this Section 2.3(a)
shall be referred to as a "Purchase Price Adjustment".
(b) Not later than 20 days after the Closing Date, SCI shall
cause to be prepared and delivered to Intergraph a schedule
setting forth the Final Net Worth determined as of the opening of
business on the Closing Date (the "Adjustment Schedule"). "Final
Net Worth" means the combined Agreed to Value of the Tangible
Property plus the Final Net Book Value of the Inventory. The
Final Net Worth shall be determined based upon the Books and
Records of Intergraph and in accordance with GAAP consistently
applied and shall take into account any net increase or net
decrease in the Net Book Value of the Inventory from the
Determination Date through the opening of business on the Closing
Date. In connection with SCI's preparation of the Adjustment
Schedule, Intergraph will provide SCI access during normal
business hours to all of the Books and Records of Intergraph
relating to the matters set forth in and necessary for SCI's
completion of the Adjustment Schedule. The Parties acknowledge
that in connection with its preparation of the Adjustment
Schedule, SCI intends to conduct a physical inventory with
respect to the items of Inventory identified as Documentation and
Other in Legacy Systems on Schedule 1.1(a). Additionally, the
Parties acknowledge that the Inventory contains certain inventory
identified as "blocked inventory" (the "Blocked Inventory"),
which Blocked Inventory is separately designated as "BLKD" on
Schedule 1.1(a). Following the Closing, and in connection with
its preparation of the Adjustment Schedule, SCI will make a
determination (subject to Intergraph's reasonable approval) as to
whether each item of the Blocked Inventory shall be treated as
scrap or defective inventory hereunder (valued at $0) or whether
such items of Blocked Inventory will be treated as Inventory and
included in the calculation of the Final Net Book Value of the
Inventory.
(c) Within 10 Business Days of Intergraph's receipt of the
Adjustment Schedule, Intergraph may deliver written notice (the
"Protest Notice") to SCI of any specific objections, and the
basis therefor, which Intergraph may have to the Adjustment
Schedule. In the absence of such Protest Notice within the 10
Business Day period, Intergraph shall be deemed to have accepted
the Adjustment Schedule and the calculation of Final Net Worth.
Upon receipt of the Adjustment Schedule and until the final
determination of the Final Net Worth, Intergraph will be given
reasonable access to all of the Books and Records in SCI's
possession directly relating to the Adjustment Schedule during
reasonable business hours for the purpose of verifying the
Adjustment Schedule.
(d) If Intergraph and SCI are unable to resolve any disagreement
with respect to the Adjustment Schedule within 15 Business Days
following SCI's receipt of the Protest Notice, then any items in
dispute will be referred to the Atlanta, Georgia office of
Deloitte & Touche, LLP (the "Accountants") for final
determination within 30 days after such referral, which
determination shall be final and binding on SCI and Intergraph.
Each Party shall bear its own expenses in connection with any
protest pursuant to this Section 2.3(d). The fees and expenses
of the Accountants shall be borne by the losing Party or, to the
extent each Party prevails in part, each Party shall pay the fees
and expenses to the extent it is the losing Party, as determined
by the Accountants.
(e) Within ten (10) Business Days following the final
determination of the Final Net Worth, (i) if the Final Net Worth
exceeds the Preliminary Net Worth, SCI shall pay to Intergraph
the amount of any such excess by wire transfer of funds as
specified in writing by Intergraph, and (ii) if the Final Net
Worth is less than the Preliminary Net Worth, Intergraph shall
pay to SCI the amount of any such deficit (the "Deficit") by wire
transfer of funds as specified in writing by SCI. Notwithstanding
the foregoing, no further adjustment shall be made to the extent
that the amount due the respective Parties has been adjusted and
satisfied pursuant to Section 2.2(b). In addition to the
foregoing, if the Final Net Book Value of the Inventory is less
than $70,000,000, SCI shall pay to Intergraph by wire transfer of
funds as specified in writing by Intergraph (or credit as an
offset to any payment due from Intergraph with respect to a
Deficit) an amount equal to ten percent (10%) of the difference
between $70,000,000 and the Final Net Book Value of the Inventory
(the "Inventory Value Protection Premium").
ARTICLE 3
CLOSING
3.1 Consummation of Sale.
--------------------
At Closing, Intergraph, in reliance upon the representations
and warranties of SCI contained herein and on the terms and
conditions herein set forth, shall sell, assign, transfer, convey
and deliver to SCI all of its right, title and interest in and to
all of the Assets, and SCI, in reliance upon the representations
and warranties of Intergraph contained herein and on the terms
and conditions herein set forth, shall purchase the Assets and
assume the Assumed Liabilities for the Purchase Price.
3.2 Closing Date.
------------
The consummation of the purchase and sale of the Assets (the
"Closing") shall be held at 10:00 a.m. on November 13, 1998, or
at such other time and date as shall be mutually agreed to by the
Parties, at the offices of Intergraph Corporation, One Madison
Industrial Park, Huntsville, Alabama 35894, to be effective as
of 12:01 a.m. on November 14, 1998 (which time and date are
referred to herein as the "Closing Date").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INTERGRAPH
Intergraph represents and warrants to SCI that the following
statements are true, complete and correct effective as of the
Closing as follows:
4.1 Organization and Qualification.
------------------------------
Intergraph is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. Intergraph
possesses all requisite corporate power and authority to (i) own,
lease and operate its respective properties and assets as they
are now owned, leased and operated and (ii) carry on the Business
as presently conducted.
4.2 Subsidiaries and Affiliates Interest in Assets.
----------------------------------------------
None of the Subsidiaries or other Affiliates of Intergraph
has an ownership interest in any of the Assets.
4.3 Validity and Execution of Agreement.
-----------------------------------
Intergraph has the full legal right, capacity and power and
all requisite corporate authority and approval required to enter
into, execute and deliver the Transaction Documents and to
perform fully its obligations thereunder. The Board of Directors
of Intergraph has approved the transactions contemplated pursuant
to this Agreement and each of the other agreements required to be
entered into pursuant hereto by Intergraph. This Agreement and at
Closing each other Transaction Document required to be entered
into pursuant hereto by Intergraph has (or in the case of the
other Transaction Documents, at Closing will have) been duly
executed and delivered by Intergraph and constitutes (or in the
case of the other Transaction Documents, at Closing will
constitute) the valid and binding obligation of Intergraph
enforceable against Intergraph in accordance with their terms,
subject to the qualifications that enforcement of the rights and
remedies created hereby is subject to (i) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law) (collectively,
the "Enforceability Exceptions").
4.4 No Conflict.
-----------
Except as set forth on Schedule 4.4, neither the execution
and delivery of the Transaction Documents by Intergraph nor the
performance by Intergraph of the transactions contemplated
thereby will: (a) violate or conflict with any of the provisions
of the Certificate of Incorporation or Bylaws (or similar
governing documents) of Intergraph; (b) violate, conflict with,
result in the acceleration of, or entitle any party to accelerate
the maturity or the cancellation of the performance of any
obligation under, or result in the creation or imposition of any
Lien in or upon any of the Assets, or constitute a default (or an
event which might, with the passage of time or the giving of
notice, or both, constitute a default) under any mortgage,
indenture, deed of trust, lease, contract, loan or credit
agreement, license or other instrument to which Intergraph is a
party or by which it or any of its material properties or assets
may be bound or affected; (c) violate or conflict with any
provision of any Law or Order applicable to Intergraph; or (d)
require any consent or approval of or filing or notice with any
Person (including lending institutions) or any Governmental or
Regulatory Body (other than filings required under the HSR Act).
4.5 Books and Records.
-----------------
The material Books and Records of Intergraph with respect to
the Business and the Assets as supplied to SCI are true, correct,
complete and current in all material respects and have been
maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls.
4.6 Financial Information.
---------------------
The operational and financial information relating to the
Business, the Assets and Intergraph's operation of the Facility
which Intergraph has previously delivered to SCI contains
financial information which fairly presents in accordance with
GAAP the financial position, assets and liabilities of the Assets
and the Business in all material respects as of the date of such
information. The Net Book Value of the Inventory as recorded on
Intergraph's Books and Records as of the Closing Date and used to
determine the Purchase Price of the Assets will be calculated in
accordance with GAAP consistently applied.
4.7 Undisclosed Liabilities.
-----------------------
To the best of Intergraph's knowledge, Intergraph has
disclosed to SCI all material liabilities related to the
Facility, the Business and the Assets.
4.8 No Material Adverse Effect
--------------------------
Except as set forth on Schedule 4.8, since June 30, 1998,
there has been no material adverse change in the assets,
properties, business, operations, income or condition (financial
or otherwise) of Intergraph, nor is any such change threatened,
nor has there been any damage, destruction or loss which could
have a Material Adverse Effect, whether or not covered by
insurance.
4.9 Tax Matters.
-----------
Except as would not result in a Lien on any Asset or result
in any Liability to SCI, all federal, state, and local income,
sales, use, real and personal property and other Tax Returns
required to be filed by or on behalf of Intergraph have been duly
and timely filed, or extensions have been obtained, and except
for those Taxes contested by Intergraph, which will not create a
Lien with respect to any of the Assets, all Taxes due and payable
prior to the Closing, have been paid. Except as would not result
in a Lien on any Asset or result in any Liability to SCI, to the
best knowledge of Intergraph, there is no audit or other Tax-
related Action or Proceeding pending or threatened relating to
the Facility, the Assets or the Business.
4.10 Litigation.
----------
Except as set forth on Schedule 4.10, there are no
outstanding Orders by which Intergraph is bound which relates to
or affects the Assets or the Business. Except as set forth in
Schedule 4.10, there is no Action or Proceeding pending or, to
the knowledge of Intergraph, threatened (whether or not the
defense thereof or liabilities in respect thereof are covered by
insurance) against or affecting the Assets or the Business, nor
to the knowledge of Intergraph are there any facts which are
likely to give rise to any such Action or Proceeding which, if
adversely decided, would have a Material Adverse Effect.
4.11 Business Contracts.
------------------
(a) Schedule 1.1(c) sets forth a list, and brief description,
including a list of the parties thereto, of all of the Business
Contracts. Intergraph has delivered to SCI true and complete
copies of all of the Business Contracts, including, without
limitation, the purchase orders identified on Schedule
1.3(a)(iii). Except as set forth on the face of such purchase
orders, or the attachments thereto, each as disclosed to SCI, no
special terms or conditions apply to the purchase orders to be
assumed by SCI hereunder.
(b) All of the Business Contracts are valid, subsisting, in full
force and effect and binding upon Intergraph and, to the best
knowledge of Intergraph, the other parties thereto in accordance
with their terms, subject to the Enforceability Exceptions.
(c) Intergraph has satisfied in full or provided for all of its
liabilities and obligations under the Business Contracts
requiring performance prior to the date hereof in all material
respects, is not in default in any material respect under any
Business Contract, nor to Intergraph's knowledge does any
condition exist that with notice or lapse of time or both would
constitute such a default. To the knowledge of Intergraph, no
other party to any Business Contract is in default thereunder,
nor to the knowledge of Intergraph does any condition exist that
with notice or lapse of time or both would constitute such a
default.
(d) Except as separately identified on Schedule 4.11, no
approval or consent of any Person is needed for the Business
Contracts to continue to be in full force and effect, and all of
Intergraph's rights under the Business Contracts will be conveyed
to SCI, upon consummation of the transactions contemplated by
this Agreement.
4.12 Inventory.
---------
Schedule 1.1(a) contains a complete and accurate list of the
Inventory as of the respective dates set forth in Schedule1.1(a).
Except for the obsolete Inventory separately identified as such
on Schedule 1.1(a) (the "Obsolete Inventory") which is and will
be valued at $0 for the purpose of calculating the Net Book Value
of the Inventory, all of such Inventory and all Inventory
reflected on the Books and Records of Intergraph as of the
Closing Date is or will be as of the Closing Date the property of
Intergraph, free and clear of any Lien, and will be useable in
the Business following the Closing in connection with the
Products and will conform in all material respects to all
standards and specification requirements applicable to such
Inventory or its use or sale established by Intergraph or imposed
by any Law or Order. Since the Determination Date, there have
been no material increases, decreases or other changes in the
Inventory except in the Ordinary Course of Business.
4.13 Compensation Arrangements: Business Employees and
------------------------------------------------------
Contractors.
- -----------
Schedule 4.13(a) sets forth the name and current annual
salary (or hourly wage), including any bonus or commitment to pay
any other amount or benefit in connection with a termination of
employment, if applicable, of all present employees engaged in
the manufacture and assembly of the Products other than
contractors and temporary employees (the "Business Employees").
Schedule 4.13(b) sets forth, and separately identifies, the name
and current annual salary (or hourly wage), including any bonus
or commitment to pay any other amount or benefit in connection
with termination of employment, if applicable, of all present
contractors and temporary employees of the Business. Except in
the Ordinary Course of Business, Intergraph has not made any
commitment (verbally or in writing) to increase the compensation
or to modify the conditions or terms of employment of any person
listed on Schedule 4.13(a) or Schedule 4.13(b).
4.14 Tangible Property.
-----------------
(a) Schedule 1.1(b) contains a complete and accurate list of the
Tangible Property as of the Closing. All material items of
Tangible Property are in good working order and in operating
condition, subject to continued repair and replacement in
accordance with past practice, and Intergraph has not received
notice that any of the Tangible Property is in violation of any
existing Law or Order. During the past six (6) months there has
not been any material interruption of the manufacturing
operations of the Business due to inadequate maintenance or
failure of the Tangible Property. Except as set forth on Schedule
4.14(a), no approval or consent of any Person is needed so that
the interests of Intergraph in the Tangible Property shall
continue to be in full force and effect and enforceable by SCI
following the transactions contemplated by this Agreement.
(b) Schedule 4.14(b) sets forth a complete and correct list of
all leases to which Intergraph is a party with respect to the
Tangible Property (the "Personal Property Leases"). Intergraph
enjoys peaceful and undisturbed possession under all of the
Personal Property Leases. All of the Personal Property Leases
are valid, subsisting and in full force and effect, no notice of
termination has been received by Intergraph with respect thereto
and to the knowledge of Intergraph there are no existing
defaults, or events which with the passage of time or the giving
of notice, or both, would constitute a default by Intergraph or
by any other party to any Personal Property Lease.
4.15 Employee Benefit Plans.
----------------------
(a) Schedule 4.15(a) contains, with respect to the Business
Employees, a list of all "employee benefit pension plans" (as
defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA); bonus,
commission and other incentive compensation arrangements; stock
option, stock bonus, stock purchase and other equity rights
arrangements; severance plans, change of control agreements and
similar arrangements; and all material fringe benefit programs,
whether formal or informal, written or unwritten (all of the
foregoing maintained (or required to be maintained under any
governmental law or regulation) or contributed to by Intergraph
for the benefit of Business Employees and/or their family members
are referred to herein as "Benefit Plans").
(b) Schedule 4.15(b) discloses and the term "Benefit Plans"
encompass all such plans which are presently in effect or which
have been in effect for the last six years with respect to any
defined benefit pension plans or multi-employer pension plans,
other than those which have been terminated and with respect to
which Intergraph has no financial, administrative or other
liability, obligation or responsibility.
(c) No Benefit Plan is or has been subject to Title IV of ERISA
or Section 412 of the Code.
(d) Intergraph has no past, present or future obligation or
liability to contribute to any multiemployer plan as defined in
Section 3(37) of ERISA.
(e) Intergraph has complied in all material respects (i) with
the continuation health coverage requirements of Section 4980B of
the Code and Sections 601 through 608 of ERISA and (ii) with the
portability, access and renewability provisions of Subtitle K,
Chapter 100 of the Code and Section 701 et seq. of ERISA.
(f) Intergraph is not related to any other trade or business
(whether or not incorporated) which, together with Intergraph,
would be treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code.
(g) With respect to each of the Benefit Plans, except as set
forth in Schedule 4.15(g) :
(i) each such plan has been established, maintained, funded and
administered in all material respects in accordance with its
governing documents, and any applicable provisions of ERISA, the
Code, other applicable law and all regulations promulgated
thereunder, except where the failure to be so operated or
administered is not, individually or in the aggregate, reasonably
likely to result in a Material Adverse Effect;
(ii) to the knowledge of Intergraph, no such plan nor any
fiduciary thereof has engaged in a prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Code (for
which no individual or class exemption exist under Section 408 of
ERISA or Section 4975 of the Code, respectively);
(iii)each such plan which is intended to qualify as a tax-
qualified retirement plan under Section 401(a) of the Code has
received a favorable determination letter or letters from the
Internal Revenue Service as to qualification of such plan which
letters apply for the period from its adoption through the
Closing Date; and to the knowledge of Intergraph nothing has
occurred, whether by action or failure to act, which has resulted
in or would cause the loss of such qualification; and each trust
thereunder is exempt from tax pursuant to Section 501(a) of the
Code;
(iv) each such plan which is required to satisfy Section
401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and has satisfied the requirements of, Section
401(k)(3) and Section 401(m)(2) of the Code for each plan year
ending prior to the Closing Date;
(v) to the knowledge of Intergraph no event has occurred and no
condition exists relating to any such plan that would subject
Intergraph to any tax or liability under Sections 4972 or 4979 of
the Code, or to any liability under Section 502 of ERISA; and
(vi) to the extent applicable, each such plan has been funded in
accordance with its governing documents, ERISA and the Code and
the assets of each such plan are reported at their fair market
value on the books and records of the plan.
(h) With respect to employee benefit matters generally:
(i) Intergraph has no financial obligation to any current,
former or retired employee, officer, director or consultant or
any family member of any of the foregoing upon retirement or
termination of employment under any Benefit Plan, other than such
obligations imposed by COBRA; and
(ii) There are no actions, audits, investigations or Claims known
to Intergraph which are pending or threatened against any Benefit
Plan, any fiduciary of any Benefit Plan with respect to any such
Benefit Plan or against the assets of any Benefit Plan, except
Claims for benefits made in the ordinary course of the operation
of such plans.
4.16 Employee Relations.
------------------
(a) Intergraph is not a party to, and there does not otherwise
exist, any agreement with any labor organization, collective
bargaining or similar agreement with respect to the Business
Employees. There are no (i) formal complaints or grievances, or
(ii) arbitrations, employment-related proceedings or
administrative proceedings, either pending or, to the best
knowledge of Intergraph, threatened, involving any Business
Employee. During the past five years, the Business has not
suffered or sustained any labor dispute resulting in any work
stoppage and no such work stoppage is, to the knowledge of
Intergraph, threatened. To the knowledge of Intergraph, there
are no attempts presently being made to organize any employees
employed by Intergraph.
(b) Schedule 4.16 contains a complete and accurate list of all
Claims brought by Business Employees currently pending against
Intergraph, including, without limitation: (i) worker's
compensation Claims; (ii) Claims brought by Business Employees
before the Equal Employment Opportunity Commission; (iii) Claims
brought by Business Employees under the Americans with
Disabilities Act, 49 U.S.C. 1201.01 et seq.; (iv) Claims
brought by Business Employees under the Age Discrimination in
Employment Act 29 U.S.C. 621 et seq.; (v) charges brought by
Business Employees before the National Labor Relations Board
under the National Labor Relations Act, 29 U.S.C. 151 et seq.;
(vi) charges brought against Intergraph by the Occupational
Safety and Health Administration with respect to the Business or
complaints filed against Intergraph by Business Employees with
such administration; (vii) Claims brought by Business Employees
under the Occupational Safety and Health Act, 29 U.S.C. 651 et
seq.; (viii) Claims brought by Business Employees under the Fair
Labor Standards Act before the Department of Labor, 29 U.S.C.
201 et seq.; or (ix) Claims brought by Business Employees
asserting violations of state law or state common law
(collectively, "Employment Claims").
4.17 Insurance.
---------
Intergraph has provided SCI with a summary of all of the
existing insurance policies directly relating to the Facility and
the Assets.
4.18 Licenses and Business Licenses.
------------------------------
Schedule 4.18 sets forth a list of all Business Licenses.
Except as set forth on Schedule 4.18, no Business Licenses
(including Business Licenses under Environmental Laws) are
required to be obtained by Intergraph in connection with its
ownership and operation of the Assets, the Facility or Business.
All Business Licenses of Intergraph with respect to the Assets,
the Facility and the Business are in full force and effect and in
good standing. Intergraph has not received any notice of any
Claim of revocation or suspension of any such Business Licenses
and Intergraph has no knowledge of any event that might give rise
to such a Claim.
4.19 Compliance with Laws.
--------------------
Intergraph has not received any Claim or notice that it is
not in compliance in any material respect with, or that it is in
violation in any material respect of, any Business License, Law
or Order applicable to the Facility, the Business or the Assets.
Intergraph has advised SCI in writing of any proposed
environmental, safety, health or other law, rule or regulation
known to Intergraph which, to its knowledge, could reasonably be
expected to have a Material Adverse Effect or which, to its
knowledge, could reasonably be expected to require substantial
new capital investments following the Closing by SCI in the
Business or the Assets.
4.20 Title; Liens.
------------
Except as set forth on Schedule 4.20, Intergraph owns
outright and has good and marketable title and, at the Closing,
Intergraph will convey to SCI good and marketable title to all of
the Assets, in each case free and clear of any Lien.
4.21 Entire Business.
---------------
The sale of the Assets pursuant to this Agreement
effectively will convey to SCI all of the tangible property used
by Intergraph in connection with the conduct of the Business
(except for the Excluded Assets) and needed for SCI to perform
its obligations under the Manufacturing Services Agreement.
Except as disclosed in Schedule 4.21, there are no material
facilities, services, assets or properties shared with any other
Person which are used in connection with the Business.
4.22 Environmental Matters.
---------------------
Except as set forth in Schedule 4.22, (i) Intergraph has not
received any written communication during the past five years
from a Governmental or Regulatory Body that alleges that
Intergraph is not in compliance with any Environmental Laws with
respect to the Business, the Assets or the Facility which has not
been resolved to the satisfaction of the Governmental or
Regulatory Body; (ii) Intergraph holds and is in compliance with
all material Business Licenses and governmental authorizations
required for Intergraph to conduct the Business in compliance
with all Environmental Laws; (iii) Intergraph has not received
any communication alleging that Intergraph is liable to any party
(including, but not limited to, a Governmental or Regulatory
Body) as a result of the Release of a Hazardous Material with
respect to the Business, the Assets or the Facility; (iv) to
Intergraph's knowledge, none of the properties leased or owned by
Intergraph and used in the Business contains underground storage
tanks, asbestos containing materials, or PCB-containing
materials; and (v) to Intergraph's knowledge, there have been no
Releases of Hazardous Material on any of the properties now or
previously owned or leased by Intergraph and used in the
Business.
4.23 Brokers.
-------
All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by
Intergraph directly with SCI without the intervention of any
Person on behalf of Intergraph in such manner as to give rise to
any valid Claim by any Person against SCI for a finder's fee,
brokerage commission or similar payment.
4.24 Product Warranties and Product Liability Claims.
-----------------------------------------------
Except as set forth on Schedule 4.24, Intergraph's warranty
Claims experience with respect to the Products has consisted
solely of routine warranty Claims for the return of defective or
non-conforming merchandise, which Claims have individually and in
the aggregate been of an immaterial nature. There exist no
Claims, and to the knowledge of Intergraph no reasonable basis
for any Claims, against Intergraph for injury to persons or
property suffered by any person as a result of the sale or use of
any Product made, designed or sold by Intergraph prior to the
Closing Date, including, but not limited to, Claims arising out
of the defective or unsafe nature of the Products of Intergraph.
Schedule 4.24 sets forth a true and correct list and brief
description of all product liability Claims that have been filed
against Intergraph with respect to the Products since January 1,
1995.
4.25 Workers Compensation and Medical Claims.
---------------------------------------
Schedule 4.25 sets forth all expenses, obligations, duties
and liabilities relating to any Claims by Business Employees
(including dependents and spouses) made since December 31, 1997,
for costs, expenses and other liabilities under any workers
compensation laws, regulations, requirements or programs.
4.26 Disclosure.
----------
Neither the Transaction Documents, nor any Delivered Item
furnished to SCI by or on behalf of Intergraph pursuant to the
Transaction Documents, contains an untrue statement of a material
fact or omits a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
SCI represents and warrants to Intergraph that the following
statements are true, complete and correct effective as of the
Closing as follows:
5.1 Organization.
------------
SCI is an Alabama corporation duly organized and validly
existing and in good standing under the laws of the State of
Alabama and has all requisite corporate power and lawful
authority to (a) enter into the Transaction Documents and to
perform its obligations thereunder, (b) own, lease and operate
its properties and assets as they are now owned, leased and
operated and (c) carry on its business as now conducted and
presently proposed to be conducted.
5.2 Validity and Execution of Agreement.
-----------------------------------
SCI has the full legal right and power and all authority and
approval required to enter into, execute and deliver the
Transaction Documents and to perform fully its obligations
thereunder. The Board of Directors of SCI has approved the
transactions contemplated pursuant to this Agreement and each of
the other agreements required to be entered into pursuant hereto
by SCI. This Agreement and at Closing each other Transaction
Document required to be entered into pursuant hereto by SCI has
(or in the case of the other Transaction Documents, at Closing
will have) been duly executed and delivered by SCI and
constitutes (or in the case of the other Transaction Documents,
at Closing will constitute) the valid and binding obligation of
SCI enforceable against SCI in accordance with their terms,
subject to the Enforceability Exceptions.
5.3 No Conflict.
-----------
Except as set forth on Schedule 5.3, neither the execution
and delivery of the Transaction Documents by SCI nor the
performance by SCI of the transactions contemplated thereby will:
(a) violate or conflict with any of the provisions of the
Articles of Incorporation or Bylaws of SCI; (b) violate or
conflict with any provisions of any Law or Order applicable to
SCI; or (c) require any consent or approval by or filing or
notice with any Governmental or Regulatory Body (other than
filings required under the HSR Act).
5.4 Brokers.
-------
All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by SCI
directly with Intergraph without the intervention of any Person
on behalf of SCI in such manner as to give rise to any valid
Claim by any Person against Intergraph for a finder's fee,
brokerage commission or similar payment.
5.5 Adequate Financing.
------------------
SCI has adequate financial resources to pay the Purchase
Price, in full, at Closing and in conformance with Section 2.2.
5.6 Disclosure.
----------
Neither the Transaction Documents, nor any Delivered Item
furnished to Intergraph by or on behalf of SCI pursuant to the
Transaction Documents, contains an untrue statement of a material
fact or omits a material fact necessary to make the statements
contained therein not misleading.
ARTICLE 6
CONDITIONS PRECEDENT TO THE CLOSING
6.1 Conditions Precedent to the Obligations of SCI to Complete
----------------------------------------------------------
the Closing.
- -----------
The obligations of SCI to enter into and complete the
Closing are subject to the fulfillment at or prior to the Closing
of the following conditions, any one or more of which may be
waived in writing by SCI:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of Intergraph contained in the
Transaction Documents and the Delivered Items shall be true and
correct as of the Closing.
(b) Performance of Obligations. Intergraph shall have performed
and complied with all of the agreements, covenants and
obligations required under the Transaction Documents to be
performed or complied with by Intergraph prior to or at the
Closing.
(c) Consents and Waivers. All authorizations, consents, waivers
and approvals as may be required to be obtained by Intergraph in
connection with the consummation of the transactions contemplated
by the Transaction Documents shall have been obtained, including,
without limitation, such consents and waivers as may be necessary
for the transfer to SCI of the Business Contracts.
(d) Governmental Approvals. All filings that are required to
have been made by the Parties with any Governmental or Regulatory
Body in order to carry out the transactions contemplated by the
Transaction Documents shall have been made and all
authorizations, consents and approvals from any Governmental or
Regulatory Body (including all necessary approvals under the HSR
Act) required to carry out the transactions contemplated by the
Transaction Documents shall have been received and any applicable
waiting periods shall have expired.
(e) Proceedings, Orders or Decrees. There shall be in force no
Order, Action or Proceeding by or before any Governmental or
Regulatory Body restraining, restricting, enjoining, prohibiting,
invalidating or otherwise preventing (or seeking to prevent) the
consummation of the transactions contemplated by the Transaction
Documents.
(f) Board Approval. SCI and Intergraph shall have received the
approvals of their respective Boards of Directors with respect to
their respective execution, delivery and performance of the
Transaction Documents.
(g) Lender Approval. SCI and Intergraph shall have received all
necessary approvals from their respective lenders with respect to
their respective execution, delivery and performance of the
Transaction Documents.
(h) Closing Certificate of Intergraph. Intergraph shall have
delivered to SCI a certificate, executed by a duly authorized
officer of Intergraph, certifying in such detail as SCI may
reasonably request that the conditions specified in Sections
6.1(a) through 6.1(g) (insofar as they are to be performed by
Intergraph) have been fulfilled.
(i) Opinion of Counsel to Intergraph. SCI shall have received
the opinion of David V. Lucas, counsel to Intergraph,
substantially in the form of Exhibit A.
(j) Tax Filings. Intergraph shall have made all filings (if
any) required to be made prior to Closing under all applicable
state sales and use tax statutes and regulations and any other
applicable state tax statutes, in connection with the sale of the
Assets to SCI.
(k) Conveyancing Documents. Intergraph shall have executed and
delivered to SCI such instruments and documents as may be
reasonably requested by SCI in order to complete the transfer of
the Assets to SCI (the "Conveyancing Documents"), including,
without limitation, a bill of sale and an assignment and
assumption agreement, each in form and substance satisfactory to
the Parties.
(l) Real Estate Lease Agreement. Intergraph shall have executed
and delivered to SCI a Real Estate Lease Agreement (the "Real
Estate Lease Agreement") with respect to the Facility
substantially in the form of Exhibit B and the Parties shall have
entered into a mutually satisfactory arrangement with respect to
the management of Intergraph's distribution center and Proto-
room.
(m) Intellectual Property License Agreement. Intergraph shall
have executed and delivered to SCI an Intellectual Property
License Agreement (the "Intellectual Property License Agreement")
substantially in the form of Exhibit C.
(n) Manufacturing Services Agreement. Intergraph shall have
delivered to SCI a Manufacturing Services Agreement (the
"Manufacturing Services Agreement") with respect to SCI's conduct
of the Business and provision of services to ICS and Intergraph
following the Closing, substantially in the form of Exhibit D.
(o) Transition Services Agreement. Intergraph shall have
delivered to SCI a Transition Services Agreement (the "Transition
Services Agreement") with respect to the transition and transfer
of the Business from Intergraph to SCI substantially in the form
of Exhibit E.
6.2 Conditions Precedent to the Obligations of Intergraph to
--------------------------------------------------------
Complete the Closing.
- --------------------
The obligations of Intergraph to enter into and complete the
Closing are subject to the fulfillment at or prior to the
Closing, of the following conditions, any one or more of which
may be waived in writing by Intergraph:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of SCI contained in the
Transaction Documents shall be true and correct as of the
Closing.
(b) Performance of Obligations. SCI shall have performed and
complied with all of the agreements, covenants and obligations
required under the Transaction Documents to be performed or
complied with by SCI prior to or at the Closing.
(c) Consents and Waivers. All authorizations, consents, waivers
and approvals as may be required to be obtained by SCI in
connection with the consummation of the transactions contemplated
by the Transaction Documents shall have been obtained.
(d) Governmental Approvals. All filings that are required to
have been made by the Parties with any Governmental or Regulatory
Body in order to carry out the transactions contemplated by the
Transaction Documents shall have been made and all
authorizations, consents and approvals from any Governmental or
Regulatory Body (including all necessary approvals under the HSR
Act) required to carry out the transactions contemplated by the
Transaction Documents shall have been received and any applicable
waiting periods shall have expired.
(e) Proceedings, Orders or Decrees. There shall be in force no
Order, Action or Proceeding by or before any Governmental or
Regulatory Body restraining, enjoining, prohibiting, invalidating
or otherwise preventing (or seeking to prevent) the consummation
of the transactions contemplated by the Transaction Documents.
(f) Board Approval. Intergraph and SCI shall have received the
approvals of their respective Boards of Directors with respect to
their respective execution, delivery and performance of the
Transaction Documents.
(g) Lender Approval. Intergraph and SCI shall have received
from their respective lenders all necessary approvals with
respect to their respective execution, delivery and performance
of the Transaction Documents.
(h) Closing Certificate of SCI. SCI shall have delivered to
Intergraph a certificate, executed by a duly authorized officer
of SCI, certifying in such detail as Intergraph may reasonably
request that the conditions specified in Sections 6.2(a) through
6.2(g) (insofar as they are to be performed by SCI) have been
fulfilled.
(i) Real Estate Lease Agreement. SCI shall have executed and
delivered to Intergraph the Real Estate Lease Agreement and the
Parties shall have entered into a mutually satisfactory
arrangement with respect to the management of Intergraph's
distribution center and Proto-room.
(j) Intellectual Property License Agreement. SCI shall have
executed and delivered to Intergraph the Intellectual Property
License Agreement.
(k) Manufacturing Services Agreement. SCI shall have executed
and delivered the Manufacturing Services Agreement.
(l) Transition Services Agreement. SCI Shall have executed and
delivered to Intergraph the Transition Services Agreement.
(m) Opinion of Counsel to SCI. Intergraph shall have received
the opinion of Michael M. Sullivan, counsel to SCI, substantially
in the form of Exhibit F.
(n) Delivery of Funds. SCI shall have delivered to Intergraph
the cash portion of the Purchase Price due at Closing in
accordance with Section 2.2.
(o) Conveyancing Documents. SCI shall have executed and
delivered to Intergraph the Conveyancing Documents.
(p) Offers of Employment. SCI shall have made offers of
employment to the Business Employees as provided in Section 7.5.
ARTICLE 7
POST-CLOSING COVENANTS
The Parties covenant to take the following actions
after the Closing:
7.1 Further Information.
-------------------
Following the Closing, each Party will afford to the other
Party, its counsel and its accountants, during normal business
hours, reasonable access to the Books and Records relating to the
Business, the Assets or the Assumed Liabilities in its possession
with respect to periods prior to the Closing and the right to
make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting Party (a) to
facilitate the investigation, litigation and final disposition of
any Claims which may have been or may be made against any Party
or its Affiliates and (b) for any other reasonable business
purpose. The Parties acknowledge that pursuant to Section 1.1(d)
certain Books and Records of Intergraph related to the Business,
but which are otherwise integrated into the remaining Books and
Records of Intergraph, will not be transferred to SCI at Closing,
and that in order for SCI to perform its obligations under the
Manufacturing Services Agreement and to receive the full benefit
of the Assets, that SCI will be dependent upon Intergraph's
providing to SCI its continued cooperation and access with
respect to such integrated Books and Records.
7.2 Record Retention.
----------------
Each Party agrees that for a period of not less than five
(5) years following the Closing, it shall not destroy or
otherwise dispose of any of the Books and Records relating to the
Business, the Assets or the Assumed Liabilities in its possession
with respect to periods prior to the Closing. Each Party shall
have the right to destroy all or part of such Books and Records
after the fifth anniversary of the Closing or, at an earlier time
by giving each other Party 30 days' prior written notice of such
intended disposition and by offering to deliver to the other
Parties, at the other Parties' expense, custody of such Books and
Records as such Party may intend to destroy.
7.3 Tax Matters.
-----------
(a) Responsibility for the preparation and filing of returns
and/or the payment of taxes incurred as a result of the sale of
the Assets contemplated by this Agreement shall be as follows:
(i) SCI and Intergraph shall each prepare and file such tax
returns as are, respectively, required of them in connection with
all sales, use or transfer or similar taxes incurred as a result
of the sale of the Assets contemplated by this Agreement in
accordance with applicable law.
(ii) Intergraph shall be responsible for preparation and filing
of any required tax returns in connection with all of
Intergraph's income or capital gains taxes incurred as a result
of the sale of the Assets contemplated by this Agreement.
(iii)Personal property taxes shall be prorated between
Intergraph and SCI based upon the Closing Date. Specifically, SCI
shall reimburse Intergraph for Madison County, Alabama personal
property taxes in an amount determined by multiplying
Intergraph's total Madison County, Alabama personal property
taxes due on the Tangible Property on October 1, 1999 by a
fraction, the numerator of which is the number of days between
the Closing Date and October 1, 1999 and the denominator of which
is 365.
(iv) Intergraph shall be responsible for all other taxes of any
nature relating to the Assets for the period up to and including
the Closing Date.
(v) Except as set forth above in this Section 7.3, SCI shall be
responsible for all other taxes of any nature relating to the
Assets for the period after the Closing Date.
(b) The Parties will provide each other with such cooperation
and information as either of them reasonably may request of the
other in connection with filing any Tax Return, amended return or
Claim for refund, determining a liability for Taxes or a right to
refund of Taxes or preparation for litigation or investigation of
Claims or in connection with any audit. Such cooperation and
information shall include providing copies of all relevant Tax
Returns, and other documents and records, or portions thereof,
relating to the Business. Each Party will retain all returns,
schedules and work papers and all material records or other
documents relating to Tax matters of the Business for the taxable
year of Intergraph ending after the Closing Date and for all
previous years, until the expiration of the statute of
limitations of the taxable years to which such Tax Returns and
other documents relate (and, to the extent notified by the other
Party in writing, any extensions thereof). Any information
obtained under this Section 7.3(b) shall be kept confidential,
except as may be otherwise necessary in connection with the
filing of Tax Returns or Claims for refund or in conducting an
audit or other proceeding.
(c) If in order to properly prepare documents required to be
filed with governmental authorities or its financial statements,
it is necessary that either Party be furnished with additional
information relating to the Assets and such information is in the
possession of the other Party, such other Party agrees to use its
reasonable efforts to furnish such information in a timely manner
to the Party reasonably requiring such information, at the cost
and expense of the Party requiring such information.
(d) Intergraph shall cooperate with SCI to qualify SCI after the
Closing as a "successor employer" pursuant to the Internal
Revenue Code and Rules thereunder or under similar provisions for
state, local or county law.
(e) Intergraph and SCI shall file or provide to each other such
Tax Returns, forms, and other documents as may be required or
necessary to minimize or obtain an exemption from any sales, use
or other transfer taxes that arise with respect to the Assets.
7.4 No Assignment Causing Breach
----------------------------
Notwithstanding anything in this Agreement, neither this
Agreement nor any document or instrument delivered pursuant
hereto shall constitute an assignment of any Business Contract or
any Claim or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof without the consent
of any other Person would constitute a breach thereof or in any
way adversely affect the rights to be assigned. Until such
consent is obtained, or if an attempted assignment thereunder
would be ineffective or would affect the rights of Intergraph
thereunder so that SCI would not in fact receive all such rights,
Intergraph and SCI will cooperate with each other to provide for
SCI the benefits of, and to permit SCI to assume all prospective
obligations under, any such Business Contract or Claim, including
enforcement at the request and expense of SCI for the benefit of
SCI of any and all rights of Intergraph against a third party
thereto arising out of the breach or cancellation thereof by such
third party; and any transfer or assignment to SCI by Intergraph
of any property or property rights or any Commitment which shall
require the consent or approval of any third party shall be made
subject to such consent or approval being obtained.
7.5 Employee Matters.
----------------
(a) SCI shall offer employment to each Business Employee
effective as of the Closing Date at salaries and wages the same
as those provided by Intergraph as of the Closing, provided
however that those Business Employees who are on leaves of
absence as of the Closing Date shall remain employees of
Intergraph and will be offered employment by SCI when and if they
return from leave of absence within twelve (12) weeks (or twenty-
six (26) weeks if the leave of absence is due to personal medical
disability) of the date their leave of absence began, and
provided further that Intergraph shall continue to cover such
employees under its benefit plans and arrangements while such
employees are on leave of absence in accordance with the terms of
such plans and arrangements. Effective as of the Closing Date,
SCI shall hire all Business Employees who accept SCI's offer of
employment. Each Business Employee who accepts employment and
becomes an employee of SCI is herein referred to as a "Hired
Employee". From and after the Closing Date, SCI shall not take
any action that will cause Intergraph liability under the
W.A.R.N. Act and shall defend and indemnify Intergraph from any
liability thereunder which is caused by an action of SCI.
(b) Effective as of the Closing Date, each Hired Employee shall
be eligible for SCI's existing compensation, severance and
benefit plans and arrangements in accordance with the terms of
each respective plan, except as provided herein.
(c) Without limiting the foregoing, SCI and Intergraph agree as
follows: (i) SCI agrees that all service of a Hired Employee with
Intergraph shall be recognized by SCI for all employee benefits
purposes including, without limitation, participation, vesting,
and benefit accrual (other than for purposes of defined benefit
pension plans) according to the terms of the SCI employee benefit
plans, (ii) during the six (6) month period following the Closing
Date, SCI will offer employment at one of SCI's, or one of its
Affiliates', Huntsville, Alabama facilities to any Hired
Employees whose services SCI determines are in excess for use at
the Facility or in the Business; (iii) SCI will credit to each
Hired Employee the equivalent number of vacation hours that such
Hired Employee had accrued, but not used, as of the Closing Date;
provided however, that beginning two years from the Closing Date
all such unused and accrued vacation will be subject to SCI's
normal policies with respect to the carryover of unused and
accrued vacation from year to year; (iv) SCI will credit to each
Hired Employee the equivalent number of sick leave hours that
such Hired Employee has accrued, but has not used, as of the
Closing Date, up to a maximum of 80 hours; (v) SCI will waive all
waiting periods, limitations with respect to pre-existing
conditions and all other conditions applicable to Hired Employees
participating in Intergraph's existing medical benefit plans and
arrangements; and (vi) for purposes of the plan year which
includes the Closing Date, when calculating deductibles and
maximum coinsurance under SCI medical benefit plans, SCI will
consider all deductible and coinsurance payments made by Hired
Employees under the Intergraph medical benefit plans as though
they were made under the SCI medical benefit plans.
(d) Intergraph shall retain all COBRA and other Liability with
regard to (i) any Business Employees whose employment is
terminated prior to the Closing Date, (ii) any Business Employees
who do not accept SCI's offer of employment, (iii) any
contractors and temporary employees of the Business who do not
become Hired Employees; and (iv) any Business Employees who are
on leaves of absence on the Closing Date until such time as they
become employees of SCI.
(e) SCI will promptly review the qualifications of the
contractors and temporary employees of the Business identified on
Schedule 4.13(b) for potential employment and shall notify
Intergraph of the results of its review, but shall have no
obligation to offer employment to any such person and shall have
no Liability to such persons or to Intergraph with respect to
such persons.
(f) (i) As soon as practicable after the Closing
Date, Intergraph will, if necessary, amend its 401(k) Plan (the
"Intergraph 401(k)") to transfer to SCI's qualified savings plan
(the "Savings Plan") an amount in cash and in kind to the extent
participant loans have been made from the Intergraph 401(K),
unless otherwise agreed by Intergraph and SCI, equal to the
account balance of Hired Employees in the Intergraph 401(k),
valued as of the most recent valuation date preceding the date
the transfer is made to the Savings Plan (but not earlier than
the Closing Date). Until such valuation date occurs, the account
of each Hired Employee will continue to accrue, at the rate of
return of the investment option(s) selected by such Hired
Employee in accordance with the terms of the Intergraph 401(k).
Anything in this subsection (f)(i) to the contrary
notwithstanding, if SCI provides notice to Intergraph that SCI
has not, in good faith, been able to arrange for the "Transfer"
(as defined below in subsection (f)(ii) hereof) into the Savings
Plan, then such Transfer shall not be executed until appropriate
arrangements are made. Prior to the Transfer, SCI shall deliver
to Intergraph a copy of the most recently issued IRS
determination letter (or other evidence satisfactory to counsel
to Intergraph) that the Savings Plan is qualified under Section
401(a) of the Code.
(ii) If necessary, the Savings Plan will be amended to permit the
transfer of assets and liabilities from the Intergraph 401(k) to
the Savings Plan and to ensure, in accordance with Section
411(d)(6) of the Internal Revenue Code of 1986 (the "Code"), that
no Hired Employee will receive an accrued benefit less than the
accrued benefit the Hired Employee would be entitled to receive
under the Intergraph 401(k) as of the date immediately prior to
the date the Transfer occurs. Such transfer of plan assets and
liabilities and the acceptance of such assets and assumption of
such liabilities shall hereinafter be referred to as the
"Transfer".
(iii) The Transfer will be accomplished in full compliance
with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code, and
regulations and rulings promulgated thereunder. Further,
Intergraph and SCI agree to cooperate fully and to file in a
timely manner whatever reports, forms and notices as are
necessary under applicable law as a result of, and to effect, the
Transfer. The Transfer will be accomplished by way of a single
transfer of plan assets (either cash and promissory notes or in
kind) and will not occur until the Hired Employees' account
balances under the Intergraph 401(k) have been determined, except
to the extent that subsequent transfers between the two trusts
are required to reconcile any errors in the calculations or data.
(iv) At the time of the Transfer and effective as of the Closing
Date, Intergraph will fully vest the unvested portion of
Intergraph's contributions to each Hired Employee's retirement
account.
(v) Following the Closing, except as expressly set forth in this
Agreement Intergraph shall have no further obligations to SCI
with respect to the Hired Employees.
(vi) Each Party acknowledges that nothing contained in this
Section 7.5 shall require the Parties to violate the terms of
their respective employee benefit plans or any applicable law.
(g) Intergraph agrees to provide to SCI in a timely manner all
information for each Hired Employee, including without
limitation, the account balance under the Intergraph 401(k) as of
the applicable valuation date, vesting service and any other
employee information required by SCI to determine benefits
payable from the Savings Plan. Intergraph shall deliver such
information to SCI by means of magnetic tape or other electronic
means as SCI may reasonably require.
(h) Following the Closing, SCI shall provide to Intergraph
reasonable access to any Hired Employee having knowledge of facts
relevant to that certain action of Intergraph Corporation v.
Intel Corporation, CV 97-N-3023-NE, and any Books and Records
related thereto, provided that such access does not cause any
material interruption to the performance by such Hired Employee
of his or her employment duties or cause any material
interruption of SCI's performance of its obligations under the
Manufacturing Services Agreement. Intergraph shall reimburse SCI
for all out-of-pocket expenses incurred by SCI in connection with
this Section 7.5(h).
(i) Following the Closing, each Party shall promptly notify the
other Party when it receives notice from a Business Employee that
such Business Employee intends to accept SCI's offer of
employment or does not intend to accept SCI's offer of
employment.
7.6 Exclusive Manufacturing Services.
--------------------------------
Intergraph shall, and shall cause its Affiliates, to
discontinue on a timely basis (but without need to cause any
breach or early termination of any binding outsourcing
agreements, in existence as of the date of this Agreement, each
of which, together with their respective expiration dates, is
listed on Schedule 7.6) using the services of any Person other
than SCI to provide those Products to be provided by SCI under
the Manufacturing Services Agreement, and shall use all
reasonable commercial efforts to transfer such work to SCI
promptly following the Closing.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties.
------------------------------------------
All representations and warranties of Intergraph and SCI
contained in this Agreement will survive the Closing until the
second anniversary of the Closing Date; provided, however, that
(a) the representations and warranties contained in Sections 4.3,
4.4, 4.9, 4.15, 4.20, 4.22, 5.2 and 5.3 shall survive until
thirty (30) days following the expiration of the applicable
statutes of limitations (including any extensions thereof), and
(b) any representation or warranty that would otherwise terminate
in accordance with this Section 8.1 will continue to survive if a
Claim Notice shall have been given under this Article 8 on or
prior to such termination date, until the related Claim for
indemnification has been satisfied or otherwise resolved as
provided in this Article 8.
8.2 Indemnification of SCI.
----------------------
Subject to the limitations contained in this Article 8,
Intergraph agrees to indemnify, defend and hold harmless SCI and
its Affiliates, and their respective officers, directors,
employees and shareholders, and their respective successors and
assigns, from and against any and all Liabilities which, directly
or indirectly, arise out of, result from or relate to:
(a) Any breach of any representation or warranty made by
Intergraph in the Transaction Documents or any Delivered Item
furnished by Intergraph pursuant to the Transaction Documents;
(b) Any breach by Intergraph of any covenant or obligation of
Intergraph contained in the Transaction Documents; or
(c) Any failure by Intergraph to satisfy when due the Excluded
Liabilities.
8.3 Indemnification of Intergraph.
-----------------------------
Subject to the limitations contained in this Article 8, SCI
agrees to indemnify, defend and hold harmless Intergraph and its
Affiliates, and their respective officers, directors, employees
and shareholders, and their respective successors and assigns
from and against any and all Liabilities which, directly or
indirectly, arise out of, result from or relate to:
(a) Any breach of any representation or warranty made by SCI in
the Transaction Documents or any Delivered Item furnished by SCI
pursuant to the Transaction Documents;
(b) Any breach by SCI of any covenant or obligation of SCI
contained in the Transaction Documents; or
(c) Any failure by SCI to satisfy when due the Assumed
Liabilities.
8.4 Indemnification Procedure for Third-Party Claims.
------------------------------------------------
(a) Promptly after receipt by an indemnified party under Section
8.2 or 8.3, of notice of the commencement of any Action or
Proceeding against it, the indemnified party shall, if a Claim is
to be made against an indemnifying party under such Section 8.2
or 8.3, as applicable, give notice to the indemnifying party of
the commencement of such Claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
Liability that it may have to any indemnified party, except to
the extent that the indemnifying party demonstrates that the
defense of such Action or Proceeding is materially prejudiced by
the indemnifying party's failure to give such notice.
(b) If any Action or Proceeding referred to in Section 8.4(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Action or
Proceeding, the indemnifying party will be entitled to
participate in such Action or Proceeding and, to the extent that
it wishes (unless (i) the indemnifying party is also a party to
such Action or Proceeding and the indemnified party determines in
good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance
to the indemnified party of its financial capacity to defend such
Action or Proceeding and provide indemnification with respect to
such Action or Proceeding), to assume the defense of such Action
or Proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified
party of its election to assume the defense of such Action or
Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified
party under this Section 8.4 for any fees of other counsel or any
other expenses with respect to the defense of such Action or
Proceeding, in each case subsequently incurred by the indemnified
party in connection with the defense of such Action or
Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of an Action or
Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the Claims made in that Action or
Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such Claims
may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of
any violation of Law or Order or any violation of the rights of
any Person and no effect on any other Claims that may be made
against the indemnified party, and (B) the sole relief provided
is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no Liability
with respect to any compromise or settlement of such Claims
effected without its consent. If notice is given to an
indemnifying party of the commencement of any Action or
Proceeding and the indemnifying party does not, within ten (10)
days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of
such Action or Proceeding, the indemnifying party will be bound
by any determination made in such Action or Proceeding or any
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability
that an Action or Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such
Action or Proceeding, but the indemnifying party will not be
bound by any determination of an Action or Proceeding so defended
or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
(d) Intergraph and SCI hereby consent to the non-exclusive
jurisdiction of any court in which an Action or Proceeding is
brought against any indemnified person for purposes of any Claim
that an indemnified person may have under this Agreement with
respect to such Action or Proceeding or the matters alleged
therein, and agree that process may be served on Intergraph or
SCI with respect to such a Claim anywhere in the world.
(e) The Parties shall cooperate in the defense of any third-
party Claim and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested in
connection with the provisions of this Article 8.
8.5 Indemnification Procedure for Other Claims.
------------------------------------------
A Claim for indemnification for any matter not involving a
third-party Claim may be asserted by notice to the Party from
whom indemnification is sought by giving written notice to the
Party describing in reasonable detail the basis for the Claim.
8.6 Limitations on Indemnification.
------------------------------
(a) Notwithstanding any provision to the contrary contained in
this Article 8, Intergraph shall not have any obligation to
indemnify SCI for any Liabilities relating to or caused by the
breach of any of Intergraph's representations or warranties
contained in this Agreement until SCI has suffered Liabilities in
the aggregate in excess of $25,000 (the "Basket") related to or
caused by such breaches. If the total Liabilities suffered by
SCI as a result of such breaches exceed the Basket, then
Intergraph shall be liable for all such Liabilities, including
the first dollar of loss.
(b) The amount which may be recovered from Intergraph pursuant
to Section 8.2 in respect of any breach of the representations
and warranties of Intergraph contained in this Agreement shall
not in the aggregate exceed $25,000,000.
(c) The limitations contained in this Section 8.6 shall not
apply to any Liabilities resulting from any breaches by
Intergraph of any representations and warranties (i) if
Intergraph knew at the time such representations and warranties
were made or on the Closing Date that such representations and
warranties were untrue, or (ii) related to Intergraph's title to
the Assets, and shall not apply to any breaches by Intergraph of
any of its covenants contained in this Agreement, including,
without limitation, Intergraph's covenants contained in Article
10.
ARTICLE 9
NON-COMPETITION PROVISIONS
9.1 Noncompetition.
--------------
In order to induce SCI to enter into this Agreement,
Intergraph expressly covenants and agrees that from and after the
Closing Date and during the term of the Manufacturing Services
Agreement, Intergraph will not, directly or indirectly, engage in
or have any interest in any Person, whether as a partner, agent,
security holder or consultant, that is engaged in the manufacture
of the Products in the United States of America and any other
countries in which Intergraph currently conducts the Business or
contemplates engaging in the Business; provided, however, that
nothing herein shall be deemed to prevent Intergraph from
acquiring through market purchases and owning, solely as an
investment, less than five percent (5%) in the aggregate of the
equity securities of any class of any issuer whose shares are
registered under 13(b) or 13(g) of the Securities Exchange Act,
and are listed or admitted for trading on any United States
national securities exchange or are quoted on the NASDAQ, or any
similar system of automated dissemination of quotations of
securities prices in common use, so long as neither of them is a
member of any "control group" (within the meaning of the rules
and regulations of the United States Securities and Exchange
Commission) of any such issuer.
9.2 Non-Solicitation.
----------------
For a period of six (6) months following the Closing Date,
(i) Intergraph will not without the prior written approval of an
authorized officer of SCI, directly or indirectly, for itself or
for any other Person (other than SCI or any of its Affiliates),
solicit for employment any employee of SCI or its Affiliates
until such Person's employment with SCI or its Affiliates has
ended, and (ii) SCI will not without the prior written approval
of an authorized officer of Intergraph, directly or indirectly,
for itself or for any other Person (other than Intergraph or any
of its Affiliates), solicit for employment any employees of
Intergraph or its Affiliates until such Person's employment with
Intergraph or its Affiliates has ended. Each Party acknowledges
that, on an individual employee basis, SCI may with the prior
written approval of an authorized officer of Intergraph solicit
such Intergraph employees who are in the determination of the
Parties important to the conduct of the Business.
9.3 Scope, Consideration and Enforcement.
------------------------------------
(a) Each Party acknowledges that the other Party has agreed to
enter into this Agreement based, in part, on the Parties'
agreement to the restrictive covenants and other agreements
contained in this Article 9. Each Party also acknowledges that
the covenants contained in this Article 9 are reasonable in scope
and duration.
(b) If any covenant in this Article 9 is held to be
unreasonable, arbitrary, or against public policy, such covenant
will be considered to be divisible with respect to scope, time,
and geographic area, and such lesser scope, time or geographic
area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public
policy, will be effective, binding, and enforceable against the
Parties.
(c) The Parties agree and acknowledge that money damages may not
be an adequate remedy for any breach of the provisions of this
Article 9 and that the Party suffering harm may in its sole
discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of
this Article 9.
ARTICLE 10
INVENTORY MATTERS AND TERMINATION OF
MANUFACTURING SERVICES AGREEMENT
10.1 Contract Sales Price Adjustment.
-------------------------------
After the Closing, and in connection with SCI's re-sale of
the Inventory to Intergraph pursuant to the terms of the
Manufacturing Services Agreement, SCI shall discount all
Inventory purchased by SCI from Intergraph under this Agreement
by reducing the selling prices for such items of Inventory by ten
percent (10%) (collectively, the "Contract Sales Price
Adjustment") as further described in the Manufacturing Services
Agreement. The Contract Sales Price Adjustment will serve as an
additional part of the Purchase Price paid by SCI for the Assets
pursuant to Article 2.
10.2 Inventory Put Option.
--------------------
(a) Option. SCI shall have the option (the "Inventory Put
Option") to sell to Intergraph (i) all Inventory (other than the
Obsolete Inventory) purchased by SCI at Closing and (ii) all
Excess Purchase Order Inventory, which has not been utilized in
the manufacture and sale of finished goods (collectively, the
"Unused Inventory") within six (6) months from the Closing Date
(the "Inventory Put Period"); provided, however, that the Unused
Inventory shall be deemed to be reduced by:
(i) the amount of inventory of the same kind, or suitable for
the same purpose, if any, purchased by SCI following the Closing
Date and used in substitution for the Unused Inventory (other
than substitutions with respect to defective Inventory, which
shall not be deemed to reduce the Unused Inventory);
(ii) the amount of Inventory, if any, lost, stolen, destroyed or
otherwise damaged during the Inventory Put Period; and
(iii)the amount of Inventory, if any (the "Covered
Inventory"), to be utilized by SCI after the Inventory Put Period
pursuant to reasonable and bona fide firm purchase orders from
Intergraph received by SCI during the Inventory Put Period to be
shipped within ninety (90) days of the end of the Inventory Put
Period (the "Covered Period"); provided, further, that any
Covered Inventory which has not actually been utilized within the
Covered Period shall also be deemed Unused Inventory and subject
to SCI's Inventory Put Option at the conclusion of the Covered
Period.
(b) Identification of Unused Inventory. In identifying the
Unused Inventory for the purposes of the Inventory Put Option,
the purchased Inventory shall be deemed to be used prior to any
other inventory of the same kind, or suitable for the same
purpose, as the Inventory acquired by SCI for use in the
manufacture of the Products following the Closing Date.
(c) Exercise of Option. The Inventory Put Option may be
exercised by SCI within thirty (30) days after the expiration of
the Inventory Put Period (and, with respect to the Covered
Inventory, within thirty (30) days after the expiration of the
Covered Period) by sending a notice in writing to Intergraph
specifying (i) the identity of the Unused Inventory, and (ii) the
original purchase cost of the Unused Inventory (the "Inventory
Put Purchase Price"), together with an officer's certificate,
signed by an officer of SCI, certifying that the Unused Inventory
has been calculated and determined in accordance with this
Section 10.2(c). Intergraph shall either (i) pay to SCI the
Inventory Put Purchase Price, within 10 Business Days of receipt
of each notice of exercise of the Inventory Put Option, or (ii)
send a written notice to SCI within ten (10) Business Days of
receipt of each notice of exercise of the Inventory Put Option
that it objects to the calculation of the Inventory Put Purchase
Price, failing which Intergraph shall be deemed to have accepted
the Inventory Put Purchase Price calculation. Any such written
notice of objection from Intergraph must state (a) the specific
items of Unused Inventory which Intergraph contends should not be
included within the Inventory to be repurchased, and (b) the
basis for its position with respect to each of such items of
Unused Inventory, which will be limited to matters of the nature
described in Section 10.2(a)(i) - (iii) above. In addition, any
such written notice of objection must be accompanied by payment
in full for the items of Unused Inventory which are not subject
to such written notice of objection. SCI will return to
Intergraph the items of Unused Inventory upon receipt from
Intergraph of payment of the Inventory Put Purchase Price for
such items.
(d) Objection to Inventory Put Purchase Price. If Intergraph
objects to the Inventory Put Purchase Price calculation pursuant
to Section 10.2(c), then either Party may refer the matter in
writing to the Accountants, who will promptly resolve the issue
after discussions with each Party and in consideration of the
concerns of each Party, and will prepare an Inventory Put
Purchase Price schedule which shall be final and binding on the
Parties. Intergraph shall pay to SCI the amount of the Inventory
Put Purchase Price determined by the Accountants within 10
Business Days of any such determination.
10.3 Payments in Connection with Termination of Manufacturing
--------------------------------------------------------
Services Agreement.
- ------------------
If Intergraph defaults in any material respect under or
terminates the Manufacturing Services Agreement without cause
prior to the third anniversary of the Closing Date, in addition
to any other remedies available to SCI under the Manufacturing
Services Agreement, SCI shall have the right to require
Intergraph to refund to SCI in cash the amount of the Premium
paid by SCI to Intergraph pursuant to this Agreement, along with
all other reasonable and customary start-up expenses incurred by
SCI in connection with the consummation of the transactions
contemplated by this Agreement and the Manufacturing Services
Agreement (which expenses shall include by way of example items
of the type identified on Schedule 10.3). All amounts paid to
SCI pursuant to this Section 10.3 shall be prorated, based upon
the number of months completed from the Closing Date through the
date of the material default under or termination of the
Manufacturing Services Agreement. Thus, by way of example only,
if the Manufacturing Services Agreement is terminated after the
eighteen-month anniversary of the Closing Date and before the
nineteen-month anniversary of the Closing Date, then Intergraph
shall pay to SCI fifty percent (50%) of the Premium and the
reasonable and customary start-up expenses incurred by SCI in
connection with the consummation of the transactions contemplated
by this Agreement and the Manufacturing Services Agreement.
10.4 Post-Closing Purchase of Consigned Tangible Property.
----------------------------------------------------
Following the Closing, Intergraph shall, upon the
termination of its outsourcing arrangement with Solectron, Inc.,
as described on Schedule 7.6, transfer to SCI all of the tangible
property identified on Schedule 10.4 (the "Consigned Property").
SCI shall have the right to inspect the Consigned Property, and
provided that SCI finds the Consigned Property to be in good
working order and in operating condition at the time of transfer,
SCI shall pay to Intergraph in cash on the date of transfer the
Net Book Value of the Consigned Property.
ARTICLE 11
MISCELLANEOUS
11.1 Expenses.
--------
Each Party shall pay all costs and expenses incurred or to
be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this
Agreement. Notwithstanding the foregoing, SCI shall pay (a) any
stamp, transfer or transaction tax imposed under the laws of the
United States of America or any state, county, municipality or
other subdivision thereof on the sale or transfer of the Assets
by Intergraph to SCI, and (b) all filing fees incurred in
connection with the Parties' compliance with the HSR Act.
11.2 Further Assurances.
------------------
At any time and from time to time after the Closing Date at
the request of SCI, and without further consideration, Intergraph
will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such
other action as SCI may reasonably deem necessary or desirable in
order to transfer, convey and assign more effectively to SCI the
Assets, to put SCI in actual possession and operating control of
the Business and to assist SCI in exercising all rights with
respect thereto. The Parties shall use their best efforts to
fulfill or obtain the fulfillment of the conditions to the
Closing, including, without limitation, the execution and
delivery of any document or other papers, the execution and
delivery of which are conditions precedent to the Closing.
11.3 Confidentiality.
---------------
(a) Each of the Parties shall exercise, and shall cause their
respective representatives and Affiliates to exercise, the same
degree of care to prevent disclosure of Confidential Information
(as hereinafter defined) received by or disclosed to such Party
pursuant to this Agreement as it takes to preserve and safeguard
its own confidential information, data, technology or know-how
but, and in any event, with no less than a reasonable degree of
care. As used herein, "Confidential Information" means all
documents and information concerning the other Party and the
Affiliates thereof furnished to a Party, its Affiliates or
representatives (in any case, a "Recipient") by such other Party
or its representatives (in any case, the "Disclosing Party") in
connection with the transactions contemplated by this Agreement.
Each Recipient shall not use any of such Confidential Information
except as permitted by this Agreement or release or disclose such
Confidential Information to any other Person, except its
auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with this Agreement. All
Confidential Information shall be safeguarded by the Recipient
for not less than three years from the date hereof. Any
Confidential Information (including all copies thereof) not
relating to the Business or the Assets shall be returned to the
Disclosing Party promptly at its request and other Confidential
Information shall be maintained in confidence subject to the
terms of this Section 11.3.
11.4 Notices.
-------
All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing
and shall be given personally, sent by facsimile transmission or
sent by prepaid air courier or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed to have
been given (a) when received, if delivered in person, sent by
facsimile transmission and confirmed in writing within three
Business Days thereafter, or sent by prepaid air courier or (b)
three Business Days following the mailing thereof, if mailed by
certified first class mail, postage prepaid, return receipt
requested, in any such case as follows (or to such other address
or addresses as a Party may have advised the other in the manner
provided in this Section 11.4):
If to Intergraph:
Intergraph Corporation
Mail Stop HQ 011
Huntsville, Alabama 35894-0001
Attention: John W. Wilhoite
Facsimile: (256) 730-2048
With a copy (which shall not constitute notice) to:
Intergraph Corporation
Mail Stop HQ 034
Huntsville, Alabama 35894-0001
Attention: David V. Lucas
Facsimile: (256) 730-2247
And
Balch & Bingham LLP
P.O. Box 306
Birmingham, Alabama 30521
Attention: Phillip A. Nichols
Facsimile: (205) 226-8799
If to SCI:
SCI Technology, Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35807
Attention: A. Eugene Sapp and
Michael M. Sullivan, Esq.
Facsimile: (256) 882-4466
With a copy (which shall not constitute notice) to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: James J. McAlpin, Jr.
Facsimile: (404) 572-6999
11.5 Publicity.
---------
Except to the extent required by Law, no publicity release
or announcement concerning this Agreement or the transactions
contemplated hereby shall be made without advance approval
thereof as to form and content by all of the Parties.
11.6 Entire Agreement.
----------------
This Agreement (including the Exhibits and Schedules) and
the agreements, certificates and other documents delivered
pursuant to this Agreement contain the entire agreement among the
Parties with respect to the transactions described herein, and
supersede all prior agreements, written or oral, with respect
thereto.
11.7 Waivers and Amendments.
----------------------
This Agreement may be amended, superseded, cancelled,
renewed or extended, and the terms hereof may be waived, only by
a written instrument signed by the Parties or, in the case of a
waiver, by the Party waiving compliance. No delay on the part of
any Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof. The rights and remedies of
any Party based upon, arising out of or otherwise in respect of
any inaccuracy in or breach of any representation, warranty,
covenant or agreement contained in this Agreement shall in no way
be limited by the fact that the act, omission, occurrence or
other state of facts upon which any Claim of any such inaccuracy
or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the Parties as to
which there is no inaccuracy or breach).
11.8 Remedies Cumulative.
-------------------
No remedy made available by any of the provisions of this
Agreement is intended to be exclusive of any other remedy, and
each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or
hereafter existing at law or in equity.
11.9 Binding Effect; No Assignment.
-----------------------------
This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and
permitted assigns. This Agreement is not assignable by either
Party without the prior written consent of the other Party except
by operation of law and any other purported assignment shall be
null and void; provided that either Party may (a) assign its
rights and interests (but not its obligations) hereunder to one
or more of its Affiliates or (b) pledge and assign its rights and
interests hereunder to one or more lenders providing financing to
such Party, and provided, further, that SCI's rights and
interests hereunder may be assigned to any purchaser of
substantially all of the Business or the Assets or as a matter of
law to the surviving entity of any merger of SCI.
11.10 Variations in Pronouns.
----------------------
All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context
may require.
11.11 Counterparts.
------------
This Agreement may be executed by the Parties hereto in
separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart
may consist of a number of copies hereof each signed by less than
all, but together signed by all of the Parties hereto.
11.12 Interpretive Provisions.
-----------------------
(a) Unless otherwise defined herein, all terms defined in this
Agreement shall have the defined meanings when used in any
certificate, report or other document made or delivered pursuant
hereto.
(b) The words "hereof" "herein" "hereunder" and "hereto" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement. Except as expressly set forth herein, the
term "including" when used with or without the term "without
limitation" shall be deemed to be inclusive, and not to the
exclusion of any other item.
(c) The specification of any dollar amount in the
representations and warranties or otherwise in this Agreement or
in the schedules hereto is not intended and shall not be deemed
to be an admission or acknowledgment of the materiality of such
amounts or items, nor shall the same be used in any dispute or
controversy between the Parties to determine whether any
obligation, item or matter (whether or not described herein or
included in any schedule) is or is not material for purposes of
this Agreement.
(d) The Exhibits and Schedules to this Agreement are a part of
this Agreement as if fully set forth herein. All references
herein to Sections, subsections, clauses, Exhibits and Schedules
shall be deemed references to such parts of this Agreement,
unless the context shall otherwise require.
11.13 Effect of Disclosure on Schedules.
---------------------------------
Any item disclosed on any Schedule to this Agreement shall
only be deemed to be disclosed in connection with (a) the
specific representation and warranty to which such Schedule is
expressly referenced, (b) any specific representation and
warranty which expressly cross-references such Schedule and (c)
any specific representation and warranty to which any other
Schedule to this Agreement is expressly referenced if such other
Schedule expressly cross-references such Schedule. Nothing on any
Schedule hereto shall be deemed adequate to disclose an exception
to a representation or warranty made herein unless the relevant
facts are disclosed in reasonable detail. Without limitation as
to the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of
the document or other item itself).
11.14 Headings.
--------
The headings in this Agreement are for reference only, and
shall not affect the interpretation of this Agreement.
11.15 Severability of Provisions.
--------------------------
If any provision or any portion of any provision of this
Agreement or the application of such provision or any portion
thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the
remaining provisions of this Agreement, or the application of
such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
thereby.
11.16 Bulk Sales.
----------
The Parties hereby waive compliance with any applicable bulk
sales Laws in any jurisdiction.
11.17 Time is of the Essence.
----------------------
Time is of the essence with respect to this Agreement and
the transactions contemplated thereby.
11.18 Choice of Law.
-------------
This Agreement and the other Transaction Documents shall be
governed and construed in accordance with the laws of the State
of Alabama without regard to conflicts of laws principles thereof
and all questions concerning the validity and construction hereof
shall be determined in accordance with the laws of said state.
Each Party hereby irrevocably submits to the non-exclusive
jurisdiction of any state or federal court sitting in the County
of Madison, State of Alabama in any action or proceeding arising
out of or relating to this Agreement and hereby irrevocably
agrees, on behalf of itself and on behalf of such party's
successor's and assigns, that all Claims in respect of such
action or proceeding may be heard and determined in any such
court and irrevocably waives any objection such person may now or
hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an
inconvenient forum.
11.19 Waiver of Jury Trial.
--------------------
The parties hereto hereby waive trial by jury in any
judicial proceeding involving, directly or indirectly, any matter
(whether in tort, contract or otherwise) in any way arising out
of, related to, or connected with this Agreement, the related
documents or the relationship established hereunder.
11.20 Resolution of Conflicts.
-----------------------
In the event of any dispute arising under this Agreement
(other than a dispute arising under Section 2.3 or Section 10.2),
each Party will undertake to use reasonable commercial efforts,
with due regard to the concerns of each Party regarding the
timing of settlement of the dispute, to refer discussion of the
issue in dispute to working parties formed by the Parties, who
will have 20 Business Days to attempt to resolve the issue in
dispute. If the working parties fail to resolve the dispute
within such 20 Business Day period, the issue in dispute shall be
referred to the Chief Executive Officers of the Parties, who will
have 15 Business Days to attempt to resolve the issue in dispute.
If the Parties fail to resolve any issue in dispute pursuant to
this Section 11.20, the Parties will be free to pursue, subject
to the provisions of this Agreement, all available remedies at
equity and at law. Notwithstanding the foregoing, if any issue
in dispute is of such consequence or such a nature that a Party
determines in good faith that it will be irreparably harmed
absent prompt judicial relief, such Party may seek a preliminary
injunction or other provisional judicial relief in order to avoid
irreparable harm or to preserve the status quo. Despite any such
attempted action, the Parties will continue to participate in
good faith in the procedures specified in this Section 11.20.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Parties have executed this Agreement
under seal as of the date first above written.
INTERGRAPH CORPORATION
By:/s/ John W. Wilhoite
----------------------------
Name: John W. Wilhoite
--------------------------
Title: Executive Vice President
-------------------------
SCI TECHNOLOGY, INC.
By:/s/ George J. King
----------------------------
Name: George J. King
--------------------------
Title: Senior Vice President
-------------------------
SCHEDULE 1
DEFINITIONS
As used in this Agreement, the following terms have the
following meanings unless the context otherwise requires:
1. "Accountants" has the meaning specified in Section 2.3(d).
2. "Action or Proceeding" means any action, suit, proceeding or
arbitration by any Person or any investigation or audit by any
Governmental or Regulatory Body.
3. "Adjustment Schedule" has the meaning specified in Section
2.3(b).
4. "Affiliate" with respect to any Person, means any other
Person controlling, controlled by or under common control with
such Person. As used in this definition, the term "control"
means direct or indirect ownership or voting control of 50% or
more of the equity or voting securities of the Person in question
or having the power, by Commitment or otherwise, to elect a
majority of the Board of Directors (or similar governing body) of
the Person in question.
5. "Agreed to Value of the Tangible Property" means
$3,400,000.00, the amount agreed to by the Parties as the value
of the Tangible Property as of the Closing Date.
6. "Agreement" means this Asset Purchase Agreement.
7. "Assets" has the meaning specified in Section 1.1.
8. "Associate" means, with respect to any Person, any
corporation or other business organization of which such Person
is an officer or partner or is the beneficial owner, directly or
indirectly, of ten percent (10%) or more of any class of equity
securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves
as a trustee or in a similar capacity and any relative or spouse
of such Person, or any relative of such spouse, who has the same
home as such Person or any child or sibling of such Person or
such Person's spouse.
9. "Assumed Liabilities" has the meaning specified in Section
1.3(a).
10. "Basket" has the meaning specified in Section 8.6(a).
11. "Benefit Plans" has the meaning specified in Section
4.15(a).
12. "Best knowledge", "knowledge" or words to that effect shall
mean the actual knowledge of each officer of Intergraph at or
above the level of Vice President based upon (i) a review of the
records received or maintained by such Person or for such Person
at its direction, and (ii) inquiry to such other current
employees of Intergraph or its Affiliates as such Person
reasonably determines to have had significant responsibility with
respect to the matter as to which the relevant representation is
being made; but shall not be based upon or require any such
Person to (a) make specific inquiry of any Person other than
those described in clause (ii) of this definition, and (b) draw
inferences or reach conclusions requiring specialized expertise
or knowledge (whether technical, legal, financial or otherwise)
that is not possessed by such Person.
13. "Blocked Inventory" has the meaning set forth in Section
2.3(b).
14. "Books and Records" of any Person means all files,
documents, instruments, papers, books and records relating to the
business, operations, conditions of (financial or other), results
of operations and assets and properties of such Person, including
without limitation financial statements, Tax Returns and related
work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies,
Commitments, licenses, lists, computer files and programs,
retrieval programs, operating data and plans and environmental
studies and plans.
15. "Business" has the meaning specified in the second recital
of this Agreement.
16. "Business Contracts" means those Commitments to which
Intergraph is a party relating to the conduct of the Business and
identified on Schedule 1.1(c).
17. "Business Day" means any day on which commercial banks are
not authorized or required by law to close in Atlanta, Georgia.
18. "Business Employee" has the meaning specified in Section
4.13.
19. "Business Licenses" means all licenses, permits, franchises,
registrations, approvals, consents and authorizations (including
applications therefor) of Intergraph relating to the Business,
the Assets or the Facility.
20. "Claim" means any pending claim, demand, assessment, cause
of action, notice or demand involving any Person.
21. "Closing" has the meaning specified in Section 3.2.
22. "Closing Date" has the meaning specified in Section 3.2.
23. "Code" means the Internal Revenue Code of 1986, as amended.
24. "Commitments" means all executory contracts, agreements,
understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, franchises, licenses, commitments, purchase
orders, purchasing arrangements and other legally binding
arrangements, whether written, oral, express or implied.
25. "Confidential Information" has the meaning specified in
Section 11.3.
26. "Consigned Property" has the meaning specified in Section
10.4.
27. "Contract Sales Price Adjustment" has the meaning specified
in Section 10.1.
28. "Conveyancing Documents" has the meaning specified in
Section 6.1(k).
29. "Covered Inventory" has the meaning specified in Section
10.2(a)(iii).
30. "Covered Period" has the meaning specified in Section
10.2(a)(iii).
31. "Current Products" means those Products placed on the master
purchase order to be issued by Intergraph to SCI at or prior to
Closing.
32. "Deficit" has the meaning specified in Section 2.3(e).
33. "Delivered Item" means any schedule, exhibit or closing
certificate delivered to a Party under or pursuant to a
Transaction Document.
34. "Determination Date" means the opening of business on
October 28, 1998.
35. "Disclosing Party" has the meaning specified in Section
11.3(a).
36. "Employment Claims" has the meaning specified in Section
4.16.
37. "Enforceability Exceptions" has the meaning specified in
Section 4.3.
38. "Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the
environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes into the environment
(including without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata), or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes.
39. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
40. "Excess Purchase Order Inventory" means any Inventory
purchased by SCI pursuant to those purchase orders identified on
Schedule 1.3(a)(iii) and delivered to SCI prior to January 1,
1999; provided, however, that with respect to those purchase
orders identified on Schedule 1.3(a)(iii) which are not
cancelable without penalty, all Inventory purchased pursuant to
such purchase orders (including Inventory purchased after January
1, 1999) shall also be deemed to be "Excess Purchase Order
Inventory"..
41. "Excluded Assets" has the meaning specified in Section 1.2.
42. "Excluded Liabilities" has the meaning specified in Section
1.4.
43. "Facility" has the meaning specified in the fourth recital
of this Agreement.
44. "Final Net Book Value of the Inventory" means the Net Book
Value of the Inventory, as finally determined pursuant to Section
2.3.
45. "Final Net Worth" has the meaning specified in Section
2.3(b).
46. "First Inventory Payment" has the meaning specified in
Section 2.2(a).
47. "GAAP" means United States generally accepted accounting
principles.
48. "Governmental or Regulatory Body" means any court, tribunal,
arbitrator or any government or political subdivision thereof,
whether federal, state, county, local or foreign, or any agency,
authority, official or instrumentality of any such government or
political subdivision.
49. "Hazardous Material" means (A) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos
in any form that is or could become friable, urea formaldehyde
foam insulation and transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (B) any chemicals or other materials or substances which
are defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants" or words of similar import
under any Environmental Law; and (C) any other chemical or other
material or substance, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or
Regulatory Body under any Environmental Law.
50. "Hired Employee" has the meaning specified in Section
7.5(a).
51. "HSR Act" means the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976.
52. "ICS" has the meaning specified in the first Recital of this
Agreement.
53. "Intellectual Property License Agreement" has the meaning
specified in Section 6.1(m).
54. "Intergraph" has the meaning specified in the first
paragraph of this Agreement.
55. "Intergraph 401(k)" has the meaning specified in Section
7.5(f)(i).
56. "Inventory" means all inventories of raw materials, work-in-
process, finished goods, merchandise and other supplies, parts,
packaging materials and other accessories related to the Business
and listed on Schedule 1.1(a), which Schedule will be updated
upon preparation of the Adjustment Schedule. The term
"Inventory" shall not include any (a) finished goods returned for
refurbishment, (b) refurbished goods, (c) finished goods sold,
consigned or otherwise delivered to any Person (other than
finished goods on loan from Intergraph to its customers or
potential customers and finished goods held by Intergraph in
inventory for resale or promotional purposes) prior to the
Closing Date, (d) finished goods, materials or other items of
inventory located outside of the United States or (e) any
inventory located at Intergraph's MRCS location.
57. "Inventory Put Option" has the meaning specified in Section
10.2(a).
58. "Inventory Put Period" has the meaning specified in Section
10.2(a).
59. "Inventory Put Purchase Price" has the meaning specified in
Section 10.2(c).
60. "Inventory Value Protection Premium" has the meaning
specified in Section 2.3(e).
61. "IRS" means the Internal Revenue Service.
62. "Law" means any law, statute, rule, regulation, ordinance
and other pronouncement having the effect of law of the United
States, any foreign country or any domestic or foreign state,
county, city or other political subdivision or of any
Governmental or Regulatory Body.
63. "Liability" means any direct or indirect obligation,
indebtedness, liability, Claim, loss, damage (including punitive
or exemplary damages and fines or penalties or interest thereon),
deficiency, obligation or responsibility, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise. With
respect to any indemnification Claim by a Party hereunder, the
term "Liability" shall also include reasonable fees and
disbursements of counsel and expenses of investigation and
defense.
64. "Lien" means any lien, pledge, hypothecation, mortgage,
security interest, Claim, lease, charge, option, right of first
refusal, easement, servitude, transfer restriction under any
stockholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.
65. "Manufacturing Services Agreement" has the meaning specified
in Section 6.1(n).
66. "Material Adverse Effect" means any change or changes or
effect or effects that individually or in the aggregate are or
may reasonably be expected to be materially adverse to the Assets
or Business or the ability of Intergraph to perform its
obligations under this Agreement.
67. "Net Book Value of the Consigned Property" means the net
book value of the Consigned Property listed on Intergraph's Books
and Records as of the Closing Date and calculated in accordance
with GAAP applied on a consistent basis.
68. "Net Book Value of the Inventory" means the net book value
of the Inventory listed on Intergraph's Books and Records as of
the Closing Date and calculated in accordance with GAAP applied
on a consistent basis. In calculating the Net Book Value of the
Inventory for all purposes under this Agreement, any Inventory
identified on Schedule 1.1(a) which is missing on the Closing
Date, any Inventory which is defective or in transit on the
Closing Date, and any Inventory which has been under repair for
in excess of 30 days prior to the Closing Date, will be valued at
$0.
69. "Net Worth" means the sum of the Agreed to Value of the
Tangible Property plus the Net Book Value of the Inventory. In
calculating Net Worth for all purposes under this Agreement, no
effect will be given to "re-valuations" of Inventory or Tangible
Property attributable to transfers of such Inventory or Tangible
Property among Intergraph and its Affiliates or transfers of such
Inventory or Tangible Property from a location to any other
location.
70. "Obsolete Inventory" has the meaning specified in Section
4.12.
71. "Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Body, in each
case whether preliminary or final.
72. "Ordinary Course of Business" means any transaction in
relation to the Business which constitutes an ordinary day-to-day
business activity of Intergraph conducted in a reasonable and
businesslike manner consistent with Intergraph's past practices.
73. "Party" means each of SCI and Intergraph.
74. "Person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock Intergraph, trust,
unincorporated organization, Governmental or Regulatory Body or
other entity.
75. "Personal Property Leases" has the meaning specified in
Section 4.14(a).
76. "Preliminary Net Book Value of the Inventory" means
$54,658,450, which represents the Net Book Value of the Inventory
as of the respective dates specified in Schedule 1.1(a).
77. "Preliminary Net Worth" has the meaning set forth in
Section 2.1.
78. "Premium" means the sum of the Tax Basis Inventory
Adjustment plus the Inventory Value Protection Premium plus the
Contract Sales Price Adjustment.
79. "Products" has the meaning specified in the first Recital of
this Agreement and includes the items listed on Schedule 1-79.
80. "Protest Notice" has the meaning specified in Section
2.3(c).
81. "Purchase Price" has the meaning specified in Section 2.1.
82. "Purchase Price Adjustment" has the meaning specified in
Section 2.3(a).
83. "Real Estate Lease Agreement" has the meaning specified in
Section 6.1(l).
84. "Release" means any release, spill, emission, leaking,
pulping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment,
including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
85. "Recipient" has the meaning specified in Section 11.3(a).
86. "Savings Plan" has the meaning specified in Section
7.5(f)(i).
87. "SCI" has the meaning specified in the first paragraph of
this Agreement.
88. "SCI E&O Offset" means $420,000, which represents the net
book value of the E&O inventory held by SCI as of the Closing.
89. "Tangible Property" means the furniture, fixtures, handling,
printing and other equipment, machinery, warehouse racking,
vehicles, fork-lift trucks, computers and other tangible personal
property used or held for use exclusively in the conduct of the
Business at the Facility or Intergraph's premises and listed on
Schedule 1.1(b), which Schedule will be updated upon preparation
of the Adjustment Schedule. The term "Tangible Property" does
not include (a) the Consigned Property and (b) any tangible
property used by Intergraph exclusively in its distribution
center and not in the conduct of the Business.
90. "Tax Basis Inventory Adjustment" has the meaning specified
in Section 2.1.
91. "Tax Return" means any return, report, information return,
or other document (including any related or supporting
information) filed or required to be filed with any federal,
state, local, or foreign governmental entity or other authority
in connection with the determination, assessment or collection of
any Tax (whether or not such Tax is imposed on Intergraph) or the
administration of any laws, regulations or administrative
requirements relating to any Tax.
92. "Tax" and "Taxes" mean all taxes, charges, fees, levies or
other assessments imposed by any federal, state, local or foreign
taxing authority, whether disputed or not, including, without
limitation, income, capital, estimated, excise, property, sales,
transfer, withholding, employment, payroll, and franchise taxes
and such terms shall include any interest, penalties or additions
attributable to or imposed on or with respect to such
assessments.
93. "Transaction Documents" mean this Agreement, the
Intellectual Property License Agreement, the Real Estate Lease
Agreement, the Manufacturing Services Agreement, the Transition
Services Agreement and the Conveyancing Documents.
94. "Transfer" has the meaning specified in Section 7.5(f)(ii).
95. "Transition Services Agreement" has the meaning specified in
Section 6.1(o).
96. "Unused Inventory" has the meaning specified in Section
10.2(a).
97. "Vacation Accrual" has the meaning specified in Section 2.1.
Exhibit A
November 13, 1998
SCI Technology, Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35807
Ladies and Gentlemen:
The undersigned has served as counsel to Intergraph Corporation,
a Delaware corporation ("Intergraph"), in connection with the
negotiation, execution and delivery of that certain Asset
Purchase Agreement, dated as of November 13, 1998 (the "Asset
Purchase Agreement"), by and between Intergraph and SCI Technology, Inc.,
an Alabama corporation ("SCI"), and in connection with the
transactions provided for and contemplated by the Asset Purchase
Agreement and the Transaction Documents (collectively, the "Transactions").
This opinion letter is rendered to you pursuant to Section 6.1(k)
of the Asset Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to them in the
Asset Purchase Agreement.
In giving this opinion, the undersigned has examined
originals or documents certified or otherwise identified to his
satisfaction as copies of the following documents, and, to the
extent deemed appropriate by the undersigned, has relied on the
following documents:
1. Asset Purchase Agreement;
2. Transaction Documents;
3. Corporate proceedings of Intergraph relating to the authorization
and consummation of the Transactions;
4. Certificate of Incorporation and By-laws of Intergraph, together
with all amendments thereto;
5. Certificate of the Secretary of State of Delaware attesting
to the continued corporate existence of Intergraph; and
6. Such other documents, agreements and records and such other
investigations by the undersigned as deemed appropriate and
relevant by the undersigned in order to furnish the opinions set
forth below.
The documents referred to in clauses (1) and (2) above are
collectively referred to as the "Documents".
In connection with such examination, the undersigned has
assumed, without verifying such assumptions, the genuineness of
all signatures (other than the signatures of Intergraph), the
authenticity of all documents submitted to the undersigned as
original documents, the conformity to original documents of all
documents submitted to the undersigned as certified, conformed,
photostatic or facsimile copies, and the authenticity of the
originals of such documents. The undersigned has also assumed,
without verifying such assumptions, that all documents executed
by a party other than Intergraph were duly and validly executed and
delivered by such party and are legal, valid and binding
obligations of such party, enforceable against such party in
accordance with their respective terms. As to certain questions
of fact that are material and relevant to this opinion, the
undersigned has relied upon certificates of appropriate state and
local officials.
The undersigned is admitted to practice only in the State of
Alabama, and expresses no opinion as to matters under or
involving laws of any jurisdiction other than the laws of the
State of Alabama and the laws of the United States of America.
To the extent that the undersigned expresses an opinion regarding
any document based upon any laws other than the State of Alabama
and the laws of the United States of America, the undersigned has
assumed, with your permission, that such laws are identical to
the laws of the State of Alabama.
Based upon and subject to the foregoing, it is the opinion
of the undersigned that:
1. Intergraph is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has
full corporate power and authority to own its own properties and
carry on its business as it is now being conducted.
2. Intergraph is duly qualified and in good standing as a foreign
corporation under the laws of the State of Alabama.
3. Intergraph has the full corporate power and authority to execute and
deliver each of the Documents to which it is a party and to
perform its obligations thereunder.
4. Intergraph has duly authorized the execution and delivery of each
of the Documents to which it is a party and all performance by
Intergraph thereunder.
5. Intergraph has duly executed and delivered each of the Documents to
which it is a party.
6. Each of the Documents to which Intergraph is a party constitutes
the valid and binding obligation of Intergraph, and each of such
Documents is enforceable against Intergraph in accordance with its
terms, except (a) as may be limited by, subject to or affected by
(i) applicable bankruptcy, insolvency, reorganization,
moratorium, arrangement of debt, fraudulent conveyance, or
similar laws or decisions now or hereafter in effect relating to
or affecting the enforcement of creditors' rights generally; (ii)
the application of public policy principles affecting the
enforcement of certain types of obligations; and (iii) the effect
of general principles of equity (regardless of whether
enforcement is considered in proceedings at law or in equity)
upon the enforceability of any of the remedies, covenants or
other provisions of such Documents or upon the availability of
injunctive relief, specific performance or other equitable
remedies; and (b) with respect to provisions of such Documents
that provide for the parties thereto to agree at some future
date, no opinion is expressed herein with respect to the validity
or enforceability of any agreements that may be made by such
parties at any such future date.
7. To the undersigned's knowledge, except as set forth in the
Documents or the Schedules thereto, and except for filings
required under the HSR Act, no approvals or consents by, or
filings with, any federal or State of Alabama governmental
authority are required in connection with the execution and
delivery by Intergraph of the Documents to which it is a party, or the
consummation of the Transactions.
Except as disclosed in the Documents or the Schedules
thereto, the execution and delivery by Intergraph of each of the
Documents to which it is a party do not, and if Intergraph were now to
perform its obligations under each of the Documents to which it
is a party such performance would not, result in any:
(1) violation of Intergraph's Certificate of Incorporation or Bylaws;
(2) subject to the obtaining of all required consents from
governmental entities having jurisdiction, any violation of any
federal or State of Alabama law, rule, regulation, commitment,
order, judgment or decree applicable to Intergraph or by which any of
its property is bound or affected; or
(3) to the best of the undersigned's knowledge, violation of any
other agreement or instrument to which Intergraph is a party or
to which Intergraph or any of its property is subject that would
materially adversely affect the purchase of the Assets in
accordance with the Asset Purchase Agreement or the consummation
of the Transaction.
Based on the limitations and qualifications set forth
herein, the undersigned confirms to you that to his knowledge no
litigation or other proceeding against Intergraph or any of its
properties with respect to the Transactions is pending or overtly
threatened by a written communication to Intergraph before any
Governmental or Regulatory Body which has not been disclosed in Section
4.10 of the Asset Purchase Agreement.
The undersigned expresses no opinion as to any matter other
than is expressly set forth above, and no other opinion is
intended to be implied nor may be inferred herein. This opinion
is given as of the date hereof, and it should be noted that
material changes regarding matters of fact and applicable law may
hereafter occur. The undersigned disclaims any undertaking to
revise or supplement the foregoing opinions or to advise you of
any change in the law, whether by legislative or regulatory
action, judicial interpretation or otherwise, or of any change of
facts as they currently exist or which may subsequently be
brought to the attention of the undersigned. This opinion is
being furnished only to the addressee hereof and is solely for
its benefit and use in connection with the Transactions. This
opinion may not be relied upon by any other person or entity or
for any other purpose without the prior written consent of the
undersigned.
Very truly yours,
/s/ David Vance Lucas
David Vance Lucas
Senior Counsel
DVL/tb
Exhibit B
LEASE AGREEMENT
This Lease Agreement (the "Lease") is effective the 13th
day of November, 1998, by and between Intergraph Corporation,
with principal offices located at Huntsville, Alabama 35894
("Landlord") and SCI Technology, Inc., with principal offices
located at 2101 West Clinton Avenue, Huntsville, Alabama 35807
("Tenant").
ARTICLE I: BASIC PROVISIONS
1.1 FUNDAMENTAL TERMS: The fundamental terms contained in this
section are to be incorporated in the applicable sections
elsewhere in this Lease. The fundamental terms are:
a. Landlord: Intergraph Corporation,
a Delaware corporation
b. Tenant: SCI Technology, Inc.,
an Alabama corporation
c. Description of Premises: Buildings 14, 21, and 28
Intergraph Way,
Madison, Alabama.
d. Term: Commencing on November 14, 1998
(the "Commencement Date") and
ending on April 30, 1999 (the
"Termination Date"), with rights of
early termination.
e. Rental Commencement Date: November 14, 1998
f. Base Rent: $10.00 a month for the Lease term.
g. Security Deposit: N/A
h. Tax Payment: N/A
i. Insurance Payment: N/A
j. Common Area Maintenance: N/A
k. Use: General Office Usage and For Development,
Assembling, Manufacturing, and
Shipping of computer products
l. Optional Extensions: To be mutually agreed upon by
the parties.
1.2 EXHIBITS: The following exhibit is attached to and made a
part of this Lease.
A. Premises Description - Buildings 14, 21, and 28, Intergraph
Way, Madison, Alabama, and parking areas to East and West of
Premises.
1.3 DEFINITIONS: As used in this Lease, the following terms
shall have the following meanings:
a. Premises: "Premises" shall mean the leased areas specified
on Exhibit "A" consisting of manufacturing and office space
and related parking.
b. Common Area: The "Common Area" shall mean all service
roads, sidewalks or other areas for use in common by the
Tenant and Landlord, and their respective employees and
business invitees under the terms of this Lease and the
other rules and regulations prescribed from time to time by
the Landlord.
c. Lease Month: Except for the partial month at the beginning
and the end of the Term, if any, the term "Lease Month"
shall mean a calendar month.
ARTICLE II: LEASE OF PREMISES
2.1 LEASE OF PREMISES: Landlord hereby leases to Tenant, and
Tenant leases and accepts from Landlord, subject to the terms and
conditions of the Lease, the Premises and the non-exclusive right
to use the Common Area.
ARTICLE III: TERM
3.1 TERM: The term of this Lease shall be for a period
commencing on the Commencement Date and terminating on April 30,
1999, unless sooner terminated (the "Lease Term"). Landlord and
Tenant may, upon mutual agreements, terminate this Lease at any
time upon 30 days notice.
3.2 EARLY ENTRY: Prior to the Commencement Date, Tenant may
enter the Premises, with the prior consent of Landlord, to
install, inspect, and/or install or place fixtures and equipment.
Any work done by Tenant shall be done in a manner as will not
interfere with the Landlord's current use or occupation of the
Premises or Common Area. Landlord shall have no liability or
responsibility for loss of, or any damage to fixtures, equipment
or other property of Tenant so installed or placed on the
Premises prior to the Commencement Date.
ARTICLE IV: RENT AND OTHER TENANT CONTRIBUTIONS
4.1 BASE RENT: Tenant shall pay to Landlord as Rent for the
Premises a monthly fee of $10.00 ("Base Rent") for the term of
this Lease, payable on the first (1st) day of each calendar month
at Landlord's address as shown in Section 13.6 or at such other
place as Landlord may designate from time to time. Should the
Commencement Date be a date other than the first day of the
month, Tenant shall pay, on the date occupancy commences, rent
for the fractional month on a per diem basis (calculated on the
basis of a thirty (30) day month). For any extension of the term
of the Lease, the Base Rent shall be adjusted to the fair market
rental value of the Premises, including the value of all services
and utilities provided by Landlord under the Lease, as mutually
agreed upon by the parties.
4.2 RIGHT TO INSPECT: At reasonable times and, except in cases
of emergency, with twenty-four hours prior notice to Tenant, the
Landlord or its designated agent may inspect the Premises for
determining Tenant's compliance with the terms of the Lease.
Said inspection shall be at the expense of Landlord. All records
furnished Landlord shall be confidential except that Landlord may
furnish copies to any mortgagee. Landlord shall exercise
reasonable efforts to minimize disruption to, or interference
with, Tenant's business operations on, or Tenant's employees at,
the Premises.
4.3 PAYMENT OF CHARGES: Should Tenant fail to pay within 10
days from the date due, the Base Rent, or any other sum or charge
payable by Tenant under this Lease, Tenant shall pay a late
charge in an amount equal to 5% of the amount due.
ARTICLE V: USE OF PREMISES
5.1 TENANT'S USE: The Premises shall be used and occupied
solely for the purpose set forth in Section 1.1 and for no other
purpose without Landlord's prior written consent, which consent
shall not be unreasonably withheld. Tenant shall comply with all
rules, regulations and laws of any governmental authority with
respect to Tenant's particular use and occupancy of the Premises
and shall not violate in any manner any of the rights of the
Landlord, or any other tenants.
5.2 UTILITIES: "Utilities", including but not limited to
electricity, gas, water and sewage shall be provided by the
Landlord. In no event shall Landlord be liable for any
interruption or failure in the supply of any utilities to the
Premises.
5.3 SIGNS: Tenant shall not place on any exterior door, wall or
window of the Premises any sign or advertising matter without
first obtaining Landlord's written consent which consent shall
not be unreasonably withheld. Tenant agrees to maintain such
sign or advertising matter as approved by Landlord in good
condition and repair. All signs shall comply with applicable
ordinances or other governmental restrictions and the
determination of such requirements and the prompt compliance
therewith shall be the responsibility of the Tenant.
5.4 OCCUPANCY: Tenant will use the Premises and Common Area for
a computer manufacturing environment. Tenant shall have access
to the Premises twenty-four (24) hours a day, seven (7) days a
week.
5.5 SECURITY: Tenant will be responsible for complying with
Landlord's Premises security requirements as mutually agreed to
with Landlord including, but not limited to;, monitoring, access,
theft and vandalism. If Tenant contracts out its own security
requirements, Tenant agrees to notify Landlord of contractor
selection within seven (7) business days.
ARTICLE VI: MAINTENANCE SERVICES AND REPAIRS
6.1 TENANT'S DUTY OF MAINTENANCE AND REPAIR:
Except for repair required of the Landlord in Section 6.3
hereof, or any conditions existing as of the Rental Commencement
Date, Tenant shall keep and maintain the Premises in a clean,
sanitary and safe condition and in accordance with all required
rules and regulations of the governmental agencies having
jurisdiction with respect to Tenant's particular use of the
Premises, and of Landlord, and Tenant shall comply with, and
maintain the Premises in compliance with all requirements of law,
by statute, ordinance or otherwise with respect to Tenant's
particular use of the Premises, affecting the Premises and the
appurtenances thereto. Without limiting the generality of the
foregoing, Tenant shall fully, completely and timely comply with
all Environmental Laws, as defined in that certain Asset Purchase
Agreement dated November 13, 1998, by and between Landlord and
Tenant (the "Purchase Agreement") regarding the operation of its
business on the Premises and Tenant shall not generate, handle,
treat, store or dispose of Hazardous or Toxic Substances (as
defined in the Purchase Agreement) on, under or in, or transport
Hazardous or Toxic Substances from, the Premises except in full
compliance with applicable Environmental Laws. If Tenant fails
to commence and to complete repairs or other obligations set
forth above, promptly and adequately, Landlord may, but shall not
be required to, make and complete said repairs or other
obligations and Tenant shall promptly pay the cost thereof as
additional rent upon demand by Landlord.
6.2 SURRENDER OF PREMISES: At termination of this Lease the
Tenant agrees to deliver the Premises in the same condition as
the Premises were on the Commencement Date, reasonable wear and
tear expected. Tenant shall surrender to Landlord all keys and
access cards for the Premises at the place then designated for
the payment of Base Rent. During the last thirty (30) days of
such term, Tenant shall remove all trade fixtures and equipment
purchased by Tenant from Landlord pursuant to the Purchase
Agreement or which have been installed by Tenant, and any other
installations, alterations or improvements made by Tenant, to the
extent reasonably required by Landlord and Tenant shall repair
any damage to the Premises caused by the removal of such items.
Tenant's obligation to observe or perform this covenant shall
survive the termination of the Term. Any items remaining in the
Premises on the termination of this Lease shall be deemed
abandoned for all purposes and shall become the property of
Landlord. Landlord may dispose of such abandoned property
without liability of any type or nature.
6.3 LANDLORD'S DUTY TO REPAIR: Landlord shall keep and maintain
the foundation, exterior walls and roof of the building in which
the Premises are located and the structural portions of the
Premises which were installed by Landlord, including but not
limited to doors, door frames, door checks, windows, window
frames and plate glass, plumbing, electrical, sewage, water,
HVAC, and security systems, in good repair, except for any
repairs caused in whole or in part by the willful act or
negligent act of Tenant, its agents, employees, invitees,
licensees or contractors. Landlord shall not be required to make
any other improvements or repairs of any kind upon the Premises.
Any repairs required as a result of the willful or negligent act
of Tenant, its agents, employees, invitees, licensees or
contractors as above described, shall be made by Tenant.
Landlord shall maintain Common Area in the same condition as the
Common Area on the Commencement Date, reasonable wear and tear
excepted.
6.4 TENANT'S ALTERATIONS: Tenant shall not alter the Premises
or any part thereof, and shall not install any fixtures or
equipment to be used in connection with Tenant's business,
without first obtaining the written approval of Landlord, which
consent shall not be unreasonably withheld.
6.5 MECHANIC'S LIENS: If Tenant makes any repairs or
alterations to the Premises, Tenant shall promptly pay all costs
related thereto. Tenant does not have any right or authority to
place any lien, claim or encumbrance of any kind against the
Premises or Landlord's right and interest therein. Tenant shall
cause all steps as are provided by law for the filing of
statutory bond prior to the initiation of any construction with
respect to the Premises. If a mechanic's or materialmen's lien
is filed by any contractor or supplier, Tenant will promptly pay
same and take steps immediately to have same removed or have such
lien bonded over. If the lien is not removed or paid within the
ten (10) days from the date of written notice from Landlord,
Landlord may, at its option, pay the amount alleged due or any
portion thereof and the amounts so paid, including attorney's
fees and expenses connected therewith, and interest at 10% per
annum on any sums advanced, shall be deemed to be additional rent
and shall be paid to Landlord immediately upon demand. Tenant
will indemnify and save harmless Landlord from and against all
loss, claims, damages, costs or expenses suffered by Landlord by
reason of any repairs, installations or improvements made by
Tenant.
6.6 ROOF: Tenant will not in any manner cut or drive nails into
or otherwise mutilate the roof of the Premises; Tenant will not
place or affix anything to the roof of the Premises, or the
exterior of building in which the Premises is located, without
first obtaining the written consent of Landlord. Tenant will be
responsible for any damage caused to the roof by any act of the
Tenant, its agent, employees, invitees or contractors of any type
or nature.
6.7 JANITORIAL/CLEANING: Landlord, directly or through
independent contractors, shall provide routine cleaning of the
Premises and all refuse and/or debris removal.
ARTICLE VII: INSURANCE
7.1 INDEMNIFICATION BY TENANT: Tenant will indemnify Landlord
for, and hold harmless Landlord from and against (a) all fines,
suits, claims, demands, liabilities, and actions (including costs
and expenses of defending against all such actions) resulting or
alleged to result from any breach, violation or nonperformance of
any covenant or condition hereof by Tenant, and (b) all claims,
demands, actions, damages, losses, costs, liabilities, expenses
and judgments suffered by, recovered from or asserted against
Landlord on account of injury or damage to person or property to
the extent that any such damage or injury may be incident to,
arise out of, or be caused either proximately or remotely, wholly
or in part, by an act, omission, negligence or misconduct on the
part of Tenant, or any of their agents, servants, employees,
patrons, guests, licensees or invitees or of any other person
entering upon the Premises under or with the express or implied
invitation or permission of Tenant or when any such injury or
damage is the result, proximate or remote, of the violation by
Tenant or any of its agents, servants, employees, patrons,
guests, licensees or invitees of any law, ordinance or
regulation, or when any such injury or damage may in any other
way arise from or out of the occupancy or use by Tenant, its
agents, servants, employees, patrons, guests, licensees or
invitees of the Premises or the Common Area; provided, however,
that the foregoing indemnity shall not apply to the extent such
claims result from the negligence or willful misconduct of
Landlord or Landlord's officers, agents, employees, customers,
licensees or invitees. Landlord shall not be liable for any
damages to or loss of Tenant's personal property, inventory,
fixtures, or improvements from any cause whatsoever, except the
negligence or willful misconduct of Landlord, its officers,
agents, employees, customers, licensees or invitees, and then
only to the extent not covered by insurance to be obtained by
Tenant in accordance with this Lease.
7.2 NOTICE OF CLAIM OR SUIT: Tenant agrees to promptly notify
Landlord of any claim, action, proceeding or suit instituted or
threatened against the Landlord of which Tenant has actual notice
thereof. In the event Landlord is made a party to any action
arising out of or resulting in any way from any act or omission
of Tenant, Tenant shall provide effective counsel in such
litigation or shall pay, at Landlord's option, the reasonable
attorney's fees and costs incurred by Landlord in connection with
said claim.
7.3 INDEMNIFICATION BY LANDLORD: Landlord agrees to indemnify,
protect, defend and hold Tenant harmless from all claims,
demands, costs, expenses, damages and liabilities (including
reasonable costs and expenses of defending against such claims,
demands, costs, expenses, damages and liabilities) resulting from
damage to property, or from injury to or death of persons to the
extent resulting from the negligence or willful misconduct of
Landlord or Landlord's officers, agents, employees, customers,
licensees or invitees. Provided, however, that the foregoing
indemnity shall not apply (i) to the extent Tenant is compensated
for such claims by any insurance policies maintained by Tenant or
Landlord, or (ii) to the extent Tenant would have been
compensated by any insurance policies required to be maintained
by Tenant under this Lease had such policies been so maintained.
7.4 DAMAGES FROM CERTAIN CAUSES: Landlord and Tenant shall not
be liable to the other for any loss or damage to any property, or
injury to or death of any person, occasioned by theft, fire, act
of God or the public enemy, injunction, riot, strike,
insurrection, war, requisition or order of governmental body or
authority, the acts or omissions of their respective independent
contractors or any other cause beyond the control of Landlord or
Tenant.
7.5 TENANT INSURANCE: Tenant agrees to maintain, at its
expense, at all times during the Term (i) fire and extended
coverage insurance for full replacement cost of the Premises and
its contents and (ii) general liability insurance naming Landlord
as additional insured in an amount not less than $500,000 per
person and $1,000,000 per accident for injuries or, damages to
persons, and not less than $5,000,000 damage or destruction of
property, and (iii) workers' compensation insurance written by
insurers licensed to do business in the State of Alabama. Tenant
shall deliver to Landlord certificates of such insurance, which
provides that the insurance policies may not be canceled or
amended in whole or in part, without first giving Landlord
written notice of the intention to cancel or amend at least ten
(10) days in advance.
7.6 FAILURE TO PROCURE INSURANCE: In the event Tenant shall
fail to maintain the required insurance policies in force
continuously during the term, Landlord shall be entitled to
procure the same and Tenant shall immediately reimburse Landlord
for such premium expense.
7.7 INCREASE IN FIRE INSURANCE PREMIUM: Tenant agrees not to
keep upon the Premises any articles or goods which may be
prohibited by the standard form of fire insurance policy. It is
agreed between the parties that in the event the insurance rates
applicable to fire and extended coverage insurance covering the
Premises shall be increased by reason of any use of the Premises
made by the Tenant, then Tenant shall pay increased premium
therefor.
7.8 PROPERTY OF TENANT: Tenant agrees that all property owned
by it in, on or about the Premises shall be at the sole risk and
hazard of the Tenant. Except to the extent caused by the
negligence or willful misconduct of Landlord, Landlord shall not
be liable or responsible for any loss of or damage to Tenant, or
otherwise, whether caused by or resulting from a peril, or from
water, steam, gas, leakage, plumbing, electricity or electrical
apparatus, pipe or apparatus of any kind, the elements or other
similar or dissimilar causes, and whether or not originating in
the Premises or elsewhere. Tenant assumes all risk for security
of the Premises but not the Common Area except for matters
arising out of Landlord's negligence or willful misconduct.
ARTICLE VIII: FIRE OR OTHER CASUALTY
8.1 CASUALTY DAMAGE: If the Premises or any part thereof shall
be damaged by fire or other casualty, Tenant shall give prompt
written notice thereof to Landlord. In the event the Landlord
decides in its discretion not to repair or restore the Premises
or in the event any mortgagee of Landlord's should require that
the insurance proceeds payable as a result of a casualty be
applied to the payment of the mortgage debt or in the event of
any material uninsured loss to the Premises, Landlord may, at its
option, terminate this Lease by notifying Tenant in writing of
such termination within thirty (30) days after the date of such
damage. If Landlord does not thus elect to terminate this Lease,
Landlord shall commence and proceed with reasonable diligence to
restore the Premises to substantially the same condition in which
it was immediately prior to the happening of the casualty, except
that Landlord shall not be required to spend for such work an
amount in excess of the insurance proceeds actually received by
Landlord as a result of the casualty. Landlord shall not be
liable for any inconvenience or annoyance to Tenant or injury to
the business of Tenant resulting in any way from such damage or
the repair thereof, except that, Landlord shall allow Tenant an
abatement of rent during the time and to the extent the Premises
are unfit for occupancy.
In the event that Landlord shall determine that restoration
of the Premises: (i) will take longer than sixty (60) days; or
(ii) in the event such restoration is not, in fact, completed
within sixty (60) days, then in any such event either of Landlord
or Tenant shall be entitled to cancel this Lease by written
notice to such effect. In the event of any casualty to the
Premises, which renders the Premises unfit for occupancy, the
rent payable by Tenant hereunder shall equitably abate from the
date of such casualty until the completion of Landlord's required
restoration or until the date of cancellation of this Lease.
ARTICLE IX: ASSIGNMENT AND SUBLETTING
9.1 TENANT ASSIGNMENT: Tenant shall not assign, sublease,
transfer, pledge, or encumber this Lease or any interest therein
without Landlord's prior written consent which consent shall not
be unreasonably withheld. Any attempted assignment, sublease or
other transfer or encumbrance by Tenant in violation of the terms
and covenants of this paragraph shall be void. Notwithstanding
any provision contained in the Lease to the contrary, Tenant
shall have the right, without Landlord's consent, to assign this
Lease or sublet all or any part of the Premises to any
"Affiliate" of Tenant, as defined in the Purchase Agreement.
Prior to any such assignment or sublease, other than to an
"Affiliate" of Tenant, Tenant shall provide Landlord with a
written notice specifying the name of the assignee or sublessee
and also providing Landlord with a copy of the instrument of
assignment or sublease. Consent of Landlord to one assignment,
subletting, or granting shall not constitute a waiver of
Landlord's rights with respect to any other assigning, subletting
or granting. In no event shall Tenant assign the Lease or permit
the use of any portion of the Premises for any use which will
conflict with the use rights of the Landlord in the Premises or
Common Areas. Any assigning, subletting or granting,
notwithstanding the consent of the Landlord, shall not in any
manner release the Tenant herein from its continued liability for
the performance of the provisions of this Lease and any
amendments or modifications then or thereafter a part of this
Lease. The acceptance of any rental payments by Landlord from
any alleged assignee shall not constitute approval of the
assignment of this Lease by the Landlord.
9.2 BANKRUPTCY, ETC.: Neither this Lease, nor any interest
therein, nor any estate created hereby, shall pass to any trustee
or receiver in bankruptcy, nor to any other receiver or assignee
for the benefit of creditors or otherwise by operation of law.
In the event of bankruptcy or assignment for the benefit of
creditors, Landlord shall be deemed a secured creditor as to the
next six months' rental to the extent permitted by the applicable
federal or state laws unless the rental is otherwise paid
hereunder. As to any additional loss of rent, Landlord shall be
entitled to file as a general creditor.
ARTICLE X: DEFAULT AND RE-ENTRY
10.1 EVENTS OF DEFAULT BY TENANT: The happening of any one or
more of the following listed events ("Events of Default") shall
constitute a breach of this Lease by Tenant:
(a) The failure of Tenant to pay any rent or any other sums
of money within ten (10) days after receipt of written notice
from Landlord that such rent or other sum of money is due;
provided, however that Landlord shall only be required to notify
Tenant in writing of such failure to pay two (2) times during any
twelve month period, and after the second such written notice
within such twelve (12) month period, it shall be an Event of
Default if Tenant shall fail to pay any rent or any other sums of
money within ten (10) days of the date such amounts are due.
(b) Except for the payment of rent and other sums of money
hereunder, the failure of Tenant, within thirty (30) days after
receipt of written notice from Landlord, to comply with any
provision of this Lease or any other agreement between Landlord
and Tenant, all of which terms, provisions and covenants shall be
deemed material; provided, however, that if the nature of
Tenant's failure is such that it cannot reasonably be cured
within such thirty (30) day period, the time for curing such
failure shall be extended for such period of time as may be
necessary to complete such cure provided Tenant shall proceed
promptly to cure the same and shall prosecute such cure
continuously, in good faith and with due diligence.
(c) If the Tenant shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Tenant or
of all or a substantial part of its assets, (ii) admit in writing
its inability to pay its debts as they come due, (iii) make a
general assignment for the benefit of creditors, (iv) file a
petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law other than
the Federal Bankruptcy Code, (v) file an answer admitting the
material allegations of a petition filed against the Tenant in
any reorganization or insolvency proceedings, other than a
proceeding commenced pursuant to the Federal Bankruptcy Code, or
if any order, judgment or decree shall be entered by any court of
competent jurisdiction, except for a bankruptcy court or a
federal court sitting as a bankruptcy court, adjudicating the
Tenant insolvent, or approving a petition seeking reorganization
of the Tenant, or appointing a receiver, trustee or liquidator of
the Tenant or of all or a substantial part of its assets.
10.2 LANDLORD'S REMEDIES FOR TENANT DEFAULT: Upon the occurrence
of any Event or Events of Default by Tenant, whether enumerated
in Section 10.1 or not, Landlord shall have the option, at
Landlord's election, to pursue any one or more of the following
remedies:
(a) Landlord may cancel and terminate this Lease and
dispossess Tenant;
(b) Landlord may without terminating or canceling this
Lease declare the "Present Value" of all amounts and rents due
under this Lease for the remainder of the existing term (or any
applicable extension or renewal thereof) to be immediately due
and payable; and thereupon all rents and other charges due
hereunder to the end of the initial term or any renewal term, if
applicable, shall be accelerated. In the event Landlord elects
to so accelerate, Tenant shall be responsible for paying, as
liquidated damages and not as a penalty, an amount equal to the
present value of the Base Rental and any additional rent provided
in this Lease Agreement for the remainder of the stated term
hereof. For purposes of calculating the "Present Value" pursuant
to this Section 10.2(b), the Base Rental and any additional rent
for the remainder of the term of this Lease shall be discounted
at a rate equal to eight percent (8%). This payment is an agreed
upon sum in the face of unknown losses to Landlord which cannot
be ascertained with certainty by the parties at the present time,
and as such constitutes agreed upon liquidated damages;
(c) Landlord may elect to enter and repossess the Premises
and relet the Premises for Tenant's account, holding Tenant
liable in damages for all reasonable expenses incurred in any
such reletting and for any difference between the amount of rent
received from such reletting and the amount due and payable under
the terms of this Lease;
(d) Landlord may enter upon the Premises and do whatever
Tenant is obligated to do under the terms of this Lease (and
Tenant shall reimburse Landlord on demand for any reasonable
expenses which Landlord may incur in effecting compliance with
Tenant's obligations under this Lease, and Landlord shall not be
liable for any damages resulting to the Tenant from such action
except for Landlord's negligence and willful misconduct).
10.3 LEGAL REMEDIES: Notwithstanding the provision of this
Lease, it is agreed between the parties that the remedies
provided for herein in the event of default are in addition to
and not in lieu of any other remedies or relief made available to
the Landlord or Tenant under the laws of the State of Alabama,
which latter remedies or relief shall be likewise available in
the event of a breach of any of the terms of this Lease.
10.4 ATTORNEY'S FEES: In the event that either party shall be
required to engage legal counsel for the enforcement of any of
the terms of this Lease, whether such employment shall require
institution of suit or other legal services required to secure
compliance on the part of a party hereto, the non-prevailing
party shall be responsible for and shall promptly pay the
prevailing party's reasonable attorney's fees and expenses.
ARTICLE XI: COMMON AREA
11.1 CONTROL OF COMMON AREA: All driveways, entrances and exits
thereto, sidewalks, ramps, landscaped areas, exterior stairways,
and all other Common Area provided by Landlord for the common use
of Tenant's and Landlord's officers, agents, employees and
customers, shall at all times be subject to the exclusive control
and management of Landlord, and Landlord shall have the right
from time to time, and as often as desirable, to establish,
modify and enforce reasonable rights and regulations with respect
to the use of all the Common Area. Landlord shall have the
exclusive right at any and all times to close any portion of the
Common Area for any purpose including without limitation making
repairs, changes or additions thereto and may change the size,
area or arrangement of the parking areas, or the lighting thereof
within or adjacent to the existing areas and may enter into
agreements with adjacent owners for cross-easements for parking,
ingress or egress. In the event that the lighting controls for
the Common Area shall be located within the Premises, Landlord
shall have the right to enter the Premises of the Tenant for the
purpose of operating, maintaining and repair of such controls and
related wiring.
ARTICLE XII: EMINENT DOMAIN
12.1 SUBSTANTIAL TAKING: If the whole or substantially the whole
of the Premises or such portion thereof which renders the
Premises unusable by Tenant should be taken for any public or
quasi-public use, by right of eminent domain or otherwise or
should be sold in lieu of condemnation, then this Lease shall
terminate as of the date when physical possession of the Premises
is taken by the condemning authority. If less than the whole or
substantially the whole of the Premises is thus taken or sold
such that the Premises are unusable as a result of a condemnation
and Tenant will be prevented from carrying on its normal business
operations for a period of 60 days or more, either party may
terminate this Lease by providing written notice to the other
party. Upon such termination, the obligations of the parties
hereunder, including the obligation of the Tenant to pay rent,
shall cease as of the day the Premises became unusable as a
result of such condemnation or taking.
If this Lease is not so terminated upon any such partial
taking or sale, the rent payable hereunder shall be diminished by
an equitable amount based on the portion of the Premises taken,
if any, and Landlord shall, to the extent Landlord deems
feasible, restore the Premises to substantially their former
condition, provided, however, Landlord shall not be required to
spend for such work an amount in excess of the amount received by
Landlord as compensation for such damage. All amounts awarded
upon a taking of any part or all of the Premises shall belong to
Landlord, and Tenant shall not be entitled to and expressly
waives all claim to any such compensation, including any award or
ascertainment for the value of Tenant's leasehold estate, which
value is hereby assigned to the Landlord.
12.2 AWARD: Tenant shall not be entitled to participate or
receive any part of the damages or award which may be paid to or
awarded Landlord by reason of a taking under this Article except
where said award shall provide for moving or other reimbursable
expenses for the Tenant under statute trade fixtures or Tenant's
lost profits, in which event the latter shall be received by
Tenant.
ARTICLE XIII: GENERAL PROVISIONS
13.1 LANDLORD'S RIGHT OF ENTRY: At reasonable times and, except
in cases of emergency, with prior notice to Tenant, Landlord may,
during the term of this Lease enter the Premises for the purpose
of inspecting and examining the same, and to show the same to
prospective purchasers or tenants, and make such repairs,
alterations, improvements or additions as Landlord may deem
necessary or desirable. Landlord's right to enter shall, in the
event of an emergency, include the right of the Landlord to
forcibly enter said Premises without rendering Landlord or
Landlord's agents or employees liable therefor. During any such
inspection or entry by Landlord, other than those required by
emergency, Tenant shall have the right to escort and accompany
the persons performing the inspection to any areas of the
Premises deemed confidential by Tenant. During the ninety (90)
days prior to the expiration of the term of this Lease, Landlord
may exhibit the Premises to prospective tenants or purchasers,
and place upon the Premises the usual notices advertising the
Premises for sale or lease, as the case may be, which notices
Tenant shall permit to remain thereon without molestation.
Nothing herein contained, however, shall be deemed or construed
to impose upon Landlord any obligation, responsibility or
liability whatsoever for the care, maintenance or repair of the
building or any part thereof, except as otherwise herein
specifically provided.
13.2 QUIET ENJOYMENT: Landlord agrees that, if the rent is being
paid in the manner and at the time prescribed and the covenants
and obligations of Tenant being all and singular kept, fulfilled
and performed, Tenant shall lawfully and peaceably have, hold,
possess, use and occupy and enjoy the Premises so long as this
Lease remains in force, without hindrance, disturbance or
molestation from Landlord, subject to the specific provisions of
this Lease.
13.3 WAIVER: Waiver by Landlord of any default, breach or
failure of Tenant under this Lease shall not be construed as a
waiver of any other existing or future default, breach or
failure. In case of a breach by Tenant of any of the covenants
or undertakings of Tenant, Landlord nevertheless may accept from
Tenant any payment or payments hereunder without in any way
waiving Landlord's right to exercise any right or remedy provided
for by reason of any other existing or future breach.
13.4 SUBORDINATION: This Lease is and shall be subject and
subordinate to any mortgage, or other lien created by Landlord,
whether now existing or hereafter arising upon the Premises, and
to any renewals, financing and extensions thereof. Tenant agrees
within ten (10) business days of demand to execute such further
instruments subordinating this Lease to any mortgage or other
lien now existing or hereafter placed upon the Premises, or
attorning to the holder of any such liens, as Landlord may
request. Notwithstanding the foregoing, Tenant's obligations
under this Section 13.5 are subject to and conditioned upon any
such lienholder's execution and delivery of a non-disturbance
agreement in a form upon which Landlord, Tenant and mortgagee may
mutually agree.
13.5 NOTICES: All notices by either party to the other shall be
made by depositing such notice in the certified mail of the
United States of America, and such notice shall be deemed to have
been served on the date of such depositing in the Certified Mail
or hand delivery (or professional overnight courier service)
unless otherwise provided. All notices to the Landlord shall be
sent to Landlord at: Intergraph Corporation, Lease
Administration, Mail Stop CR041, Huntsville, Alabama 35894, or
at such other address as Landlord may from time to time designate
in writing to Tenant, and all notices to Tenant shall be sent to
Tenant at the address set forth in Section 1.1 or at such other
address as Tenant may from time to time designate in writing to
Landlord. Notices effective upon receipt; refusal to accept
delivery is deemed receipt.
13.6 RECORDING: Neither this Agreement, or any memorandum hereof
shall be recorded, or otherwise made available as a public
document.
13.7 AMENDMENT: No amendment shall be enforceable unless in
writing and signed by the parties. All amendments must be in
writing, executed by the parties or their respective successors
in interest.
13.8 HOLDING OVER: Any holding over after the expiration of the
term with the consent of the Landlord, shall be construed to be a
tenancy from month to month at a rental equal to $15,000.00 per
day.
13.9 NO PARTNERSHIP: It is understood that neither party hereto
shall in any way or purpose, due to the terms of this Lease be
deemed a partner or joint venturer with the party hereto.
13.10 PARTIAL INVALIDITY: If any term or condition of this
Lease or the application thereof to any person or event shall to
any extent be invalid and unenforceable, the remainder of this
Lease in the application of such term, covenant or condition to
persons or events other than those to which it is held invalid or
unenforceable shall not be affected and each term, covenant and
condition of this Lease shall be valid and enforced to the
fullest extent permitted by law.
13.11 SUCCESSORS: The provisions, covenants and conditions
of this Lease shall bind and inure to the benefit of the legal
representatives, successors and assigns of each of the parties,
except that no assignment or subletting by Tenant without the
written consent of Landlord (except as otherwise permitted in
Section 9.1) shall vest any right in the assignee or sublessee or
Tenant.
13.12 ENTIRE AGREEMENT; MODIFICATION: This Lease supersedes
all prior discussions and contracts between Landlord and Tenant
with respect to the Premises and contains the sole and entire
understanding between Landlord and Tenant with respect to the
Premises. All promises, contracts, commitments, representations
and warranties heretofore made between the parties are merged
into this contract. This contract shall not be modified or
amended in any respect except by a written instrument executed by
or on behalf of each of the parties to this Lease.
13.13 EXHIBITS. Each and every exhibit referred to or
otherwise mentioned in this Lease is attached to this Lease and
is and shall be construed to be made a part of this Lease by such
reference or other mention at each point at which such reference
or other mention occurs, in the same manner and with the same
effect as if each exhibit were set forth in full and at length
every time it is referred to or otherwise mentioned.
13.14 GOVERNING LAW: This Lease is made and shall be
construed under and in accordance with the laws of the State of
Alabama. Jurisdiction and venue shall be in the Circuit Court of
Madison County, Alabama, or the United States District Court for
the Northern District of Alabama, Northern Division.
13.15 SECURITY REQUIREMENTS: Not applicable.
13.16 COMMISSION: Landlord and Tenant each warrant to the
other that there are no claims for broker's commission or
finder's fees in connection with Tenant's execution of this
Lease.
13.17 ENVIRONMENTAL MATTERS: As of the Commencement Date, to
the best knowledge of the Landlord, without independent
investigation, the Premises are currently in compliance with, all
Environmental Laws (as defined in the Purchase Agreement and all
related permits, licenses, orders, approvals, waivers and
variances. Except as set forth in Exhibit "C" hereto, to the
best knowledge of the Landlord, without independent
investigation, no Hazardous or Toxic Substances are, or have
been, used, generated, handled, treated, stored or disposed of
on, under or in, or transported from, the Premises except in full
compliance with applicable Environmental Laws. Except as set
forth in Exhibit "C", the Landlord has never received any
complaint, order, citation or notice, public or private, with
respect to any possible violation of the Environmental Laws or
obligation or liability thereunder related to the Premises.
13.18 Tenant's Liability Upon Occupancy.
As of the Commencement Date, Tenant represents, warrants and
covenants (i) that it will not use nor store in, on or about the
Premises, any Hazardous Materials, other than those Hazardous
Materials that are necessary for Tenant to conduct its business
activities on the Premises, (ii) that, with respect to any such
Hazardous Materials, Tenant shall comply with all applicable
federal, state and local laws, rules, regulations, policies and
authorities relating to the storage, use, disposal or cleanup of
Hazardous Materials, including, without limitation, the obtaining
of proper permits, and (iii) that it will not dispose of any
Hazardous Materials in, on or about the Premises under any
circumstances.
Tenant agrees to clean up or cause to be cleaned up any
contamination generated by Tenant during the term of this Lease,
at the Premises, including the soil or surface or groundwater
requiring removal or remediation under federal, state or local,
law, statutes, ordinances, regulations or policies. Tenant
further agrees to indemnify, defend and hold Landlord harmless
from and against all claims, liabilities, attorneys' fees and
costs, arising out of or in connection with (i) any remediation,
cleanup work, inquiry or enforcement proceeding in connection
therewith; (ii) any Hazardous Materials used, stored or disposed
of by the Tenant or its agents, employees, contractors or
invitees in, on or adjacent to the Premises; or (iii) any
Hazardous Materials generated by or resulting from Tenant's use
of the Premises and transported, stored, disposed of, or released
in any manner at a location other than the Premises.
Tenant shall surrender the Premises to Landlord upon the
expiration or earlier termination of this Lease free of debris,
waste and Hazardous Materials used, stored or disposed of by the
Tenant or its agents, employees, contractors or invitees, and in
a condition which complies with all governmental statutes,
ordinances, regulations and policies governing Hazardous
Materials.
Landlord agrees to clean up or cause to be cleaned up any
contamination at the Premises, including soil, surface or
groundwater requiring removal or remediation under federal, state
or local law, statutes, ordinances, regulations or policies
accruing as a result of acts or omissions of Landlord or any
other party prior to the Commencement Date of this Lease.
Landlord further agrees to indemnify, defend and hold Tenant
harmless from and against all claims, liabilities, attorneys'
fees and costs, arising out of or in connection with (i) any
remediation, clean up work, inquiry or enforcement proceedings in
connection therewith; (ii) Hazardous Materials used, stored, or
disposed of in, on or adjacent to the Premises at any time prior
to the Commencement Date; or (iii) any Hazardous Materials
generated by or resulting from the use of the Premises prior to
the Commencement Date and transported, stored, disposed of, or
released in any manner at a location other than the Premises..
"Hazardous Materials" shall mean any material: (i) the
presence of which requires the investigation or remediation under
any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; or (ii) which is or becomes
defined as a "hazardous waste," "hazardous substance," pollutant
or contaminant under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.)
and/or the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.); or (iii) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission,
board, agency or instrumentality of the United States, the state
of where the Premises are located or any political subdivision
thereof; or (iv) the presence of which on the Premises causes or
threatens to cause a nuisance upon the Premises to adjacent
properties or poses or threatens to pose a hazard to the health
or safety of persons on or about the Premises; or (v) without
limitation which contains gasoline, diesel fuel or other
petroleum hydrocarbons. Notwithstanding anything herein to the
contrary, Hazardous Materials shall not include standard cleaning
and office materials as may be reasonably necessary for Tenant to
conduct its business on the Premises.
13.19 TRANSFERS BY LANDLORD: Landlord shall have the right
to transfer and assign, in whole or in part, all of its rights
and obligations hereunder and in the Premises, and in such event
and upon such transfer, Landlord shall be released from any
obligations hereunder accruing from and after the date of
transfer and Tenant agrees to look solely to such successor in
interest of Landlord for the performance of obligations accruing
after the date of transfer.
13.20 ADDITIONAL SERVICES PROVIDED BY LANDLORD. During the
term of this Lease, Landlord shall provide the following
additional services/items to Tenant in connection with its use of
the Premises, at no additional cost to Tenant:
a. The vending machines and photocopying machines in use
with respect to the Premises immediately prior to the
Commencement Date (or machines substantially similar
thereto);
b. Use of the off-site cafeteria currently used as of the
Commencement Date by the personnel located at the
Premises. The use of the cafeteria facilities shall be
on substantially the same basis as has existed for the
employees of Landlord located on the Premises
immediately prior to the Commencement Date.
c. Tenant shall be permitted to store inventory and
components in Building 5B as needed by Tenant.
[ continued on following page ]
THIS LEASE, including Exhibit A attached hereto, is
effective the 13th day of November, 1998.
LANDLORD:
ATTEST: INTERGRAPH CORPORATION
By: /s/ David V. Lucas By: /s/ John W. Wilhoite
-------------------------- -----------------------------
Its: Assistant Secretary Its: Executive Vice President
------------------- ------------------------
TENANT:
ATTEST: SCI TECHNOLOGY, INC.
By: /s/ Michael Sullivan By: /s/ George J. King
--------------------- ---------------------------
Its: Secretary Its: Senior Vice President
--------- ----------------------
Exhibit C
INTELLECTUAL PROPERTY
LICENSE AGREEMENT
THIS INTELLECTUAL PROPERTY PURCHASE AND LICENSE AGREEMENT is
dated effective as of November 13, 1998, and is made by and among
SCI TECHNOLOGY, INC., an Alabama corporation ("SCI"), and
INTERGRAPH CORPORATION, a Delaware corporation ("Intergraph").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement,
effective as of the effective date hereof, between Intergraph and
SCI (the "Asset Purchase Agreement"), Intergraph has agreed to
transfer certain assets to SCI, so as to enable SCI to assume
certain manufacturing responsibilities for Intergraph.
B. The assets to be transferred to SCI include assets used
by Intergraph in the operation of Intergraph's manufacturing
facilities in Huntsville, Alabama (the "Facility"), which
Facility Intergraph represents is not operated in whole or in
part by any Intergraph affiliate. After the closing of the
transaction contemplated by the Asset Purchase Agreement, SCI
intends to manufacture Products (as that term is defined in the
Asset Purchase Agreement) for sale to Intergraph, pursuant to
that certain Manufacturing Services Agreement dated the date
hereof (together with any subsequent amendments or renewals
thereof, the "Manufacturing Agreement"). The manufacturing under
the Manufacturing Agreement will be conducted at the Facility for
a transitional period; thereafter the manufacturing may, at SCI's
option, be moved to another facility or facilities operated by
SCI (or an affiliate of SCI, as provided below).
C. In order to enable SCI to conduct manufacturing
operations on a "turnkey" basis, it is necessary that Intergraph
license or sublicense (collectively, "license") to SCI certain
software and other Intellectual Property Rights (as defined
below), as further described below. The execution of this
Agreement and the licensing of those rights is a condition to the
obligation of SCI to close the transaction under the Asset
Purchase Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, and in further
consideration of the payments by SCI to Intergraph under the
Asset Purchase Agreement, the Parties agree as follows:
1. Definitions. In addition to other terms defined in
context as they appear in this Agreement, the following terms
shall have the following meanings when used herein:
1.1 "Transferable Third-Party Software" or "TTPS"
means all third-party software applications, operating systems,
and software products "bundled" in connection with hardware,
currently resident at the Facility and installed on computers or
computerized equipment which SCI is purchasing under the Asset
Purchase Agreement, and which are not subject to any license or
contract restrictions which would prohibit the free transfer by
Intergraph to SCI of Intergraph's license rights therein, other
than Desktop Applications or Manufacturing Support Applications
(as defined below). The term TTPS includes all related user and
technical documentation in Intergraph's possession and all Associated
Files (as defined below) of this software. Examples of TTPS are
the Data I/O software resident on the Data I/O equipment being
purchased by SCI, and the Teradyne applications used for In-Circuit
Testing and Development.
1.2 "Desktop Applications" or "DTAs" means the
third-party commercial applications software and operating
systems currently installed on desktop computers being purchased
by SCI under the Asset Purchase Agreement, primarily Microsoft
software and other Windows-based application products. DTAs do
not include any applications listed as "Manufacturing Support
Applications" below. The term DTAs also includes all related
user and technical documentation in Intergraph's possession and
all Associated Files of this software.
1.3 "Manufacturing Support Applications" means
all computer software applications (other than the TTPS and the
DTAs and other than the SAP Software and the WA System) used by
Intergraph in direct support of the manufacturing process at the
Facility, including those which furnish data used in connection
with the manufacturing process. Some of the Manufacturing
Support Applications are owned by Intergraph; others are licensed
by Intergraph from third parties, and others are systems
comprising components owned by Intergraph and components licensed
by Intergraph from third parties. The Manufacturing Support
Applications include the following:
(a) The Online Documentation System, which
comprises an Intergraph proprietary application running on top of
an Informix database licensed to Intergraph (the "ODS System").
(b) The Order Processing System, which also
comprises an Intergraph proprietary application running on top of
an Informix database licensed to Intergraph (the "OPS System").
(c) The Flexible Manufacturing System (the
"FMS"), an Intergraph proprietary application that uses a kernel
licensed from Phoenix.
(d) The PIDS software (the "PIDS") used by
Intergraph, which are Intergraph proprietary applications
developed using third-party Visual Basic, Visual C++, and Perl
software, and which (with the exception of Perl, which is public
domain software) require licenses to those third-party products
for continued development
(e) The OLTEP systems (the "OLTEP"), an
Intergraph application created by use of several third party
applications including Visual Studio Enterprise (consisting of
Visual Basic, Visual C++, SQL Server 6.5 Developer's Edition, and
Visual InterDev) Access 97, and Perl. The runtime applications
use Visual Basic, Visual C++, SQL Server 6.5, and Perl.
(h) Software tools used for In-Circuit Testing
and Development (other than those originally bundled with the
equipment, which are included in TTPS), including the Dragon File
creator, the Dragonizer, the IPL creator, the MDC viewer,
Momentum, Veribest PCB Design, Veribest Report Writer, Veribest
Design Capture, Accugen, and VictoryBICT v.2.30 (the "In-Circuit
Tools").
The term Manufacturing Support Applications includes all
user and technical documentation in Intergraph's possession and
all Associated Files of this software.
1.4 "Associated Files" means all files (including
macros, scripts, data files, and custom applications) created by
use of the given software, which are directly relevant to, and
reasonably needed for, the manufacturing operations to presently
conducted at the Facility.
1.5 "Intellectual Property Rights" means
worldwide patents, patent applications, patent rights, marks,
mark registrations, copyright registrations, copyrights
(including those in computer programs, drawings, documentation,
and specifications), proprietary rights in information (including
in data, trade secrets, inventions, discoveries, know-how,
formulae, processes, technical information and business
information), license rights under the intellectual property
rights of third parties, and all other intellectual property
rights whether or not subject to statutory registration or
protection, which rights are or may become reasonably necessary
for the manufacture of Products under the Manufacturing
Agreement.
1.6 "Physical Processes" means those physical
processes used in the operation of the Facility during the sixty-
day period prior to the date hereof in the manufacture and
assembly of the Products, together with all (if any) related
technical materials and documentation.
1.7 "Manufacturing Rights" means any and all
Intellectual Property Rights of Intergraph or of any company now
or hereafter controlled by or under common control with
Intergraph, other than rights in the Physical Processes, which
would give Intergraph or its affiliates the right to prohibit,
limit or restrict the manufacture, assembly or sale of the
Products by SCI as provided for in the Manufacturing Agreement.
"Manufacturing Rights" includes such rights as those under
patents or mask works embodied in the Products or in components
thereof, which it is reasonably necessary for SCI to practice or
exercise in the course of manufacturing Products under the
Manufacturing Agreement; rights in trademarks to be placed on the
Products; trade secret rights in the design of Products;
copyrights in schematics or assembly instructions, etc.
1.8 "Loading Rights" means the right for SCI to
possess and reproduce, from master copies, third-party software
and data for the purpose of pre-loading that software and data on
Products as requested by Intergraph, under the Manufacturing
Agreement. Currently Intergraph has the right to reproduce from
master copies and load onto its products a number of third-party
software and/or data products, and it is the parties' intention
that SCI assume this function on behalf of Intergraph, under the
Manufacturing Agreement, as soon as Intergraph has obtained for
SCI the right to do so.
1.9 "Closing Date" means the Closing Date as
defined in the Asset Purchase Agreement.
1.10 "Parties" means Intergraph and SCI.
2. Transfer of TTPS. Intergraph hereby transfers to SCI,
effective as of the Closing Date, all of Intergraph's rights as
licensee under its licenses to the TTPS, subject to the terms of
the respective licenses, and SCI hereby assumes the obligations,
if any, of the licensee under the respective license agreements
accruing from and after the Closing Date. In connection with
this transfer, Intergraph shall deliver to SCI all tangible
embodiments of the TTPS (including those recorded on magnetic,
optical, or other media) in Intergraph's possession at the
Facility.
3. No Transfer of DTAs. Intergraph will neither transfer
nor sublicense to SCI any of its rights as licensee under its
licenses to the DTAs. Intergraph will deliver to SCI the
computers on which the DTAs are installed without deleting the
DTAs, for the convenience of the parties (e.g., the installed
DTAs may be specially configured and may be intertwined with
needed Associated Files). SCI shall be responsible for obtaining
licenses from the third-party licensors for any DTAs which SCI
wishes to use.
4. License of Manufacturing Support Applications.
4.1 General. Intergraph hereby grants to SCI,
effective as of the Closing Date, a nonexclusive, royalty-free
license under all of Intergraph's Intellectual Property Rights to
use the Manufacturing Support Applications for the limited
purpose of manufacturing Products for Intergraph under the
Manufacturing Agreement, for so long as the Manufacturing
Agreement is in effect. It is understood that the Manufacturing
Support Applications may be accessed (to the extent necessary)
through Intergraph's existing network connections between the
Facility and any other facility where the servers containing the
Manufacturing Support Applications are located. It is anticipated
that standalone Manufacturing Support Applications will be moved
to SCI's manufacturing facility, but that other systems that are
integrated with Intergraph's other information systems will not
be moved. Accordingly, after the manufacturing has been
relocated from the Facility, SCI shall have the right to access
any Manufacturing Support Applications which remain installed at
the Facility or other Intergraph facilities and are not relocated
to the SCI facility, through remote network connections, the cost
of which will be reimbursable as tooling or NRE costs under the
Manufacturing Agreement. Intergraph will furnish SCI with all
reasonable cooperation in the establishment of any such remote
network connection as part of the transition to the new location.
4.2 Specific Provisions. The following specific
provisions supplement or modify the general provisions of Section
4.1:
(a) The above license includes a sublicense
under all licenses from third parties to Intergraph of
Manufacturing Support Applications or components thereof, subject
to SCI's compliance from and after closing with restrictions in
such agreements as to use, copying and disclosure. As to these
third party applications or components, Intergraph warrants that
it either has the right to grant this sublicense or will promptly
obtain the same following the Closing with no interruption of, or
third-party licensor interference with, SCI's use of the software
in question, and at no expense to SCI. Furthermore, if any such
third-party licenses contain location or CPU-specific
restrictions, network access or time-sharing prohibitions, or
other similar restrictions that would prevent or interfere with
SCI's move of the manufacturing operations to a location of its
choice and use of the software after such move, Intergraph will
at its sole expense obtain a waiver of those restrictions in
favor of SCI's use of the software in connection with
manufacturing under the Manufacturing Agreement.
(b) In addition to the Manufacturing Support
Applications, Intergraph uses SAP Software and a Work
Authorization ("WA") System to generate, store or process data
needed in manufacturing operations. While the manufacturing
continues in the Facility, Intergraph will provide data from
these systems as reasonably necessary to facilitate SCI's
manufacturing under the Manufacturing Agreement; unless otherwise
agreed this data will be provided in printed hardcopy form.
(c) With respect to Manufacturing Support
Applications that are Intergraph proprietary applications, if SCI
desires to use those applications to manufacture products for
third parties, Intergraph shall, if SCI so requests, negotiate in
good faith with SCI with respect to granting a further license
thereunder to SCI for manufacture of products for third parties,
at a reasonable royalty and on reasonable terms, to be negotiated
in good faith between the parties based on available market
information on arms-length licenses for comparable technologies.
(d) As of the date hereof it has not been
finally determined whether the In-Circuit Tools will be needed by
SCI in connection with its duties under the Manufacturing
Agreement. Accordingly, it is agreed that the In-Circuit Tools
will be licensed to SCI under Section 4.1 only if and to the
extent the use of these tools is necessary or expedient in order
for SCI to meet in-circuit testing or development tasks or
specifications under the Manufacturing Agreement.
5. License of Physical Processes. Intergraph hereby
grants to SCI, effective as of the Closing Date, a perpetual,
nonexclusive, royalty-free license under all of Intergraph's
Intellectual Property Rights (if any) in the Physical Processes,
to use the Physical Processes (and SCI modifications thereof) in
the manufacture, assembly, and testing of products of every kind
and description (including products made for third parties) at
the Facility and at any other facility to which the manufacturing
operations under the Manufacturing Agreement may be transferred.
In connection with this license, Intergraph shall deliver to SCI
all (if any) documentation of the Physical Processes and related
know-how in its possession.
6. License of Manufacturing Rights. Intergraph hereby
grants to SCI, effective as of the Closing Date, a nonexclusive,
royalty-free license under all of Intergraph's Manufacturing
Rights, for so long as the Manufacturing Agreement is in effect,
to manufacture, assemble, and test Products at the Facility and
any other facility to which the Facility operations may be
transferred, and to sell the Products to Intergraph as
contemplated by the Manufacturing Agreement. This license
specifically includes rights under the two patents mentioned in
the preceding section, to the extent SCI needs such a license to
manufacture, assemble and test Products as contemplated by the
Manufacturing Agreement. As to any trademark rights of
Intergraph included in the Manufacturing Rights, SCI acknowledges
that the Product quality criteria in the Manufacturing Agreement
are applicable to the use of such marks.
Intergraph has identified two patents, a board stiffening
patent and an impedance patent, in which Intergraph claims rights
and which may be Manufacturing Rights. Like other Manufacturing
Rights, these rights are licensed royalty-free only for the
manufacture of Products under the Manufacturing Agreement.
However, Intergraph shall, if SCI so requests, negotiate in good
faith with SCI with respect to granting a further license
thereunder to SCI for manufacture of products for third parties,
at a reasonable royalty and on reasonable terms, to be negotiated
in good faith between the parties based on available market
information on arms-length licenses for comparable technologies.
7. Warranties.
7.1 Adequacy. Intergraph warrants to SCI that
the licenses, sublicenses and other Intellectual Property Rights
granted in this Agreement:
(a) Are all of the Intellectual Property
Rights necessary to manufacture, assemble and test the Products
in accordance with practices in effect at the Facility or by
Intergraph during the ninety (90) day period prior to the Closing
Date; and
(b) Are free of any material defect or error
which significantly adversely affects the manufacturing, assembly
and testing process as presently conducted by Intergraph.
Intergraph has identified Year 2000 compliance problems with the
systems identified in Schedule A attached; except as disclosed on
Schedule A, Intergraph has no actual knowledge of Year 2000
compliance problems with respect to any of the software systems
being licensed or sublicensed to SCI hereunder or with respect to
any hardware systems being transferred to SCI under the Asset
Purchase Agreement; however, Intergraph has not fully
investigated the matter and does not warrant against the
existence of additional Year 2000 problems.
7.2 Status of Intergraph's Rights. Intergraph
warrants to SCI that:
(a) Intergraph has valid licenses to use (a)
the TTPS and (b) any of the Manufacturing Support Applications or
components thereof, the Intellectual Property Rights to which are
owned by any Party other than Intergraph; provided, however, that
with respect to the Informix database, if Intergraph is unable to
document its license prior to Closing, then Intergraph will
promptly after Closing obtain from Informix a confirmation of its
license, or a new license, as appropriate, with no interruption
of, or third-party interference with, SCI's use of the Informix
database, and at no expense to SCI.
(b) All of Intergraph's licenses to the
foregoing software products are fully paid-up, and to the best of
Intergraph's knowledge (i) there is no existing claim by any
licensor that Intergraph is in breach of any such license, and
(ii) Intergraph is not in breach in any material respect of any
such license;
(c) Intergraph has the right to transfer the
TTPS to SCI and to allow SCI to use the Manufacturing Support
Applications as contemplated by this Agreement; and
(d) Intergraph owns, or has, or will obtain
in accordance with Section 4.2(a), sufficient rights in all the
Intellectual Property Rights licensed to SCI hereunder, to
license or sublicense the same to SCI as provided for herein and
otherwise to perform its obligations under this Agreement.
7.3 Non-Infringement; Indemnity.
(a) Intergraph warrants that the use by SCI
after Closing, in accordance with this Agreement, of the TTPS,
the Manufacturing Support Applications and the Physical
Processes, in the manner used by Intergraph prior to the Closing
Date, and the exercise of the Manufacturing Rights in accordance
herewith, will not infringe any Intellectual Property Right of
any third party.
(b) Intergraph agrees to indemnify and hold
SCI harmless in respect of any claim or action for infringement
of third-party Intellectual Property Rights, so far as the claim
or action arises out of SCI's performance of its obligations
under the Manufacturing Agreement and is related to (i) any use
of the TTPS or the Manufacturing Support Applications in
accordance with this Agreement at the Facility; or (ii) any use
of the TTPS or Manufacturing Support Applications at another
facility in accordance with this Agreement; or (iii) any use of
the Physical Processes, or (iv) the exercise of the
Manufacturing Rights or the manufacturing and assembly from
purchased component parts of Products for sale to Intergraph as
contemplated by the Manufacturing Agreement. SCI shall promptly
notify Intergraph in writing of any such claim or action and
provide Intergraph with authority, information and assistance, at
Intergraph's expense, to handle the claim or the defense of the
action. In addition, in the event a claim is made against
Intergraph or SCI arising out of an alleged violation by
Intergraph of any third-party license relating to such
Intellectual Property Rights prior to closing, or a violation by
reason of Intergraph's grant of sublicenses to SCI pursuant
hereto, Intergraph will indemnify and hold SCI harmless against
such claim.
(c) If, in an action described in the
preceding paragraph (b), SCI's activities as contemplated under
the Manufacturing Agreement are held to constitute an
infringement of any third-party Intellectual Property Rights and
the use of such rights or of a product embodying such rights is
enjoined, Intergraph shall, at its own expense and at its option,
either procure for SCI the right to continue use or, if
applicable, replace the same with non-infringing software or
physical processes of equivalent function and performance, or
modify the software or Physical Processes so they become non-
infringing without detracting from their function or performance.
Any failure or inability of SCI to perform under the
Manufacturing Agreement as a result of any claim of infringement
described above, or any injunction, judgment or other remedy
issued pursuant to any such claim, shall be excused and SCI shall
have no liability to Intergraph in respect of such failure or
inability.
(d) With respect to DTAs, SCI warrants to
Intergraph that SCI has, or shall have obtained from the third
party vendors on a timely basis, sufficient rights in the DTAs to
perform its obligations under the Manufacturing Agreement. SCI
agrees to indemnify and hold Intergraph harmless in respect of
any claim or action for infringement of third-party Intellectual
Property Rights so far as the claim or action relates to a use of
the TTPS, the DTAs, the Manufacturing Support Applications, the
Physical Processes or the Manufacturing Rights (a) in a manner
not authorized by this Agreement, or (b) in the case of the DTAs,
not authorized by the third-party owners or licensors thereof.
Intergraph shall promptly notify SCI in writing of any such claim
or action and provide SCI with authority, information and
assistance, at SCI's expense, to handle the claim or the defense
of the action.
8. Loading Rights. SCI shall have no obligation to load
third-party software or data onto Products under the
Manufacturing Agreement until Intergraph has obtained for SCI
Loading Rights for each third-party product in question, in a
form reasonably satisfactory to SCI and at no initial or ongoing
cost to SCI. Until SCI assumes this function, Intergraph shall
be responsible, at Intergraph's expense, for loading any third-
party software and/or data onto the Products which Intergraph
desires to have loaded. Similarly, SCI shall have the right to
cease the loading function with respect to any third-party
software or data product as to which SCI's Loading Rights are
withdrawn or cancelled.
9. Transfer of Rights. SCI may freely transfer its rights
to the TTPS. Solely in connection with an assignment and
delegation of its rights and obligations under the Manufacturing
Agreement, SCI may transfer its rights to use the Physical
Processes and the Manufacturing Support Applications, and its
license under Intergraph's Manufacturing Rights, (i) upon notice
to Intergraph, to any corporation controlling, controlled by, or
under common control with, SCI, or (ii) to any successor to
substantially all of the business assets or operations of SCI
employed in the performance of the Manufacturing Agreement or, if
the Manufacturing Agreement has then expired, to any successor in
ownership of the Facility or any other facility to which the
operations conducted at the Facility shall have been transferred,
as described in the following Section.
10. Relocation of Facilities. SCI may relocate any or all
of the operations of the Facility to another facility controlled
by SCI, and in connection therewith may relocate to such facility
any of the software and its associated licenses, and other
Intellectual Property Rights acquired by or licensed to SCI
hereunder, except as expressly provided to the contrary in this
Agreement.
11. Force Majeure. No Party will be deemed in default of
this Agreement to the extent that performance of its obligations
or attempts to cure any breach are delayed or prevented by reason
of any act of God, fire, natural disaster, accident, act of
government, or an act that is beyond the reasonable control of
either Party, provided that such Party gives the other Party
written notice thereof promptly and, in any event, within fifteen
(15) days of discovery thereof and uses commercially reasonable
efforts to continue to so perform or cure. In the event of such
a Force Majeure, the time for performance or cure will be
extended for a period equal to the duration of the Force Majeure.
12. Relationship of the Parties. Each of the Parties will
at all times during the during the Term act as, and will
represent itself to be, an independent contractor. No Party will
have any right or authority to create any obligations or to make
any representations or warranties on behalf of any other Party
whether express or implied, or otherwise to bind the other Party
in any respect whatsoever.
13. Successors. The rights and liabilities of the Parties
will bind and inure to the benefit of their respective successors
and permitted assigns.
14. Severability. If for any reason a court of competent
jurisdiction finds any provision of this Agreement or portion
thereof to be unenforceable, that provision of this Agreement
will be enforced to the maximum extent permissible to effect the
intent of the Parties and the remainder of this Agreement will
continue in full force and effect.
15. No Waiver. All rights and remedies conferred under
this Agreement or by any other instrument or law will be
cumulative and may be exercised singularly or concurrently.
Failure by any Party to enforce any provision of this Agreement
will not be deemed a waiver of future enforcement of that or any
other provision.
16. Notices. All notices required under this Agreement
will be in writing, will reference this Agreement and will be
deemed given when: (i) delivered personally; (ii) when sent by
confirmed facsimile; (iii) five (5) days after having been sent
by registered or certified mail, return receipt requested,
postage prepaid; or (iv) two (2) days after deposit with a
commercial overnight carrier, with written verification of
receipt. All communications will be sent to addresses set forth
below or such other address as may be designated by a given Party
by giving written notice to the other Party pursuant to this
Section.
Intergraph: SCI:
- ---------- ---
Intergraph Corporation SCI Technology, Inc.
Mail Stop HQ 011 2101 West Clinton Avenue
Huntsville, Alabama 35894-0001 Huntsville, Alabama 35807
Attention: John W. Wilhoite Attention: A. Eugene Sapp and
Facsimile: (256) 730-2048 Michael M. Sullivan, Esq.
Facsimile: (256) 882-4466
With a copy (which shall not With a copy (which shall not
constitute notice) to: constitute notice) to:
Intergraph Corporation Powell, Goldstein, Frazer & Murphy LLP
Mail Stop HQ 034 Sixteenth Floor
Huntsville, Alabama 35894-0001 191 Peachtree Street, N.E.
Attention: David V. Lucas Attention: James J. McAlpin, Jr.
Facsimile: (256) 730-2247 Facsimile: (404) 572-6999
And
Balch & Bingham LLP
P.O. Box 306
Birmingham, Alabama 30521
Attention: Phillip A. Nichols
Facsimile: (205) 226-8799
17. Governing Law. This Agreement will be governed by and
construed according to the laws of the State of Alabama as
applied to agreements entered into and to be performed entirely
within Alabama between Alabama residents, except for that body of
law relating to conflict of laws. Any litigation or other
dispute resolution between the parties relating to this Agreement
will take place in the Northern District of Alabama. The Parties
consent to the personal jurisdiction of and venue in the state
and federal courts within that District.
[Signatures on following page...]
IN WITNESS WHEREOF, Intergraph and SCI have caused this
Agreement to be executed by their duly authorized officers as of
the date first above written.
INTERGRAPH CORPORATION
By:/s/ John W. Wilhoite
----------------------------
Name: John W. Wilhoite
--------------------------
Title: Executive Vice President
-------------------------
SCI TECHNOLOGY, INC.
By:/s/ George J. King
----------------------------
Name: George J. King
--------------------------
Title: Senior Vice President
-------------------------
::ODMA\PCDOCS\ATL\255791\1
Exhibit D
MANUFACTURING SERVICES AGREEMENT
BETWEEN
INTERGRAPH CORPORATION
AND
SCI TECHNOLOGY, INC.
MANUFACTURING SERVICES AGREEMENT
BETWEEN
INTERGRAPH CORPORATION
AND
SCI TECHNOLOGY, INC.
This Manufacturing Services Agreement (the "Agreement") by and between
Intergraph Corporation ("Intergraph"), with its principal place of
business at One Madison Industrial Park, Huntsville, Alabama 35894-0001 and
SCI Technology Inc., a corporation having a place of business at 13000
South Memorial Parkway, Huntsville Alabama 35807 ("SCI") is entered into on
November 13, 1998.
PURPOSE
Intergraph and SCI entered into this Agreement whereby SCI will
manufacture and/or purchase hardware Products exclusively for Intergraph
and Intergraph will purchase Products exclusively from SCI on a turnkey
basis during the Initial term of this Agreement.
This Agreement defines the terms and conditions governing all transactions
between the Parties for Products, Service Units and Spare Parts
manufactured at SCI. The initial listing of Products is attached as
Exhibit A, which are those Products contained in ICS Price List as of the
date of the Closing, which shall be updated by mutual agreement of the
Parties during the term of this Agreement.
In consideration of the above and the mutual promises contained herein,
Intergraph and SCI agree as follows:
AGREEMENT
1.DEFINITIONS
Whenever capitalized in this Agreement:
"Affiliate" with respect to any entity, means any other entity
controlling, controlled by or under common control with such entity. As
used in this definition, the term "control" means direct or indirect
ownership or voting control of 50% or more of the equity or voting
securities of the entity in question or having the power, by commitment or
otherwise, to elect a majority of the Board of Directors (or similar
governing body) of the entity in question.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated the
date hereof between SCI and Intergraph pursuant to which Intergraph agrees
to sell to SCI substantially all of the assets of Intergraph currently
used in the manufacture of Products, together with the Initial Inventory.
"Closing" and "Closing Date" have the meanings set forth in Section 2.1,
below.
"Confidential Information" means: (a) for Intergraph, all data relating
to Intergraph custom and proprietary components supplied to SCI by
Intergraph or an Intergraph Authorized Vendor, the Specifications, the
Quality Requirements, the Products, any test software, equipment or
fixtures developed by or for Intergraph, and any trade secrets related to
any of the foregoing; (b) for SCI, including but not limited to, the
Service Documentation, costed Bill of Materials, any test software,
equipment or fixtures developed by or for SCI, and any trade secrets
related to any of the foregoing; (c) any information, including but not
limited to any information relating to either Party's product plans,
designs, costs, prices and names, finances, marketing plans, business
opportunities, personnel, research, development or know-how, that is
designated by the disclosing Party as confidential within thirty (30) days;
and (d) the terms, conditions and existence of this Agreement: provided,
however that "Confidential Information" will not include information that:
(i) is or becomes generally known or available by publication, commercial
use or otherwise through no fault of the receiving Party; (ii) is known and
has been reduced to tangible form by the receiving Party at the time of
disclosure and is not subject to similar restrictions on confidentiality
(iii) is independently developed by the receiving Party; (iv) is lawfully
obtained from a third party who has the right to make such disclosure; or
(v) is released for publication by the disclosing Party in writing.
"Delivery" or "Deliver" means delivery of or to deliver the quantity of
Product ordered by Intergraph in a particular Purchase Order to the
Delivery Point.
"Delivery Point" means FOB destination for Products shipped from SCI's
north Alabama facilities to Intergraph's Huntsville facility, and for all
other finished Products, unless otherwise agreed by the Parties for a
particular Product, Service Unit and/or Spare Part, the Delivery Point will
be FOB SCI' dock. If FOB destination, SCI will pay for freight and
insurance in transit to Intergraph's Huntsville facility. If FOB SCI's
dock, Intergraph will pay for freight and insurance in transit to the
shipping destination.
"Direct Labor Cost" means Standard Labor Hours for a Product multiplied
by the Labor Rate for such Product.
"Field Replaceable Unit" or "FRU" shall mean those Product components
and parts designated as such in the bill of materials.
"ICS" shall mean Intergraph Computer Systems, Inc., Intergraph Computer
Systems Holding, Inc., and their respective present and future subsidiaries
and Affiliates (other than Intergraph and any entity which is an Affiliate
of ICS solely by reason of its relationship as an Affiliate to Intergraph),
and their respective successors and assigns. The term "ICS" shall also
include any successor (by transfer, spinoff, merger or otherwise) to all or
any portion of the business conducted by ICS on the Closing Date and/or in
the future.
"Intergraph Authorized Vendor" means (i) Intergraph, (ii) third parties
selected, approved and qualified by Intergraph in writing, (iii) with
Intergraph's prior written approval, third parties selected by SCI.
"Initial Inventory" means the initial inventory purchased by SCI at the
Closing from Intergraph pursuant to the Asset Purchase Agreement.
"Initial Inventory Standard Cost" means the standard cost at which the
Initial Inventory will be entered into SCI's accounting system at the
Closing. As described in Section 10.1 of the Asset Purchase Agreement,
the Initial Inventory Standard Cost shall be 90% of the current net book
value at Closing of each item of inventory comprising the Initial
Inventory.
"Initial Loaned Inventory" means the inventory identified in Exhibit G
hereto, which represents all of the Initial Inventory which is currently on
loan by Intergraph and which will be conveyed but not physically
transferred to SCI at Closing.
"Initial Master Purchase Order" means the firm purchase order from
Intergraph to SCI on the effective date of this Agreement for all
Intergraph Product requirements for the next ninety (90) days.
"Intergraph Distribution Center" shall in all cases refer to the
distribution center located in north Alabama, in either an Intergraph or
SCI facility. For purposes of this Agreement, Intergraph's European
Distribution Center shall be considered a third party customer.
"IP Agreement" means the Intellectual Property License Agreement
between the Parties granting SCI a license to use certain manufacturing
technology and information systems at Intergraph during the transition
phase as well as such longer period as the Parties mutually agree.
"Labor Rate" for a Product means the rate SCI may charge Intergraph for
each Standard Labor Hour, including overhead, required to manufacture such
Product, as reflected in Exhibit B .
"Lead Time" means the amount of time in advance of Delivery Intergraph
must issue a Master Purchase Order. Unless otherwise specified, the Lead
Time shall be ninety (90) days.
"Loaned Product" means any Product which is loaned from the Intergraph
Distribution Center for short term promotional (trade show, etc.) or
engineering testing purposes.
"Long Lead-Time Components" means components and/or materials that SCI
must order from a supplier at least ninety (90) days before the requested
delivery date.
"Master Purchase Order" means the current month's Product commitment,
plus three (3) month rolling Product commitment, not to exceed a cumulative
ninety (90) day commitment, that authorizes SCI to make material purchases
and to set up manufacturing and staffing in preparation for the receipt of
Sales Orders.
"Material Mark-Up" for a Product means the percentage markup, that SCI
may add to the Procured Material Cost for such Product to cover SCI's
material related costs, which include freight, scrap, cost of money and
material handling.
"NTF Product" (No Trouble Found) shall have the meaning set forth in
Section 14.
"Non-conforming Product" shall have the meaning set forth in Section 14.
"Parties" means the parties to this Agreement.
"Preferred Carrier(s)" means the carrier(s) specified by Intergraph from
time to time.
"Premium" has the meaning set forth in the Asset Purchase Agreement.
"Pre-Production Deliverables" means the pre-production deliverables
which are mutually agreed to by the Parties as part of the process of
qualifying and introducing new Products.
"Procured Materials" means the materials purchased by SCI to manufacture
and/or deliver the Products for Intergraph under this Agreement, including
the Initial Inventory.
"Products" means the products identified on Exhibit A (which Intergraph
represents and warrants is a complete and accurate ICS Product price list
as of the Closing), and all products currently or in the future
manufactured, assembled, purchased or sold by ICS, or traditionally
included in ICS's Product price list, including without limitation products
of ICS which from time to time are not included on the ICS Product price
list. Notwithstanding the foregoing, the Parties agree that to the extent
Intergraph or any of its Affiliates choose to source any products from ICS,
ICS will cause its requirement for the products to be procured from SCI.
"Product Warranty" means the warranty on workmanship and materials that
Intergraph may purchase for any or all Products pursuant to Section 14.3.
"Sales Order(s)" shall mean written instructions from Intergraph to SCI
containing Product production quantities by model and part number, the
Customer's name and ship-to address, and the scheduled shipping date.
Sales Orders shall be transmitted by means of Electronic Data Interface
("EDI") or other means as mutually agreed.
"Service Documentation" means and may include some or all of the
following, in English and in reproducible format, for the Products and
associated Service units and Spare Parts, including assemblies and cable
harnesses as applicable:
( a ) Product Specification;
( b ) Schematic, block, and component layout diagrams, and drawings,
with reference designators where appropriate
( c ) Complete bill of materials, with reference designators to
the schematics and vendor part numbers, of all levels within
the Product;
( d ) Test and inspection procedures and assembly and
disassembly instructions, troubleshooting procedures,
alignment and calibration procedures and safety procedures; and
( e ) Specifications (data sheets) for commercially available
components with sources of supply, cross-referenced to
the schematics and vendor part number.
"Service Software" means software necessary for the testing and
inspection of the Product and/or Service Units.
"Service Units" means serviceable modules and/or field replaceable
units of each respective Product.
"Spare Parts" means spare parts associated with each respective Product,
as separately identified by Intergraph for such Product.
"Specifications" means the specifications for a Product and associated
Pre- Production Deliverables for such Product. Specifications may be
amended from time to time by documented engineering change orders.
"Standard Cost" of a component means the price offered by a vendor for
such component as adjusted from time to time to reflect changing vendor
prices.
"Standard Labor Hours" for a Product means the number of standard SCI
labor hours required to assemble and test such Product.
"Term" means the term of this Agreement, including the Initial Term and
any Renewal Terms, as defined in Section 2 of this Agreement.
"Transition Services Agreement" means the Transition Services Agreement
dated the date hereof between SCI and Intergraph pursuant to which
Intergraph agrees to provide certain transition services to SCI for
specified periods of time.
"Tooling" means the manufacturing tooling and inspection equipment used
in manufacture and assembly of a particular Product, Service Units and/or
Spare Parts.
"Unique Components" means components purchased by SCI on behalf of
Intergraph that are non-cancelable, nonreturnable and unusable in
manufacturing products for SCI's other customers, or for which a vendor
charges restocking or other special charges if returned.
"Volume Commitment" has the meaning set forth in Section 3.1.
2.TERMS OF AGREEMENT
2.1 Closing Date. The rights and obligations of the Parties under this
Agreement are conditioned upon and subject to reaching final conclusion on
all related agreements between Intergraph and SCI (the "Closing"). The
Closing will occur on November 13, 1998 or such other date as the Parties
agree (the "Closing Date").
2.2 Initial Term. This Agreement will commence on the Closing Date and
remain in effect for three (3) years (the "Initial Term"), unless earlier
terminated pursuant to Section 17 (Termination) or renewed pursuant to
Section 2.3 (Renewal Terms), below.
2.3 Renewal Terms. This Agreement will renew automatically for
successive one (1) year renewal terms (the "Renewal Terms") unless one
Party provides the other written notice of its intent not to renew the
Agreement at least ninety (90) days before the end of the Initial Term or
any Renewal term thereafter.
3.PERCENTAGE VOLUME COMMITMENT
3.1 Percentage of Intergraph's Volumes Committed to SCI. Intergraph
agrees and commits that it will, and that it will cause ICS through
Intergraph to, purchase from SCI, and SCI agrees to purchase and or
manufacture and deliver to Intergraph during each year of the Initial Term,
100% of the total annual volumes for all Products which are offered for
sale during the Initial Term ("Volume Commitment").
3.2 Audit. SCI will be given the opportunity to audit on a reasonable
basis Intergraph's records to insure compliance with the Volume Ccommitment
as mutually agreed to or require Intergraph to provide reasonable
documentation to substantiate Intergraph's compliance with the Volume
Commitment.
3.3 PCBA Transfer. Intergraph will transfer all Product- related PCBA
manufacturing or purchasing currently performed by third parties to SCI on
a timely basis. The Initial Purchase Order shall include as a minimum, the
initial requirements for PCBAs, with deliveries to commence within ninety
(90) days, pending qualification. Notwithstanding the above, nothing
herein shall require Intergraph to breach any existing contractual
obligation.
3.4 Exclusivity Covenant. Intergraph covenants that it shall not take
any action, or authorize or permit any subsidiary, or Affiliate to take
any action, which will have the effect of subverting the intent of the
Parties with regard to the Volume Commitment or SCI's right to manufacture,
assemble, purchase or sell the Products during the Initial Term of this
Agreement.
4.PRODUCTS
4.1 Generally. Intergraph will provide Product specific documentation
to SCI for all Products listed in Exhibit A. The Parties will add new
Products to this Agreement after the Closing Date by amending Exhibit A .
4.2 Pricing for New Products. SCI will provide Intergraph a price
quote for each new Product proposed by Intergraph. Such price quotations
will be consistent with the Labor rate in Exhibit B, the Pricing Model in
Exhibit C and the Pricing Matrix in Exhibit D. The cost of NRE or tooling,
if any, will be separately quoted for each new Product. The initial agreed
upon price for each Product will be set forth in the Initial Master
Purchase Order.
4.3 Other Documents for Products. Unless otherwise agreed, Intergraph
will be solely responsible for the identification of Products, Service
Units and Spare Parts, Intergraph part numbers, Specifications, Quality
Requirements, and Unique Components included in each new Product. The
Parties will be jointly responsible for the identification of pre-
production services, the Pre-Production Deliverables and NRE payment
schedule.
5. MANUFACTURING SERVICES
5.1 Services. SCI will accept Master Purchase Orders for Products,
Service Units and/or Spare Parts issued in accordance with Section 11
(Forecasts, Orders & Adjustments) for the purpose of purchasing materials.
Sales Orders shall be issued by Intergraph to SCI for the purpose of
authorizing SCI to assemble, test and package such Products, Service
Units and/ or Spare Parts on a turnkey basis in accordance with
Intergraph's Specifications and Quality Requirements, and Deliver them to
Intergraph or its customers in accordance with the terms of this Agreement.
Unless otherwise agreed to by the Parties, and except as set forth in the
IP Agreement and in the Transition Services Agreement, SCI will provide all
manufacturing technology, equipment, labor, materials and facilities
necessary to perform the scope of work.
5.2 On-Site Personnel. SCI employees as required will be on site at
Intergraph and supervised by SCI management with appropriate Intergraph
management in place. Intergraph Distribution Center and Proto-Room will be
managed by Intergraph utilizing SCI employees. The relocation of some or
all of the related manufacturing activities will be by mutual agreement of
the Parties.
6.INITIAL INVENTORY OF MATERIALS AND COMPONENTS
6.1 Generally. Pursuant to the Asset Purchase Agreement, SCI will
purchase from Intergraph the Initial Inventory at current net book value
as of the Closing Date. As part of the Premium, SCI will discount by ten
(10) percent any Initial Inventory which SCI subsequently sells back to
Intergraph in finished Product prices. This ten percent discount is
reflected in the Initial Inventory Standard Cost.
6.2 Use of Initial Inventory. SCI will use commercially reasonable
efforts to utilize the Initial Inventory before utilizing any materials or
components purchased by SCI from any other source. SCI will provide
Intergraph regular transactional reports showing its use of the Initial
Inventory.
6.3 Warranty. Intergraph warrants that the Initial Inventory and any
other Intergraph owned inventory purchased by SCI will meet the
requirements of SCI's and Intergraph's specifications for such materials
and/or components for the same period of warranty as granted by SCI for the
Product. Intergraph will replace, repair or at Intergraph's option, refund
the purchase price, of any Initial Inventory purchased by SCI and
subsequently found to be defective, provided that SCI gives Intergraph
written notice of such defect and returns the defective materials to
Intergraph using Intergraph's RMA procedure. Intergraph shall not be
obligated to replace or refund the purchase price of any Initial Inventory
that has been abused, damaged, altered or misused by SCI or that is
defective as a result of causes by SCI.
6.4 Intergraph's Obligation to Repurchase. Intergraph's obligation to
repurchase shall be in accordance with SCI's "Inventory Put Option" as
described in Section 10.2 of the Asset Purchase Agreement .
7.PROCUREMENT OF MATERIALS
7.1 Procured Materials. To the extent the Initial Inventory does not
contain sufficient quantities of materials and components to fulfill
Intergraph Master Purchase Orders or Sales Orders , SCI will purchase such
materials and components directly from vendors authorized by Intergraph as
set forth in Section 7.2 below.
SCI will purchase and manage its inventory of Procured Materials in a
manner:
(i) consistent with standard industry inventory management practices,
including but not be limited to the use of Economic Order Quantities,
ABC buy policies, and long lead-time component management; and
(ii) that will ensure that SCI can fill Intergraph Master Purchase
Orders or Sales Orders on a turnkey basis according to the agreed upon
Lead Times and flexibility terms and obtain competitive prices for
such materials and components.
7.2 Intergraph Authorized Vendors. SCI will procure materials only
from Intergraph Authorized Vendors. Intergraph will provide SCI with an
Approved Vendor List/Preferred Vendor List for each phase of Product
manufacture. All suppliers of Procured Materials will be considered tier
two suppliers to Intergraph. SCI will not change vendors without
Intergraph's advance written approval, which shall not be unreasonably
withheld. Intergraph's specification of vendors will not release SCI from
any of its obligations for meeting the standards of workmanship or any
other obligations it has under this Agreement.
7.3 Long Lead-Time Components. Intergraph and SCI will identify any
long Lead- Time Components in writing upon receipt of the Initial Master
Purchase Order or at any time during the production of a Product. SCI will
not purchase Long Lead-Time Components except as expressly approved by
Intergraph in a letter of authorization which will be as binding as a
Purchase Order for such Long Lead-Time Components.
7.4 Use of Proprietary Components. SCI agrees to use Proprietary
Components for the sole purpose of producing the Products, Service Units
and Spare Parts for Intergraph and not for any other purpose. SCI agrees
not to engage in, nor will it authorize others to engage in, the reverse
engineering, disassembly or the decompilation of any Proprietary
Components.
7.5 Reports. Upon reasonable request, SCI agrees to provide Intergraph
written reports on Procured Materials, current inventory and production
scheduling.
7.6 Packaging and Printed Materials. All packaging, product graphics,
instructional materials and other Intergraph specified print matter will be
created, developed and produced in accordance with Intergraph requirements
and produced internally by SCI or purchased from an SCI supplier on a
competitive price basis.
7.7 Programs Manager. Each company will name a person to be a single
point of contact to handle matters related to the day to day administration
of this Agreement.
8.DESIGN, MATERIAL AND PROCESS CHANGES
8.1 At SCI's Request. SCI will not change any Product, including any
component or material used in such Product, without obtaining Intergraph's
prior written consent. SCI's request will include any cost, schedule or
other impact of such change. If Intergraph requests, SCI will also provide
sample units of the modified Product for Intergraph evaluation. Intergraph
will target to approve or disapprove SCI's request within fifteen (15)
days after receipt or, as a minimum, within such period advise SCI of the
estimated date such decision will be made by Intergraph.
8.2 At Intergraph's Request. Should Intergraph desire modifications in
the design of a Product, Intergraph will submit a written Engineering
Change Order ("ECO") to SCI. Within one (1) week after SCI's receipt of
the ECO, SCI will advise Intergraph of any cost, schedule or other impact
of such change, and will not implement any such change unless and until
Intergraph has approved such impact in writing. SCI will make commercially
reasonable efforts to implement the required changes in a timely manner
which is mutually agreeable to both Parties.
8.3 Emergency Changes. If Intergraph submits an emergency ECO clearly
identified as such, SCI will strive to implement such ECO within 24 hours;
provided that SCI has advised Intergraph of and Intergraph has approved in
writing any estimated cost or other impact of such change and the required
components are available.
8.4 Impact on Open Purchase Orders. Unless Intergraph specifies
otherwise in its written approval of changes pursuant to this Section, such
changes will not impact any units already scheduled for Delivery as of the
date of Intergraph's approval.
9.QUALITY AND INSPECTION
9.1 Quality Requirements. SCI will manufacture the Products in
accordance with the Quality Requirements set forth in Exhibit F. SCI will
provide Intergraph regular reports and analysis of its yields. SCI will
also provide Intergraph, for Intergraph's review and approval, its
corrective action procedures, defect containment plan, recall risks, repair
capabilities and costs, business risk insurance, and known liabilities.
9.2 Incoming Inspection. Intergraph may inspect Product Delivered
under this Agreement for deficiencies in material and workmanship either at
the Delivery Point and/or at its destination. Intergraph may return
defective or non-conforming Products to SCI at SCI's cost (using SCI's
selected carrier) within thirty (30) days after direct Delivery (or up to
forty-five (45) days if delivered into the Distribution Center) in
accordance with the agreed RMA procedure. In the event the Parties
mutually agree that the Product is "no trouble found" after return to SCI,
then Intergraph shall pay for the shipping costs.
9.3 Agency Approvals. Unless the Parties agree otherwise, Intergraph
will be responsible for obtaining agency and regulatory approvals;
provided, however, that SCI will provide Intergraph all information and
assistance reasonably requested by Intergraph for the purpose of obtaining
such approvals. If Intergraph desires for SCI to perform such
certification services, the Parties will mutually agree to contract
separately for such services.
10. PRICING
10.1 The Pricing Model. SCI will provide Intergraph a price quote for
each new Product proposed by Intergraph as set forth in Section 4.2, above.
The unit price agreed upon by the Parties will be set forth in the Product
Pricing Schedule at Exhibit E; provided, however, that such prices may vary
in accordance with Section 10.2, below. The Parties agree separate costing
will be utilized for PCBA Products as compared to other final assembled
Products.
10.2 Labor Rates. The Labor Rate element of the Pricing Model shall be
determined in accordance with Exhibit B.
10.3 Procured Material Cost. The Procured Material Cost for Initial
Products will be based on the SCI Initial Inventory Standard Cost, SCI
normal standard cost for the materials not included in the Initial
Inventory, plus the applicable Material Mark-up.
10.4 Tooling and NRE Costs. SCI will quote tooling, NRE, and other one
time costs separately, and will not incur any such costs without
Intergraph's prior written approval. SCI will substantiate all such costs.
Such agreed costs will appear as "Other Direct Costs" in the Exhibit C
Pricing Model.
10.5 Product Cost Review. SCI will meet with Intergraph every ninety
(90) days during the Term to review the existing Product cost and establish
a plan to pursue all reasonable cost reduction opportunities.
10.6 Taxes. The prices set forth in the Price Schedules are exclusive
of state or local sales, use, excise or similar taxes, which, if
applicable, will be paid by Intergraph. SCI shall be solely responsible
for its own taxes based on its revenues or property ownership.
10.7 Royalties. Unless stated otherwise specifically agreed to in
writing, SCI will have no obligation to collect and pay separate royalties
to any third party (except those royalties contained within a vendor's
product price). SCI shall be responsible for paying royalties associated
with its manufacturing processes or its own designs. In the event SCI is
required to pay royalties for the use of Lemelson patents, the Product
prices will be appropriately adjusted.
10.8 Intergraph Equipment Loaner Program. There are two types of
Product loans from the Distribution Center:
(A) Loans within Intergraph for a specific promotional purpose such as
a trade show, etc. or for quality testing purposes. For Products loaned
on this basis, SCI will retain title and ownership, up through forty-five
(45) days from the date the Product was received in the Distribution
Center. Intergraph shall purchase from SCI at the then current pricing, any
loaned equipment which is damaged to the point of not being eligible for
refurbishment for any reason not caused by SCI.
(B) All other loans within Intergraph or all Products loaned to a third
party for any reason. For Products loaned on this basis, SCI shall invoice
Intergraph on the date the Product is removed from the Distribution Center
and Intergraph shall have title to the Products while it is on loan.
(C) Intergraph represents and warrants that Exhibit G contains a
complete and accurate list of the Initial Inventory on loan by Intergraph
and conveyed but not physically transferred to SCI at Closing. With
respect to each item of Initial Loaned Inventory, unless such item of
Initial Loaned Inventory is returned to SCI prior to forty-five (45) days
following the Closing Date, SCI shall invoice Intergraph for such item on
the earlier of (i) the date such item is sold or (ii) forty-five (45) days
from the Closing.
In all cases, upon the return of loaned equipment to the Intergraph
Distribution Center, SCI shall charge Intergraph on a time and materials
basis based on mutually agreed standards and terms for the refurbishment of
such loaned equipment.
11. FORECASTS, ORDERS & ADJUSTMENTS
11.1 Forecasts. Intergraph will provide SCI, every calendar month
during the Term, a forecast covering the period of six (6) calendar months
beginning with the month in which such forecast is provided. Such forecast
will specify the number of units of the Products which Intergraph
anticipates purchasing during such six (6) month period. Such forecasts
will be non-binding and will not be regarded as a commitment to purchase by
either Party.
11.2 Master Purchase Orders. The Initial Master Purchase Order shall be
for a minimum of ninety (90) days. Subsequent Master Purchase Orders will
be issued on a rolling monthly basis so that at any time SCI will have no
less than sixty (60) days Lead Time to Delivery. Master Purchase Orders
will be issued by Intergraph and will be issued in writing or by electronic
means, in accordance with the applicable Lead Time(s). Intergraph will
issue a written authorization to allow SCI to procure long-lead materials
that are beyond the Master Purchase Order coverage in quantities consistent
with the forecast. To be effective, all Master Purchase Orders must
contain the following terms:
( a ) description of the Products to be purchased, including
Intergraph part number;
( b ) quantity to be purchased;
( c ) anticipated manufacturing schedule; and
( d ) confirmation of price.
SCI will accept or reject Intergraph Master Purchase Orders in writing
within five (5) working days after its receipt and shall target to provide
such notice within three (3) working days. Failure to deliver an
acknowledgment to Intergraph within such five (5) day period will be deemed
acceptance. Only terms (a) - (d), above, and the terms of this Agreement
will apply to orders for Products, even if Intergraph's Purchase Order
and/or SCI's acknowledgment form contains other terms and conditions,
preprinted or otherwise inserted.
11.3 Authorized Purchasing Locations. SCI agrees to accept and act upon
only those Master Purchase Orders and Sales Orders received from the
following authorized purchasing location:
Intergraph Corporation
Corporate Procurement
Huntsville, AL 35894
The above list of authorized purchasing locations may be revised from time
to time upon the Parties' mutual written consent.
11.4 Order Adjustments.
(a) Intergraph may increase, decrease or reschedule the quantity of
Products previously set forth in a Master Purchase Order or Sales Order in
accordance with the rescheduling chart set forth below. SCI shall utilize
commercially reasonable efforts to avoid the incurring of any vendor
special charges or premiums in providing Products within the parameters set
forth in the chart. In the event a special charge or premium is required
for rescheduling (increases or decreases within the parameters of the
chart) then Intergraph shall pay or reimburse SCI for such vendor premiums
or special charges; provided that, SCI shall not incur any premium or
special charge without advance notice to, and written approval by,
Intergraph. SCI shall use its commercially reasonable efforts to mitigate
any expense to Intergraph arising out of a change in production quantities.
The following chart defines the percentage of change allowable by period:
Periods covered by Master Purchase Orders:
Adjustments Made Permissible Adjustment**
Within 30 Days* As Negotiated on a case by case basis
31 to 45 Days + 30%/ - 50%
46 to 60 Days + 50%/ - 70%
61+ Days Up to 100%+
* "Days" means the number of calendar days between Intergraph order
adjustment and the Delivery Date.
**"Adjustment" means the percentage of any Product ordered for Delivery
on such Delivery Date that Intergraph may add to the order, delete from the
order or reschedule for later delivery.
Contingent on availability of materials and labor and with commercially
reasonable efforts, SCI will supply increased quantities of Products on
the originally scheduled Delivery date.
If Intergraph reschedules the Delivery Date under a particular Master
Purchase Order or Sales Order by more than forty-five (45) days after the
original Delivery date, Intergraph will pay SCI an inventory carrying
charge equal to one percent (1%) of the actual cost of affected inventory
held by SCI on the last day of each month thereafter, provided that SCI
will use every reasonable effort to mitigate such carrying charges to
Intergraph by, without limitation, canceling or delaying orders, returning
components and utilizing components in other products currently produced by
SCI at any of its sites.
If due to requests or changes by Intergraph, Intergraph will be responsible
for:
(i) any overtime charges required to meet Intergraph's needs where
Intergraph requires greater flexibility than is permitted above,
provided that SCI shall advise Intergraph in advance of the need for
overtime activity; provided SCI will use every reasonable effort to
minimize such charges;
(ii) any vendor premiums required to meet Intergraph flexibility needs
when Intergraph requires greater flexibility than is permitted above,
provided that such premiums are incurred due to circumstances beyond
SCI's control; provided that SCI will use every reasonable effort to
minimize such charges or premiums and will advise Intergraph of any
such charges or premiums in advance so that Intergraph may choose
whether to incur the additional cost in order to achieve the desired
flexibility.
11.5 Sales Orders. SCI will assemble finished Products in accordance
with the instructions contained in Sales Orders. Sales Orders will be
issued by Intergraph pursuant to a Master Purchase Order. SCI will build
and ship as directed by Sales Orders. SCI will notify Intergraph of
exceptions to scheduled ship dates within one (1) Working Day of receiving
a Sales Order. SCI will confirm actual shipment on-line within a time
frame consistent with agreed-upon EDI download frequencies.
11.7 Cancellation or Modification.
(a) Sales Orders. Intergraph may cancel or modify any Sales Order
prior to shipment of Product upon written notice to SCI. Sales Orders
shall be modified by cancellation of the original Sales Order followed by
the issuance of a new Sales Order reflecting the modification.
Modifications shall be limited to changes in the Sales Order configuration
(including quantity changes), changes in Customer name or ship to address
or postponement of shipment date. SCI shall strive to implement all
cancellations or modifications on a commercially reasonable basis, given
the availability of manpower and materials. Intergraph has the right to
cancel a Sales Order provided that Intergraph will reimburse SCI for costs
actually and reasonably incurred by SCI, including the actual cost of labor
expended, materials and components for the ordered quantity which are not
otherwise usable on another Sales Order and material mark-up therefore (as
set forth in Exhibit D,), as the result of such cancellation, but no profit
or lost opportunity cost shall be allowed. Both Parties will undertake
reasonable measures to mitigate the costs of cancellation.
(b) Master Purchase Orders. Within the parameters of the
Schedule, Intergraph may modify any Master Purchase Order prior to shipment
of Product upon delivery to SCI of a Change Order (as defined below).
Intergraph may only cancel a Master Purchase Order in accordance with the
terms set forth in Section 17, Termination.
11.8 Change Orders. Intergraph shall confirm in a writing delivered to
SCI any changes ("Change Order") to a Master Purchase Order, and SCI shall
target to acknowledge such changes in writing within three days, which
shall include an estimate of the cost and /or schedule impact of
implementing the change. SCI shall not be required to implement any change
in a Master Purchase Order which is delivered to SCI at intervals less than
the normal thirty day rolling update until the Parties have agreed on the
impact, if any, of the change.
11.9 Timing; Quantities in Sales Orders. Intergraph shall issue Sales
Orders not less than five (5) Working Days prior to the required shipment
date. SCI shall comply with the terms of the Sales Order, provided that
the weekly production quantity is not less than 20%, nor more than 30%, of
the total forecasted production quantity for the current month as set forth
in the latest Master Purchase Order. In the event that the production
quantity exceeds 30% of the total forecasted production quantity for the
current month, then SCI's obligation to ship by the shipment date specified
in the Sales Order shall be on a commercially reasonable basis.
11.10 Obsolete/Excess Materials. If due to Master Purchase Order
adjustments in 11.4 above, cancellations, modification or push out of a
Sales Order, or an Engineering Change Order, if SCI has any components or
material on hand more than sixty (60) days which it can not mitigate with
the vendor and which have substantially less demand as reflected in the
current three month Purchase Order and six month forecast, such inventory
shall be considered obsolete/excess material by the Parties. Within thirty
(30) days of such material being designated as obsolete/excess, Intergraph
shall either purchase such materials at the standard price paid by SCI plus
material mark up (plus labor if an SCI manufactured subassembly or at the
latest Purchase Order price if a completed Product) or shall authorize SCI
to obtain liquidation offers from third parties. SCI shall advise
Intergraph if the liquidation value is less than that Intergraph would
otherwise owe SCI, and Intergraph shall approve the liquidation price in
writing, preferably within five (5) working days, and shall be liable for
the difference in price, which shall be invoiced by SCI upon the sale of
the obsolete/excess materials to the third party. Intergraph shall receive
the benefit if the materials are sold at a price higher than that owed to
SCI. Until disposed of and any difference reconciled by Intergraph or
purchased by Intergraph, the one percent (1%) carrying charge per month in
11.4 shall apply to the cost of the excess/obsolete material.
11.11 Lead Time Reduction Program. SCI and Intergraph will meet
quarterly to discuss options to effect reductions in Lead Times to allow
improved flexibility in ordering and delivery. The agenda for each meeting
will include identification of such options, schedules for determination of
associated cost and schedules for implementation.
12. DELIVERY, TITLE, CARRIER & RISK OF LOSS
12.1 Delivery. SCI will Deliver the total number of units ordered in a
particular Sales Order to the Delivery Point on or before the date
specified in such Sales Order, subject to the provisions of Section 11.4
above. Delivery is considered on time if delivered zero (0) days late and
up to three (3) days early. In computing the above delivery date, each
Sales Order for other than complicated Servers or Systems shall have a
manufacturing lead time of five (5) days from the date of the Sales Order
and a mutually agreed manufacturing lead time for all complicated Servers
or Systems, to be agreed on a case by case basis. The above manufacturing
lead time assumes that the materials required to manufacture the Products
have been previously ordered and received in accordance with the Master
Purchase Order and the Sales Orders support the mix, quantity, and
scheduling reflected in the Master Purchase Order. If the required
materials are not available to support an on time delivery of a Sales
Order, SCI shall target to notify Intergraph within one (1) working day of
the receipt of the Sales Order of the estimated date delivery can be made
to satisfy the requirements of the Sales Order. Such delay shall not be
considered the fault of SCI, provided SCI has not otherwise caused the
delay.
12.2 Carrier; Risk of Loss. SCI will use Intergraph's Preferred
Carrier(s) for Delivery, provided that if Intergraph does not designate a
preferred carrier, SCI may select a common carrier at its discretion. In
the event SCI were to be directed to deliver Product directly to an
Intergraph customer or to any other location, in all cases the FOB point
shall be SCI's dock. For shipment of Products to the Intergraph
Distribution Center, carrier selection and risk of loss shall remain with
SCI.
12.3 Distribution Center Inventory. Except for the Product loan
conditions in Section 10.8 above, SCI will consign Products to
Intergraph's Distribution Center for a maximum of forty-five (45) days. On
the forty-sixth (46th) day, SCI will invoice Intergraph for any Products
which resides within, or is under the control of, the Distribution Center,
including any Products on loan from the Distribution Center if loaned under
the conditions described in Section 10.8 (A). SCI will invoice Intergraph
a one percent (1%) inventory carrying charge for any inventory which
resides within, or remains under the control of, the Distribution Center
for longer than forty-eight (48) hours. The Parties will review on a
quarterly basis the weighted average time Products remain in the
Distribution Center, and such percentage will be reasonably adjusted by SCI
on a forward basis if the data indicates a substantial sustained reduction
in the average time Products reside in the Distribution Center.
13. PAYMENTS
Intergraph will pay SCI for quantities of Product shipped to Intergraph net
thirty (30) days from the date of SCI's invoice. Product will be invoiced
at the earlier of: (a) the time of shipment directly to Intergraph's
customer; (b) upon the Product being removed by Intergraph for resale from
Intergraph's Distribution Center or for loan under the conditions described
in Section 10.8 (b) above; or (c) the forty-fifth (45th) day after the
Product has been placed within Intergraph's Distribution Center. Any
payment not received by day forty-five (45) from the date of the invoice
will be considered late. Unless otherwise agreed by the Parties,
Intergraph's payment will be made by telegraphic transfer to a bank account
designated by SCI. Neither Party will have the right of off set or set
off. At SCI's option, SCI may impose a late payment fee of up to 1 percent
(1%) per month on all amounts past due. Both Parties agree to work
diligently to resolve any discrepancies involving invoices. All payments
shall be in U.S. dollars.
14. WARRANTIES, REMEDIES, LIMITATION OF LIABILITY
14.1 Warranty Period. SCI warrants to Intergraph that each Product
shall be free from defects in workmanship and materials for twelve (12)
months from the Product invoice date (the "Product Warranty"). SCI will
offer Intergraph an Extended Warranty period of up to two (2) additional
years for an additional one percent (1%) per year of the Product price.
Intergraph shall indicate on its Purchase Order the length of the desired
warranty and shall compute the Product Price accordingly.
(A) SCI PCBA FRUs. FRUs under warranty which are designed and/or
manufactured by SCI will be returned freight prepaid to SCI for repair,
refund, full credit or replacement at SCI's option. If a repair or
replacement is performed, SCI will repair or replace the FRU and ship the
FRU at SCI's expense to the shipping location requested by Intergraph.
Warranty repair FRUs will be unpacked, devirussed, tested for the failure
or non-conformity, repaired, have new software loaded (if applicable) and
have the Bios reflashed (if applicable) before shipment to Intergraph.
Intergraph shall only return complete Product units when the failed
component can not be readily removed from the Product unit.
(B) Vendor FRU Pass Through Warranty. If a FRU is purchased by SCI
from a vendor, then Intergraph shall have the option to select either
repair, replace, refund or credit remedies, provided and to the extent such
remedies are contained in the purchase order between SCI and the vendor.
Additionally, to the extent any vendors warrant their component or assembly
for longer than twelve (12) months, SCI shall pass through such warranties
to Intergraph (to the extent authorized by the vendor and to the extent
permitted by applicable purchase order or laws), and Intergraph may obtain
warranty remedies directly from the vendor, provided such direct action
between Intergraph and the vendor does not create any additional liability,
cost or expense to SCI. Intergraph may request that SCI process pass
through warranty claims after the initial twelve (12) month warranty period
on Intergraph's behalf for an agreed-to processing fee. Intergraph shall be
responsible for all transportation costs if a vendor FRU is returned to
SCI for processing after the initial twelve (12) months. During the
initial twelve (12) months of warranty, Intergraph shall pay transportation
costs to return the defective Product to SCI, and SCI shall pay the
transportation cost to return the repaired or replaced item to Intergraph
or Intergraph's customer.
14.2 DOA Warranty and Corrective Actions. In the event any Product
received by an Intergraph customer is dead on arrival "DOA", then upon
notice from Intergraph, the Parties shall mutually agree on the most cost
effective means of remedying the situation with the customer on an
expedited basis. Such immediate actions may include expedited shipping of
replacement FRU if diagnostic tests indicate an FRU has failed or, as a
last resort, replacing the entire Product, if a replacement is reasonably
available. After the failed FRU or Product is returned to SCI, an
inspection/test of the failed item will be performed, a report will be
issued by SCI identifying the root cause or causes of the failure and
appropriate corrective, if necessary to prevent a recurrence of the DOA.
If the cause of failure is not covered by SCI's warranty, or the failure
can not be duplicated or if the failed item is not returned within thirty
days, then SCI shall be reasonably reimbursed its added expenses of
correcting the DOA situation. In all cases both Parties will work in good
faith to correct the problem at minimum cost while responding to the
customer in a manner which recognizes the need for quick action.
14.3 Exclusions. The materials portion of the Product Warranty shall
not apply to (i) Intergraph supplied materials for which the vendor will
not honor at no cost a pass through by SCI of Intergraph's warranty rights,
(ii) Product that is abused, damaged, altered or misused after title passes
to Intergraph other than by SCI, or (iii) Product damaged after title
passes to Intergraph by external causes not directly contributed to by SCI;
(iv) if the original name and/or serial number and/or identification
markings have been defaced, altered or removed, or (v) use in violation of
operational instructions furnished with each Product.
14.4 Free From Defects. Products shall be considered free from defects
in workmanship if they are manufactured in accordance with SCI's
manufacturing workmanship standards, which shall be mutually agreed to by
the Parties, conform to the Product specifications, and successfully
complete any mutually agreed upon Product Acceptance Tests. Intergraph
may perform acceptance testing which measures a different array of
performance criteria but the Parties agree that the mutually agreed upon
Product Acceptance Test will be the measurement standard to determine if
the Product meets specifications. Intergraph shall have the right to
observe any tests performed by SCI and shall have the right to review and
inspect all test record, provided that such actions are reasonably
requested and do not impede SCI's manufacturing and testing schedule.
14.5 Claims. All claims for breach of warranty must be received by SCI
no later than thirty (30) days after the expiration of the warranty period
for the product.
14.6 DISCLAIMERS. THE PRODUCT WARRANTY IS THE ONLY WARRANTY GIVEN BY
SCI. SCI MAKES, AND INTERGRAPH RECEIVES, NO OTHER WARRANTY EITHER
EXPRESSED OR IMPLIED. ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE, AND ALL IMPLIED WARRANTIES OF TITLE FOR ANY
CONSIGNED OR INTERGRAPH SUPPLIED MATERIALS, ARE EXPRESSLY DISCLAIMED AND
EXCLUDED HERE FROM.
14.7 Certifications and Approvals. Unless expressly agreed to by SCI in
writing, SCI makes no warranty that the Products will meet any
specification not made known to and agreed to by SCI. Except if
separately contracted for in Section 9.3 above, SCI makes no warranty that
the Products will receive the approval of or be certified by Underwriters
Laboratory, any federal, state, local or foreign government agency
(including without limitation the federal communications commission) or any
other person or entity. SCI assumes no responsibility for obtaining such
approvals or certifications, or meeting such specifications except as
dictated by the manufacturing process unless such dictation is required by
Intergraph.
14.8 Remedy. Intergraph's exclusive remedy for any breach of the
Product Warranty shall be, at SCI's option, repair by SCI at a facility
of its choice, replacement of the defective Product with a functionally
equivalent product, or return of the Purchase Price.
14.9 Warranty Termination. SCI's warranty obligations will cease upon
the earlier of the agreed upon warranty period or upon SCI's fulfillment
of Intergraph's request to return any Intergraph-owned test equipment
and fixtures which would be required by SCI to provide warranty services
for a Product.
14.10 Outside the Warranty Period. SCI will repair Products which are
outside the warranty period on mutually agreed prices and terms and
conditions. Additionally, SCI shall offer such repair services to
Intergraph for products produced by Intergraph prior to the Closing Date.
14.11 Intergraph's Warranty. Intergraph warrants the accuracy and
completeness of the drawings, specifications and documentation provided to
SCI for the manufacture of components and products.
15. INDEMNIFICATION
15.1 Indemnity by SCI. SCI will at SCI's expense, indemnify, hold
harmless and, defend Intergraph, any of its subsidiaries, affiliates,
directors, officers, employees, agents and independent contractors, from and
against any and all loss, cost, liability or expense (including costs and
reasonable fees of attorneys and other professionals) arising out of or in
connection with a third party claim that SCI's manufacturing process
infringes any patent, copyright, license, trademark right, trade secret,
mask work right or other proprietary right of any kind of any third party;
provided that SCI will have no liability under this Section 15 to the
extent such infringement is attributable to Intergraph's written
instructions. Intergraph will provide prompt written notice of any claim
or the assertion of a claim by a third party. Upon such notice, SCI shall
have the right to defend against such claim or assertion and to select
counsel for such defense. Intergraph shall cooperate reasonably with SCI
in supporting the defense against the claim or assertion. Notwithstanding
the above, the Parties have agreed that the Lemelson patents shall be
excluded from SCI's indemnity to Intergraph. However, in the event the
Lemelson patents become applicable to either of the Parties with respect to
SCI's manufacture of the Products, (a) SCI will exert commercially
reasonable efforts to negotiate a reasonable license and royalty for the
use of Lemelson technology in the manufacture of the Products and (b) to
the extent any claim arises with respect to the Lemelson patents which
relates to SCI's manufacturing processes used in the manufacture of the
Products, SCI shall, between the Parties, take the lead, without any
indemnification obligation or additional responsibility as to cost, in the
defense of any such claim.
15.2 Indemnity by Intergraph. Intergraph will, at Intergraph's
expense, indemnify, hold harmless and, defend SCI, any of its subsidiaries,
affiliates, directors, officers, employees, agents and independent
contractors, from and against any and all loss, cost, liability or expense
(including costs and reasonable fees of attorneys and other professionals)
arising out of or in connection with a third party claim or other
proprietary right of any third party that a Product infringes any patent,
copyright, license, trademark right, trade secret, mask work right or other
proprietary right of any third party to the extent that such claim is
attributable to SCI's incorporation of designs or materials provided by
Intergraph into the Product. Intergraph shall also to the same extent as
stated above indemnify SCI in connection with any third party claim based
on Intergraph's design, distribution, sales, and use of Products, including
refurbishment of loaned Products or components for sale as new. SCI will
provide prompt written notice of any claim or the assertion of a claim by a
third party. Upon such notice, Intergraph shall have the right to defend
against such claim or assertion and to select counsel for such defense.
SCI shall cooperate reasonably with Intergraph in supporting the defense
against the claim or assertion.
15.3 Legal Compliance. Each Party will defend, indemnify, and hold
the other Party harmless from any loss, cost, or expense directly resulting
from the first Party's violation of any law, rule, regulation or ordinance
of the United States, any State, or any other government agency in the
performance of this Agreement.
15.4 Conditions. A Party's obligation to indemnify the other under this
Section 15 is conditioned upon and subject to: (a) the indemnified Party
giving the indemnifying Party reasonably prompt notice in writing of any
such suit and permits the indemnifying Party through counsel of its choice,
to answer the charge of infringement and defend such claim or suit; (b) the
indemnified Party provides the indemnifying Party information, assistance
and authority, at the indemnifying Party's expense, to enable such Party to
defend the suit; and (c) the indemnifying Party will not be responsible for
any settlement made by indemnified Party without its prior written consent.
The indemnifying Party agrees not to disclose or publicize the terms of any
settlement of a suit against the indemnified Party without first obtaining
the such Party's written permission.
16. CONFIDENTIALITY
Each Party will protect the other's Confidential Information from
unauthorized dissemination and use with the same degree of care that each
such Party uses to protect its own like information, but at a minimum, with
a reasonable degree of care. Neither Party will use the other's
Confidential Information for purposes other than those necessary to perform
this Agreement and only employees of the receiving Party who have a need to
know such Confidential Information will have access thereto. Neither Party
will disclose to third parties the other's Confidential Information without
the prior written consent of the other Party. Upon termination or
expiration of this Agreement, each Party shall return the other Party's
Confidential Information or obtain written approval for the destruction of
the other Party's Confidential Information.
17. TERMINATION
17.1 Termination with Cause. Either Party may, by written notice,
terminate and/or suspend its performance under this Agreement, without
penalty other than as set forth in this Section 17 if: (1) the other Party
fails to comply with any material provisions of this Agreement and such
condition is not remedied within thirty (30) days after receipt of written
notice thereof from the non-defaulting Party which sets forth in reasonable
detail the specific failures to comply; or (2) the other Party becomes
bankrupt or insolvent, suffers a receiver to be appointed or makes an
assignment for the benefit of creditors; or (3) the other Party is
enjoined, restrained or in any way prevented by court order from conducting
all or part of its business affairs; or (4) if the other Party is generally
not paying its obligations as they become due under the terms of this
Agreement.
17.2 Termination Without Cause. Either party may terminate this Agreement
without cause by giving the other Party ninety (90) days advance written
notice.
17.3 Effect of Termination. Upon termination of this Agreement:
(i) SCI will, to the extent and at times specified by
Intergraph, stop all work on outstanding Purchase Orders, incur
no further direct costs, and protect all property in which
Intergraph has or may acquire an interest. Intergraph will have
the option to request that SCI complete work in progress pursuant
to any Purchase Orders open on the date of termination; for
remaining work-in-process, Intergraph will pay a reasonable pro
rata percentage of the finished Product's purchase price;
(ii) Intergraph will compensate SCI for all Product delivered to
Intergraph;
(iii) SCI will deliver to Intergraph and Intergraph will
purchase from SCI, at SCI's purchase price, plus the material
mark up, any Unique Components in SCI's inventory or on order as
of the effective date of the termination; and
(iv) Each Party will return to the other, freight collect,
all materials that contain the other's Confidential Information,
or if the other Party gives written instructions to do so,
destroy all such materials and provide the other a written
certificate of destruction within thirty (30) days after such
destruction.
17.4 Inventory Indemnification.
17.4.1 Upon expiration of this Agreement or termination of this
Agreement for any reason, Intergraph will be responsible for:
(i) all finished Product;
(ii) all work-in-process at the effective date of the notice of
termination or intent not to renew; and
(iii) all procured materials purchased to fill a Purchase
Order or authorized by Intergraph in a letter of Authorization to
be purchased by Intergraph which are on hand or on order at
receipt of the notice of termination or intent not to renew.
Items (i), (ii) and (iii) are referred to as the "Termination
Inventory."
17.4.2 SCI will make every reasonable effort to use the Termination
Inventory on other current customer programs, will cancel all
outstanding material orders with vendors, and will attempt to return
piece parts to vendors with Intergraph prior approval. Intergraph
will be responsible for costs, charges and fees actually incurred by
SCI to cancel or return any portion of the Termination Inventory to
vendors and, upon mutual agreement, the cost to modify the procured
materials for other programs.
17.4.3 Within thirty (30) days from termination or cancellation, SCI
will invoice, and Intergraph will purchase, the Termination Inventory
remaining after vendor cancellations and returns and after other
program use, as follows: (I) for Procured Material Inventory and
authorized long lead time components, at SCI's standard cost, plus
material mark up; (ii) for work-in-process, at a mutually agreed
reasonable cost pro rata percentage of the finished Product purchase
price; and (iii) for finished Product, at the purchase price in effect
at termination or cancellation. Intergraph will be responsible for any
substantiated negative price differential between the price SCI paid
for the Procured Material and authorized long lead time components and
the price at which SCI was able to return and/or utilize the items on
other programs.
17.4.4 In addition to the above, should Intergraph default in any
material respect under this Agreement or terminate this Agreement
without cause prior to the end of the Initial Term, SCI shall be
entitled to receive a refund of its Premium and startup expenses
pursuant to Section 10.3 of the Asset Purchase Agreement.
18. LIMITATION OF LIABILITY
Except pursuant to Section 15 (Indemnification), in no event will either
Party be liable to the other for any special, incidental, punitive or
consequential, damages, whether based upon contract, tort, or any other
legal theory, including without limitation lost profits and opportunity
damage to associated equipment, cost of capital, facilities, service, or
replacement power, downtime costs, or claims of either Party's customers
for such damages, whether or not either Party was advised of the
possibility of such damage.
19. EXPORT/IMPORT COMPLIANCE
19.1 Export Controlled Commodities, Technical Data and Software.
This Agreement is subject to all laws, regulations, orders or other
limitations on the export and re-export of commodities, technical data and
software. The Parties hereby agree that they will not export, re-export,
resell or transfer an export controlled commodity, technical data or
software, (i)in violation of such limitations imposed by the United States or
any other appropriate national government authority, or (ii) to any country
for which an export license or other governmental approval is required at the
time of export, without first obtaining all necessary licenses or other
approvals.
19.2 Exporter of Record. Unless the Parties agree otherwise for
particular Product(s), Intergraph will be the Exporter of Record for all
Products manufactured at SCI and Delivered to Intergraph or its designee
outside of the United States. The Exporter of Record will be responsible
for obtaining necessary export licenses and other government approvals
required for export, and for preparing export documentation such as
commercial invoices, shipper's export declarations, and international
waybills. Each Party agrees to comply fully with the export control laws
of the United States and with the U.S. Export Administration Regulations
and the U.S. Arms Export Control Act when acting as the Exporter of Record.
If requested by Intergraph, SCI shall make reasonable working space
available for Intergraph's Export Documentation personnel in SCI's
manufacturing facility on a rent free basis.
21. GENERAL TERMS
21.1 Force Majeure. Neither Party will be deemed in default of this
Agreement to the extent that performance of its obligations or attempts to
cure any breach are delayed or prevented by reason of any act of God, fire,
natural disaster, accident, act of government, or an act that is beyond the
reasonable control of either Party, provided that such Party gives the
other Party written notice thereof promptly and, in any event, within
fifteen (15) days of discovery and uses its best efforts to continue to so
perform or cure. In the event of such a Force Majeure, the time for
performance or cure will be extended for a period equal to the duration of
the Force Majeure, but in no event more than ninety (90) days.
21.2 Relationship of the Parties. Each of the Parties will at all times
during the Term act as, and will represent itself to be, an independent
contractor. Neither Party will have any right or authority to assume or
create any obligations or to make any representations or warranties on
behalf of the Party whether express, implied, the appearance or otherwise
to bind the other Party in any respect whatsoever.
21.3 Assignment. The rights and liabilities of the Parties hereto will
inure to the benefit of their respective successors, executors and
administrators, as the case may be; provided that, neither Party may assign
or delegate its obligations specified under this Agreement either in whole
or in part, without the prior written consent of the other, which will not
be unreasonably withheld. Any attempted assignment in violation of the
provisions of this Section will be void.
21.4 Insurance. During the term of this Agreement, both Parties shall
obtain and maintain, at its own expense, industry standard insurance
coverage, which as a minimum shall include but not be limited to: (a)
Commercial Liability, no less than $5M for damage or destruction of
property, $500,000 per person, with no less than $1M per occurrence; and
(b) Workman's Compensation, Employment Practices, Product Liability, and
Automobile Liability; at no less than $1M (and $500,000 per person) each.
The insurance companies must be legally authorized to do business in the
region in which the work is to be performed. Each Party shall provide the
other Party with evidence of this insurance coverage signed by an
authorized representative of the insurance company. The coverage
documentation must contain customary provisions for thirty (30) day advance
written notice to the other Party of any change, non-renewal or
cancellation. Either Party may reasonably request evidence of coverage and
verify compliance to the minimum coverage requirements listed below at any
time during the term of the Agreement. Failure to secure and maintain
coverage or to comply with the coverage minimums will be a default under
the Agreement.
21.5 Trademark Usage. SCI will not, without Intergraph's prior written
consent, use any Intergraph trademarks, service marks, trade names, logos
or other commercial or product designations, for any purpose, including,
but not limited to, use in connection with any SCI products, promotions,
advertisements or Exhibitions.
21.6 Publicity. Unless otherwise agreed by the Parties in writing, no
press releases, conferences, interviews or other public announcements, in
whatever form, will be made or given by either Party in relation to this
Agreement.
21.7 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of Intergraph and SCI and their permitted assigns and nothing
herein expressed or implied will give or be construed to give to any person,
other than Intergraph and SCI and such assigns, any legal or equitable
rights hereunder.
21.8 Severability. If for any reason a court of competent jurisdiction
finds any provision of this Agreement or portion thereof to be
unenforceable, that provision of this Agreement will be enforced to the
maximum extent permissible to effect the intent of the Parties and the
remainder of this Agreement will continue in full force and effect.
21.9 No Waiver. All rights and remedies conferred under this Agreement or
by any other instrument or law will be cumulative and may be exercised
singularly or concurrently. Failure by either Party to enforce any
provision of this Agreement will not be deemed a waiver of future
enforcement of that or any other provision.
21.10 Notices. All notices required or permitted under this Agreement
will be in writing, will reference this Agreement and will be deemed given
when: (i) delivered personally; (ii) when sent by confirmed telex or
facsimile; (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1)
day after deposit with a commercial overnight carrier, with written
verification of receipt. All communications will be sent to addresses set
forth below or such other address as may be designated by a given Party
by giving written notice to the other Party pursuant to this Section.
21.11 Personnel. SCI's employees, consultants, contractors and agents
will observe the working hours, working rules and holiday schedule of
Intergraph while working on Intergraph's premises. Intergraph's employees,
consultants, contractors and agents will observe the working hours, working
rules and holiday schedule of SCI while working on SCI's premises.
21.12 Contacts. All notices required by the provisions of this
Agreement or desired to be given hereunder shall be in writing to the
person(s) listed below by registered mail, return receipt requested:
Intergraph: SCI:
Kirk Totten Wendell G. Seay
ICS Vice President of Materials Manager of Contract Management
Intergraph Corporation SCI Systems, Inc.
Huntsville, AL 35894-0001 2101 W. Clinton Avenue
Huntsville, AL 35807
With a copy to With a copy to
David Lucas SCI, Sr VP-Southeastern Division,
Senior Counsel 13000 South Memorial Parkway
Intergraph Corporation Huntsville, AL 35803
Huntsville, AL 35894-0001
21.13 Governing Law. This Agreement will be governed by and construed
according to the laws of the State of Alabama as applied to agreements
entered into and to be performed entirely within Alabama between Alabama
residents, except for that body of law relating to conflict of laws. Any
litigation or other dispute resolution between the Parties relating to this
Agreement will take place in the Northern District of Alabama. The Parties
consent to the personal jurisdiction of and venue in the state and federal
courts within that District. The provisions of the United Nations
Convention on Contracts for the International Sale of Goods shall
not apply to this Agreement.
21.14 Interpretation. This Agreement has been negotiated by the
Parties. This Agreement will be fairly interpreted according to its terms
and without any strict construction in favor of or against either Party.
The headings and captions are included for reference purposes only and do
not affect the interpretation of the provisions hereof.
21.15 Complete Agreement. This Agreement, including all Exhibits and
attachments constitutes the entire Agreement between the Parties in
connection with the subject matter hereof, and terminates and supersedes
all prior agreements, understandings, negotiations and discussions, whether
oral or written, between the Parties. No amendment to or modification of
this Agreement will be binding unless in writing and signed by a duly
authorized representative of both Parties.
INTERGRAPH CORPORATION SCI TECHNOLOGY, INC.
BY: /s/ John W. Wilhoite BY: /s/ George J. King
NAME: John W. Wilhoite NAME: George J. King
TITLE: Executive Vice President TITLE: Senior Vice President
Exhibit E
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT ("Agreement") is made as
of the 13th day of November, 1998, between INTERGRAPH
CORPORATION, a Delaware corporation ("Intergraph"), and SCI
TECHNOLOGY, INC., an Alabama corporation ("SCI").
RECITALS
--------
A. Intergraph and SCI have entered into an Asset Purchase
Agreement dated as of November 13, 1998 (the "Asset Purchase
Agreement"), pursuant to which SCI has agreed to purchase from
Intergraph the Assets, as such term is defined in the Asset
Purchase Agreement, subject to the terms and conditions of the
Asset Purchase Agreement.
B. In connection with such transaction, SCI will need to
obtain and Intergraph is willing to provide on the terms set
forth herein, certain services as described on Exhibit A attached
hereto in order to effect an orderly transition following the
closing of the transaction.
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises set forth herein and in the Asset Purchase
Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
AGREEMENT
---------
1. Services to be Provided.
-----------------------
1.1. General. During the Term, Intergraph will provide, at no
cost to SCI, the services (the "Transition Services") described
on Exhibit A, which exhibit is attached hereto and incorporated
herein by reference. If any services, functions or
responsibilities not specifically described on Exhibit A are
reasonably required for the proper performance of the Transition
Services and are a necessary sub-task included within any of the
Transition Services, then such services, functions and
responsibilities will be deemed to be implied by and included
within the scope of the Transition Services to the same extent
and in the same manner as if specifically described in this
Agreement.
1.2. Additional Services; Modification of Transition Services.
SCI and Intergraph may, from time to time, in their reasonable
discretion, agree on additional transition-related services or
assistance to be performed by Intergraph, which additional
services or assistance will also be subject to the terms and
conditions of this Agreement, or the Parties may agree to
eliminate, reduce or otherwise modify the Transition Services,
and in any such case Exhibit A shall be amended to reflect the
agreement of the Parties.
1.3. Standard of Care. Intergraph will at all times use the same
care in performing the Transition Services as it uses in
performing similar services for itself and its Affiliates, and
will use reasonable efforts to perform the Transition Services
with a minimum of disruption to SCI's activities at the Facility.
2. Term; Termination.
-----------------
2.1. The term of this Agreement will commence on the Closing
Date, and will continue until the completion of the Transition
Services listed on Exhibit A; unless earlier terminated as
provided in paragraph 2.2 below.
2.2. SCI may terminate this Agreement at any time by providing
Intergraph at least fifteen (15) business days' prior written
notice of SCI's intent to terminate this Agreement.
3. Confidential Information.
------------------------
The provisions of the Asset Purchase Agreement with respect
to Confidential Information, which are hereby incorporated by
this reference, shall apply to the Parties in connection with
Intergraph's performance of the Transition Services pursuant to
this Agreement.
4. No Relationship by Reason of Transition Services.
------------------------------------------------
By reason of its performance of the Transition Services
under and pursuant to this Agreement, Intergraph shall not be
deemed to be an affiliate or a partner of, or in any other
relationship with, SCI, nor shall this Agreement be deemed to
appoint or constitute Intergraph as an agent of SCI.
5. Miscellaneous.
-------------
5.1. Defined Terms. Any capitalized terms used in this Agreement
but not specifically defined herein shall have the same meanings
as in the Asset Purchase Agreement.
5.2. Entire Agreement. This Agreement, including the recitals
first set forth above, which are incorporated herein by
reference, and any exhibits and addenda attached hereto, sets
forth the entire agreement and understanding of the Parties, and
supersedes all prior oral or written agreements and
understandings, relating to the subject matter hereof.
5.3. Parties and Successors. This Agreement, including all
covenants, representations and warranties set forth herein, is
binding upon and will inure to the benefit of the Parties and
their respective successors, endorsers and assigns.
5.4. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable, such illegality,
invalidity, or unenforceability will attach only to such
provision and will not in any manner affect or render illegal,
invalid, or unenforceable any other provision of this Agreement,
and this Agreement will be carried out as if any such illegal,
invalid, or unenforceable provision were not contained herein.
5.5. Captions. Captions and section headings are for convenience
only and are not deemed to be part of this Agreement.
5.6. Further Assurances. Each Party shall do and perform, or
cause to be done and performed, all such further acts and things
and shall execute and deliver all such other agreements,
certificates, instruments and documents as the other Party hereto
may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
5.7. Applicable Law. This Agreement has been made in and shall
be governed by and construed in accordance with the laws of the
State of Alabama, without giving effect to the conflict of law
principles thereof.
5.8. Survival. The provisions contained in Sections 3, 4 and 5
of this Agreement will survive the termination of this Agreement.
5.9. Waivers and Consents. The terms and provisions of this
Agreement may be waived, or consent for the departure therefrom
granted, only by a written document executed by the Party
entitled to the benefits of such terms or provisions. Each such
waiver or consent will be effective only in the specific instance
and for the purpose for which it was given, and will not
constitute a continuing waiver or consent.
5.10.Notices. All notices permitted or required under this
Agreement shall be given as provided in the Asset Purchase
Agreement.
5.11.Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and
all of which together shall constitute one and the same
instrument.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, Intergraph and SCI have duly executed
this Agreement as of the day and year first above written.
INTERGRAPH CORPORATION
By:/s/ John W. Wilhoite
----------------------------
Name: John W. Wilhoite
--------------------------
Title: Executive Vice President
-------------------------
SCI TECHNOLOGY, INC.
By:/s/ George J. King
----------------------------
Name: George J. King
--------------------------
Title: Senior Vice
-------------------------
Exhibit F
November 13, 1998
Intergraph Corporation
1 Madison Industrial Park
Huntsville, Alabama 35894
Ladies and Gentlemen:
The undersigned has served as counsel to SCI Technology,
Inc., an Alabama corporation ("SCI"), in connection with the
negotiation, execution and delivery of that certain Asset
Purchase Agreement, dated as of November 13, 1998 (the "Asset
Purchase Agreement"), by and between SCI and Intergraph
Corporation, a Delaware corporation ("Intergraph"), and in
connection with the transactions provided for and contemplated by
the Asset Purchase Agreement and the Transaction Documents
(collectively, the "Transactions"). This opinion letter is
rendered to you pursuant to Section 6.2(m) of the Asset Purchase
Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Asset
Purchase Agreement.
In giving this opinion, the undersigned has examined
originals or documents certified or otherwise identified to his
satisfaction as copies of the following documents, and, to the
extent deemed appropriate by the undersigned, has relied on the
following documents:
(a) the Asset Purchase Agreement;
(b) the Transaction Documents;
(c) Corporate proceedings of SCI relating to the authorization
and consummation of the Transactions;
(d) the Articles of Incorporation and Bylaws of SCI, together
with all amendments thereto;
(e) a certificate of the Secretary of State of Alabama attesting
to the continued corporate existence of SCI; and
(f) Such other documents, agreements and records and such other
investigations by the undersigned as deemed appropriate and
relevant by the undersigned in order to furnish the opinions set
forth below.
The documents referred to in clauses (a) and (b) above are
collectively referred to as the "Documents."
In connection with such examination, the undersigned has
assumed, without verifying such assumptions, the genuineness of
all signatures (other than the signatures of SCI), the
authenticity of all documents submitted to the undersigned as
original documents, the conformity to original documents of all
documents submitted to the undersigned as certified, conformed,
photostatic or facsimile copies, and the authenticity of the
originals of such documents. The undersigned has also assumed,
without verifying such assumptions, that all documents executed
by a party other than SCI were duly and validly executed and
delivered by such party and are legal, valid and binding
obligations of such party, enforceable against such party in
accordance with their respective terms. As to certain questions
of fact that are material and relevant to this opinion, the
undersigned has relied upon certificates of appropriate state and
local officials.
The undersigned is admitted to practice only in the State of
New York, and expresses no opinion as to matters under or
involving laws of any jurisdiction other than the laws of the
State of New York and the laws of the United States of America.
To the extent that the undersigned expresses an opinion regarding
any document based upon any laws other than the State of New York
and the laws of the United States of America, the undersigned has
assumed, with your permission, that such laws are identical to
the laws of the State of New York.
Based upon and subject to the foregoing, it is the opinion
of the undersigned that:
1. SCI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Alabama, and has
full corporate power and authority to own its own properties and
carry on its business as it is now being conducted.
2. SCI has the corporate power and authority to execute and
deliver each of the Documents to which it is a party and to
perform its obligations thereunder.
3. SCI has duly authorized the execution and delivery of each
of the Documents to which it is a party and all performance by
SCI thereunder.
4. SCI has duly executed and delivered each of the Documents to
which it is a party.
5. Each of the Documents to which SCI is a party constitutes
the valid and binding obligation of SCI, and each of such
Documents is enforceable against SCI in accordance with its
terms, except (a) as may be limited by, subject to or affected by
(i) applicable bankruptcy, insolvency, reorganization,
moratorium, arrangement of debt, fraudulent conveyance, or
similar laws or decisions now or hereafter in effect relating to
or affecting the enforcement of creditors' rights generally; (ii)
the application of public policy principles affecting the
enforcement of certain types of obligations; and (iii) the effect
of general principles of equity (regardless of whether
enforcement is considered in proceedings at law or in equity)
upon the enforceability of any of the remedies, covenants or
other provisions of such Documents or upon the availability of
injunctive relief, specific performance or other equitable
remedies; and (b) with respect to provisions of such Documents
that provide for the parties thereto to agree at some future
date, no opinion is expressed herein with respect to the validity
or enforceability of any agreements that may be made by such
parties at any such future date.
6. To the undersigned's knowledge, except as set forth in the
Documents or the Schedules thereto, and except for filings
required under the HSR Act, no approvals or consents by, or
filings with, any federal or State of Alabama governmental
authority are required in connection with the execution and
delivery by SCI of the Documents to which it is a party, or the
consummation of the Transactions.
7. Except as disclosed in the Documents or the Schedules
thereto, the execution and delivery by SCI of each of the
Documents to which it is a party do not, and if SCI were now to
perform its obligations under each of the Documents to which it
is a party such performance would not, result in any:
(a) violation of SCI's Articles of Incorporation or Bylaws;
(b) subject to the obtaining of all required consents from
governmental entities having jurisdiction, any violation of any
federal or State of Alabama law, rule, regulation, commitment,
order, judgment or decree applicable to SCI or by which any of
its property is bound or affected; or
(c) to the best of the undersigned's knowledge, violation of any
other agreement or instrument to which SCI is a party or to which
SCI or any of its property is subject that would materially
adversely affect the purchase of the Assets in accordance with
the Asset Purchase Agreement or the consummation of the
Transaction.
Based on the limitations and qualifications set forth
herein, the undersigned confirms to you that to his knowledge no
litigation or other proceeding against SCI or any of its
properties with respect to the Transactions is pending or overtly
threatened by a written communication to SCI before any
Governmental or Regulatory Body.
The undersigned expresses no opinion as to any matter other
than is expressly set forth above, and no other opinion is
intended to be implied nor may be inferred herein. This opinion
is given as of the date hereof, and it should be noted that
material changes regarding matters of fact and applicable law may
hereafter occur. The undersigned disclaims any undertaking to
revise or supplement the foregoing opinions or to advise you of
any change in the law, whether by legislative or regulatory
action, judicial interpretation or otherwise, or of any change of
facts as they currently exist or which may subsequently be
brought to the attention of the undersigned. This opinion is
being furnished only to the addressee hereof and is solely for
its benefit and use in connection with the Transactions. This
opinion may not be relied upon by any other person or entity or
for any other purpose without the prior written consent of the
undersigned.
Very truly yours,
SCI Technology, Inc.
/s/ Michael M. Sullivan
Michael M. Sullivan
Corporate Counsel
AMENDMENT NUMBER THREE TO
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER THREE TO LOAN AND SECURITY
AGREEMENT (this "Amendment") is entered into as of October 30,
1998, by and between Foothill Capital Corporation, a California
corporation ("Foothill"), on the one hand, and Intergraph
Corporation, a Delaware corporation ("Borrower"), with reference
to the following facts:
A. Foothill and Borrower heretofore have entered into
that certain Loan and Security Agreement, dated as of
December 20, 1996 (as heretofore amended, supplemented,
or otherwise modified, the "Agreement");
B. Borrower has requested Foothill to amend the
Agreement to, among other things, consent to the
proposed sale of Borrower's manufacturing operations
and modify the Borrowing Base, as set forth in this
Amendment;
C. Foothill is willing to so amend the Agreement in
accordance with the terms and conditions hereof; and
D. All capitalized terms used herein and not defined
herein shall have the meanings ascribed to them in the
Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals
and the mutual premises contained herein, Foothill and Borrower
hereby agree as follows:
1. Amendments to the Agreement.
---------------------------
a. Section 1.1 of the Agreement hereby is
amended by adding the following new defined terms in alphabetical
order:
"Manufacturing Business" means all or
substantially all of the assets of Borrower comprising the
business of purchasing, manufacturing, assembling and
distributing hardware products (the "Products") for Borrower's
interactive computer graphics systems and printed circuit boards,
including the Equipment comprising Borrower's "Mechanical
Fabrication" machine tools and the Inventory of Borrower as of
the SCI Closing Date purchased by SCI pursuant to the SCI Asset
Purchase Agreement and ancillary documents referenced therein.The
term "Products" does not include Image Stations, ruggedized
workstations, Anatech products, products sold through EDC, TAMPS
workstations, photoscans, scan servers,
printers/plotters/scanners sold through Intergraph, and Optronics
products
"SCI" means SCI Technology, Inc., an Alabama
corporation.
"SCI Asset Disposition" means, subject to the
prior or concurrent satisfaction of the SCI Release
Condition therefor, the Asset Disposition of the
Manufacturing Business, free and clear of Foothill's Lien
thereon (other than Foothill's Lien in the proceeds of such
Asset Disposition) to SCI, together with the lease of
buildings 14, 21 and 28 used in the Manufacturing Business
to SCI and the licensing of software related to the
Manufacturing Business.
"SCI Asset Purchase Agreement" means that certain
Asset Purchase Agreement, on or about October 30, 1998,
between SCI and Borrower, in form and substance reasonably
satisfactory to Foothill together with all schedules and
exhibits thereto.
"SCI Closing Date" means the "Closing Date" as
such term is defined in the SCI Asset Purchase Agreement.
"SCI Release Condition" means, in respect of the
SCI Asset Disposition, that (a) no Default or Event of
Default has occurred and is continuing or would result
therefrom, and (b) Borrower receives at least fair value (as
determined in accordance with Section 3439 of the California
Civil Code, as amended) for the property or assets that are
the subject of the SCI Asset Disposition, and in any event
not less than $62,000,000 in net cash proceeds of the SCI
Asset Disposition, of which not less than $22,000,000 shall
be received on or before the SCI Closing Date.
"Third Amendment" means that certain Amendment
Number Three to Loan and Security Agreement, dated as of
October 30, 1998, between Foothill and Borrower.
"Third Amendment Closing Date" means the first
date on which all of the conditions to the effectiveness of
the Third Amendment have been satisfied (or waived or
postponed by Foothill in its sole discretion) pursuant to
the terms thereof.
b. From and after the SCI Closing Date, the
following definitions contained in Section 1.1 of the Agreement
hereby are deleted in their entirety and all references in the
Loan Agreement and the other Loan Documents to such terms hereby
are deleted: "Eligible Domestic Inventory"; "Eligible Domestic
Finished Goods Inventory"; "Eligible Domestic Raw Materials
Inventory"; "Inventory Advance Rate".
c. From and after the SCI Closing Date,
Subsections (a), (b), and (c) of Section 2.1 of the Agreement
hereby are amended and restated in their respective entirety to
read as follows:
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to make advances ("Advances") to
Borrower in an amount outstanding not to exceed at any one
time the lesser of (i) the Maximum Revolving Amount less the
sum of the Letter of Credit Usage and the F/X Reserve, or
(ii) the Borrowing Base less the sum of the Letter of Credit
Usage and the F/X Reserve. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall
mean the result of:
(x) the lesser of (i) the result of (A) 80%
of Eligible Domestic Accounts, plus (B) the lowest of
(1) 80% of Eligible Unbilled Accounts, (2) 40% of the
amount of credit availability created by this clause
(x), and (3) $20,000,000, minus (C) the amount, if any,
of the Dilution Reserve, and (ii) an amount equal to
the Collections with respect to the Accounts of
Borrower for the immediately preceding 60 day period,
plus
(y) [intentionally omitted], minus
(z) the sum of (i) the Reserve, and (ii)
reserves from time to time established and maintained
against the Borrowing Base in connection with any Asset
Disposition that qualifies as a Permitted Disposition
as a result of such reserve and in connection with any
other Asset Disposition (other than a Permitted
Disposition) to the extent such Asset Disposition is
permitted by Foothill in its sole discretion, including
(A) $1,187,500 relative to the Asset Disposition of
certain surface mount Equipment on or before February
1998, (B) $3,341,525 relative to the Asset Disposition
of Borrower's printed circuit board manufacturing
business on or about April 2, 1998, (C) $216,625
relative to the Asset Disposition of Borrower's "Solid
Edge" and "Engineering Modeling System" product lines
on or about March 2, 1998, and (D) the Liquidation
Value of the Equipment sold pursuant to the SCI Asset
Disposition identified to Foothill in an appraisal, of
a recent date and in form and substance reasonably
satisfactory to Foothill, covering such Equipment
(provided however, that until such Liquidation Value of
such Equipment is identified to Foothill, the amount of
the Reserve under clause (D) shall be $3,000,000).
(b) Anything to the contrary in Section 2.1(a)
above notwithstanding, Foothill may create reserves against
or reduce its advance rates based upon Eligible Domestic
Accounts or Eligible Unbilled Accounts without declaring an
Event of Default if it determines in good faith and in its
reasonable credit judgment that there has occurred a
Material Adverse Change.
(c) [intentionally omitted]
d. From and after the SCI Closing Date, Section
5.3 of the Agreement hereby is amended and restated in its
entirety to read as follows:
5.3 [Intentionally Omitted]
2. Consent to SCI Asset Disposition; Release of
Liens. Foothill hereby consents to the SCI Asset Disposition for
all purposes under the Agreement and the Loan Documents, and
acknowledges that the SCI Asset Disposition shall occur free and
clear of Foothill's Liens on the Manufacturing Business (other
than Foothill's Lien on the proceeds of the SCI Asset
Disposition), which Liens Foothill hereby releases without any
recourse, representation, or warranty. Concurrently herewith,
Foothill is executing and delivering to Borrower UCC-3 Partial
Releases, in form and substance satisfactory to Foothill,
relative to the Manufacturing Business. Foothill hereby agrees
that, upon Borrower's reasonable request, Foothill will execute
such additional documents (in form and substance satisfactory to
Foothill) necessary to confirm the releases (in each case,
without any recourse, representation, or warranty) contemplated
hereby of Foothill's Liens on the Manufacturing Business.
3. Representations and Warranties; Covenants.
Borrower hereby represents and warrants to Foothill that: (a) the
execution, delivery, and performance of this Amendment and of the
Agreement, as amended by this Amendment, are within its corporate
powers, have been duly authorized by all necessary corporate
action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or
award of any arbitrator, court, or governmental authority, or of
the terms of its charter or bylaws, or of any contract or
undertaking to which it is a party or by which any of its
properties may be bound or affected; and (b) this Amendment and
the Agreement, as amended by this Amendment, constitute
Borrower's legal, valid, and binding obligation, enforceable
against Borrower in accordance with its terms. Borrower hereby
covenants and agrees that Borrower promptly shall deposit or
cause to be deposited any net cash proceeds of the SCI Asset
Disposition into a Lockbox Account and promptly shall deliver or
cause to be delivered to Foothill in pledge any proceeds of the
SCI Asset Disposition consisting of Negotiable Collateral
(together with any necessary endorsements or assignments, duly
executed and in form and substance satisfactory to Foothill).
4. Conditions Precedent to Amendment. The
satisfaction of each of the following on or before the Third
Amendment Closing Date, unless otherwise specified below, shall
constitute conditions precedent to the effectiveness of this
Amendment:
a. Foothill shall have received copies of the
SCI Asset Purchase Agreement and all material agreements,
documents, and instruments related thereto, in each case, in form
and substance reasonably satisfactory to Foothill and certified
by the Secretary or Assistant Secretary of Borrower as true,
correct, and complete;
b. Foothill shall have received the
reaffirmation and consent of each of the Obligors (other than
Borrower) attached hereto as Exhibit A, duly executed and
delivered by the respective authorized officials thereof;
c. Foothill shall have received all required
consents of Foothill's participants in the Obligations to
Foothill's execution, delivery, and performance of this Amendment
and each such consent shall be in form and substance satisfactory
to Foothill, duly executed, and in full force and effect;
d. Foothill shall have received a certificate
from the Secretary or Assistant Secretary of Borrower attesting
to the incumbency and signatures of authorized officers of
Borrower and to the resolutions of Borrower's Board of Directors
authorizing its execution and delivery of this Amendment and the
performance of this Amendment and the Agreement as amended by
this Amendment, and authorizing specific officers of Borrower to
execute and deliver the same;
e. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the
other Loan Documents shall be true and correct in all respects on
and as of the date hereof, as though made on such date (except to
the extent that such representations and warranties relate solely
to an earlier date);
f. No Event of Default or event which with the
giving of notice or passage of time would constitute an Event of
Default shall have occurred and be continuing on the date hereof,
nor shall result from the consummation of the transactions
contemplated herein;
g. No injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly,
the consummation of the transactions contemplated herein shall
have been issued and remain in force by any governmental
authority against Borrower, Foothill, or any of their Affiliates;
h. The Collateral shall not have declined
materially in value from the values set forth in the most recent
appraisals or field examinations previously done by Foothill; and
i. All other documents and legal matters in
connection with the transactions contemplated by this Amendment
shall have been delivered or executed or recorded and shall be in
form and substance satisfactory to Foothill and its counsel.
5. Effect on Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in
accordance with its respective terms and hereby is ratified and
confirmed in all respects. The execution, delivery, and
performance of this Amendment shall not operate as a waiver of
or, except as expressly set forth herein, as an amendment, of any
right, power, or remedy of Foothill under the Agreement, as in
effect prior to the date hereof.
6. Further Assurances. Borrower shall execute and
deliver all agreements, documents, and instruments, in form and
substance satisfactory to Foothill, and take all actions as
Foothill may reasonably request from time to time, to perfect and
maintain the perfection and priority of Foothill's security
interests in the Collateral and the Real Property, and to fully
consummate the transactions contemplated under this Amendment and
the Agreement, as amended by this Amendment.
7. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement", "hereunder",
"herein", "hereof" or words of like import referring to the
Agreement shall mean and refer to the Agreement as amended by
this Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement",
"thereunder", "therein", "thereof" or words of like import
referring to the Agreement shall mean and refer to the Agreement
as amended by this Amendment.
c. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute
this Amendment by signing any such counterpart. Delivery of an
executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed
counterpart of this Amendment. Any party delivering an executed
counterpart of this Amendment by telefacsimile also shall deliver
an original executed counterpart of this Amendment but the
failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Victor Barwig
------------------
Title: Vice President
---------------
INTERGRAPH CORPORATION, a Delaware
corporation
By /s/ John W. Wilhoite
--------------------
Title: Executive V.P.
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