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): Filing: June 28, 1996
(Event: June 13, 1996)
Maxtor Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-14016 77-0123732
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
211 River Oaks Parkway, San Jose, CA 95134
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 432-1700
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Not Applicable
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(Former name or former address, if changed since last report)
ITEM 2. Disposition of Assets
In November 1994, Maxtor Corporation ("the Company") formed a new wholly-owned
subsidiary, IMS International Manufacturing Services, Ltd. (IMS), whose
primary business is contract manufacturing for electronic original equipment
manufacturers (OEMs). The Company's printed circuit board (PCB) assembly
plant in Hong Kong formed the foundation of these operations, and a second
plant was added in Thailand in May 1995. In early June 1996, the Company
reorganized all of these operations under a wholly-owned Delaware subsidiary,
International Manufacturing Services, Inc. (IMS). IMS supplies the Company
and a variety of external customers with PCB assemblies, sub-assemblies and
fully integrated box-build products.
On June 13, 1996, Oak Investment Partners, Prudential Equity Investors and
certain members of the IMS management team (collectively, "Buyer") purchased a
majority interest in IMS from the Company.
Under the terms of the Recapitalization and Redemption Agreements (the
"Agreements") between the Company and the Buyer, on the closing, the Company
received $25,000,000 in cash, $20,000,000 aggregate in principal amount of
Senior Subordinated Notes (including a $4,300,000 existing note previously
treated as equity of IMS which was converted to interest-bearing debt) with a
combined effective interest rate of 7% and a warrant to purchase 2% of IMS
equity, which is exercisable upon occurrence of certain future events. In
addition, the Company retained a 23.5% (19.9% on a fully diluted basis) equity
interest in IMS.
The Agreements are included as Exhibits 1 and 2, herewith. Pursuant to the
Agreements, the Company made various representations and warranties as to
itself and IMS and has agreed to indemnify Buyer for any breaches thereof.
Generally, in the event that losses from such breaches when aggregated exceed
$500,000, Buyer shall be entitled to indemnification for all losses, including
the first $500,000 up to a maximum total of $17,500,000, provided that tax and
environmental representations are not subject to the liability limit. In
addition, the Company entered into a Manufacturing Services Agreement with IMS
(attached hereto as Exhibit 3) under which IMS agrees to supply and the
Company agrees to purchase certain volumes of products over a three year
period.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated balance sheet on page 3 sets
forth the estimated effect on the company as if the sale occurred on March 30,
1996, and is based on the Company's historical condensed consolidated balance
sheet as of March 30, 1996. The unaudited pro forma condensed consolidated
statement of operations on page 4 sets forth the estimated effect on the
Company as if the sale occurred on March 26, 1995, and is based upon the
Company's historical consolidated statement of operations for the year ended
March 30, 1996. This unaudited pro forma information has been prepared using
the assumptions set forth in the notes to pro forma condensed consolidated
financial statements on page 5.
The unaudited pro forma consolidated financial statements do not purport to
represent the Company's actual financial condition or results of operations
had such sale actually been made on the dates indicated, nor do they project
the Company's financial position or results of operations for any future dates
or periods. The unaudited pro forma consolidated financial statements should
be read in conjunction with the notes thereto and with the historical
financial statements of the Company as of and for the period ended March 30,
1996.
MAXTOR CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
As of March 30, 1996
(In thousands)
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Less Pro forma Pro forma
ASSETS Historical IMS Adjustments Adjusted
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Current assets:
Cash and cash equivalents $ 52,794 $ - $ 25,000 (b)$ 77,794
Accounts receivable, net 121,818 24,364 97,454
Accounts receivable from
affiliates 4,426 547 3,879
Inventories 155,935 45,009 110,926
Prepaid expenses and other 11,642 1,264 (42)(c) 10,336
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Total current assets 346,615 71,184 24,958 300,389
Net property, plant and equipment 88,162 10,822 77,340
Equity investment in IMS - - 17,776 (a)
(17,776)(b) -
Other assets 7,710 728 4,300 (a)
15,700 (b)
(20,000)(b) 6,982
$ 442,487 $ 82,734 $ 24,958 $ 384,711
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term borrowings $ 110,595 $ 795 $ 109,800
Short-term borrowings due
to affiliates 65,000 - 65,000
Accounts payable 160,102 45,618 114,484
Accounts payable to affiliates 8,656 8,531 125
Income taxes payable 7,499 1,145 6,354
Accrued payroll and
payroll-related expenses 16,727 2,246 14,481
Accrued warranty 23,751 311 23,440
Accrued expenses 18,934 1,004 340(c) 18,270
Long-term debt and capital lease obligations
due within one year 1,879 708 1,171
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Total current liabilities 413,143 60,358 340 353,125
Long-term debt and capital lease obligations
due after one year 100,181 - 100,181
Deferred tax liabilities 300 300 -
Stockholders' equity:
Preferred stock - - -
Class A common stock - - -
Common stock - - -
Additional paid-in capital 335,599 8,811 8,811(a) 335,599
Accumulated earnings (deficit)(406,736) 13,265 13,265(a)
2,542(b,c)(404,194)
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Total stockholders'
equity (deficit) (71,137) 22,076 24,618 (68,595)
$ 442,487 $82,734 $ 24,958 $ 384,711
See notes to unaudited pro forma condensed consolidated financial statement
MAXTOR CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Year Ended March 30, 1996
(In thousands, except per share amounts)
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Less Pro forma Pro forma
Historical IMS Adjustments Adjusted
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Revenue $ 1,268,998 $409,695 $367,219(d)$1,226,522
Cost of revenue 1,196,305 395,808 367,219(d) 1,167,716
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Gross margin 72,693 13,887 58,806
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Operating expenses:
Research and development 94,717 - 94,717
Selling, general and
administrative 82,775 5,380 77,395
Restructuring and other 4,460 - 4,460
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Total operating expenses 181,952 5,380 176,572
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Income (loss) from operations (109,259) 8,507 (117,766)
Interest expense (11,849) (105) (11,744)
Interest income 1,169 41 1,128
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Income (loss) before income taxes (119,939) 8,443 (128,382)
Provision for income taxes 2,826 1,858 968
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Net income (loss) $ (122,765) $ 6,585 $ (129,350)
=============================================================================
Net loss per share $(2.97) $(3.13)
Shares used in computing net
loss per share 41,354 41,354
See notes to unaudited pro forma condensed consolidated financial statements.
NOTES TO (Unaudited) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Historically, the IMS operations assembled printed circuit boards for use by
the Company in its manufacture of disk drives. As such, the sale of IMS was
accounted for as the sale of a portion of a segment of a business.
As a result of the transaction, the IMS consolidated financial position at
June 30, 1996 will reflect a stockholders' deficit of approximately $10
million. Therefore, the Company has written down its remaining equity
interest in IMS to zero. In addition, given the stockholder deficit of IMS
and due to the subordination of the Company's note receivable from IMS to
bank debt of IMS, combined with certain specified conditions which must be
achieved before any payment of principal will occur, the Company has fully
reserved its notes from IMS.
For purposes of the accompanying unaudited pro forma condensed consolidated
statement of operations, revenue and expense amounts related to the transition
activities, discussed on page 2, have not been included as such activities are
not considered to be continuing in nature. Due to the Company's significant
available net operating losses for tax purposes, any tax expense resulting
from the gain would be offset by utilizing net operating loss, therefore, no
adjustment of tax expense has been reflected in the accompanying unaudited pro
forma statement of operations.
The following notes describe the unaudited pro forma adjustments included in
the accompanying unaudited pro forma condensed consolidated financial
statements.
(a) To reflect the Company's current investment in IMS which has been
eliminated in the historical consolidated financial statements.
(b) To record the net gain and sale of the majority interest in IMS before
transaction costs, to write down the Company's remaining equity investment in
IMS and to fully reserve the notes receivable from IMS :
Proceeds from sales of stock
(net of $4,300,000 equity converted to senior subordinated debt)
Cash $25,000,000
Notes $15,700,000
Less: Book value of investment in IMS (17,776,000)
Reserve on notes receivable (20,000,000)
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Gain, before transaction costs $ 2,924,000
============
(c) To accrue additional costs incurred in the transaction ($340,000) and to
expense costs incurred through March 30, 1996 ($42,000) against the proceeds
from redemption of stock.
(d) To adjust revenue for the impact of deducting total IMS sales, which
included intercompany sales to Maxtor, from consolidated balances.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS - (Continued)
(c) Exhibits
1. Recapitalization Agreement among the Company, International
Manufacturing Services, Incorporated and certain investors, dated as of May
21, 1996
2. Redemption Agreement between the Company and International
Manufacturing Services, Incorporated dated as of May 21, 1996
3. Manufacturing Services Agreement between the Company and International
Manufacturing Services, Incorporated dated as of June 13, 1996*
* Confidential treatment has been requested for portions of this
document.
SIGNATURES
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 hereunto duly authorized.
Maxtor Corporation
By: /s/ Nathan Kawaye
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Nathan Kawaye
Vice President, Finance, and Chief Financial Officer
Dated: June 28, 1996
-xxxiii-
INTERNATIONAL MANUFACTURING SERVICES, INC.
RECAPITALIZATION AGREEMENT
This RECAPITALIZATION AGREEMENT is made as of May 16, 1996, by and among
INTERNATIONAL MANUFACTURING SERVICES, INC., a Delaware corporation
(individually, "IMS Delaware" and together with the International IMS
Entities (as hereinafter defined), the "Company"), MAXTOR CORPORATION
("Maxtor") and each of the investors listed on Exhibit A hereto (each an
"Investor", and collectively, the "Investors").
R E C I T A L S :
A. IMS Delaware has been a wholly-owned subsidiary of Maxtor since
1994. The Company, Maxtor, Prudential Private Equity Investors III, L.P.
("Prudential"), and Oak Investment Partners VI, L.P. and Oak VI Affiliates
Fund, L.P. (collectively, "Oak") intend to enter into a series of related
transactions pursuant to which (i) IMS Delaware will acquire, either directly
or indirectly, all outstanding stock of three related subsidiaries of Maxtor,
IMS International Manufacturing Services Limited, an exempted company
incorporated in the Cayman Islands ("IMS Cayman"), IMS International
Manufacturing Services (Thailand) Limited, a company organized under the laws
of Thailand ("IMS Thailand"), and Maxtor (Hong Kong) Limited, a company
organized under the laws of Hong Kong (IMS Hong Kong") (collectively, the
"International IMS Entities"); (ii) IMS Delaware will repurchase a portion of
its outstanding securities held by Maxtor in exchange for cash, a promissory
note and a warrant to purchase Class A Common Stock of the Company; (iii) the
Investors will invest portions of approximately $25,000,000 in debt and
equity securities of the Company; (iv) IMS Delaware will obtain a revolving
credit facility of approximately $32,000,000 (the "Senior Debt"); (v) IMS
Delaware will grant to members of its management options to purchase Common
Stock of IMS Delaware; and (vi) the certain members of management of IMS
Delaware (each a "Manager", and collectively, the "Managers") will purchase
shares of Class A Common Stock of the Company pursuant to separate stock
purchase agreements.
B. A Redemption Agreement between IMS Delaware and Maxtor of even date
herewith (the "Redemption Agreement") provides for the repur-chase by the
Company from Maxtor of shares of the Company's outstanding Common Stock.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Redemption Agreement.
C. This Agreement provides for the purchase by the Investors of an
aggregate of 2,260,000 shares of the IMS Delaware's Class A Common Stock, par
value $0.001 per share, and no shares of IMS Delaware's Class B Common Stock,
par value $0.001 per share (the Class A Common Stock and Class B Common Stock
of IMS Delaware hereinafter referred to collectively as the "Common Stock"),
2,327,050 shares of IMS Delaware's 10% Series A Convertible Preferred Stock,
par value $0.001 per share, and 1,672,950 shares of IMS Delaware's 10%
Series B Convertible Preferred Stock, par value $0.001 per share (the Series
A Convertible Preferred Stock and the Series B Convertible Preferred Stock
hereinafter referred to collectively as the "Preferred Stock"), and
$12,500,000 principal amount of 12% junior subordinated promissory notes (the
"Subordinated Notes").
Prudential and Oak shall have the right to reallocate their respective
obligations to purchase shares of the Common Stock, the Preferred Stock and
the Subordinated Notes to additional investors prior to the Closing, provided
that each such additional investor shall execute a counterpart signature page
hereto. Each such additional investor shall be deemed an "Investor" as used
herein and Exhibit A shall be amended accordingly to reflect each such
reallocation.
A G R E E M E N T
In consideration of the foregoing, and the representations, warranties,
covenants and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1
PURCHASE, SALE AND TERMS OF STOCK AND NOTES
1.1 The Stock. IMS Delaware has authorized the issuance, sale and
delivery of 2,260,000 shares of its Common Stock and 4,000,000 shares of its
Preferred Stock (collectively, the "Stock") to the Investors at a price of
$1.1061945 per share of Common Stock and $2.50 per share of Preferred Stock,
such purchase price to be paid by each of the Investors by cashier's check or
by wire transfer of immediately available funds in the respective amounts set
forth in Exhibit A hereto. Immediately prior to the Closing (as defined in
Section 1.4 hereof), IMS Delaware shall file a Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware in
substantially the form attached hereto as Exhibit B.
1.2 The Notes. IMS Delaware has authorized the issuance, sale and
delivery of its Subordinated Notes in the aggregate principal amount of
$12,500,000, to be dated the date of issuance, and to bear interest at the
rate of twelve percent (12%) per annum. The Subordinated Notes shall be
prepayable at any time at the election of IMS Delaware, and shall in any
event be subject to repayment of principal on the anniversary of their date
of issuance occurring in 2004. The Subordinated Notes shall have
substantially the terms described in the term sheet attached as Exhibit C
hereto.
1.3 The Securities. The Subordinated Notes and the Stock are sometimes
referred to herein collectively as the "Securities."
1.4 The Closing of the Purchase and Sale of Stock and Notes. The sale
and purchase of the Stock and Subordinated Notes shall take place at a
closing (the "Closing") to be held at Wilson Sonsini Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California at 10:00 a.m., Pacific Time, on May
31, 1996, or such other place or time as IMS Delaware, Maxtor and the
Investors may fix (the date on which the Closing occurs being referred to
herein as the "Closing Date"). At the Closing, against payment to IMS
Delaware by cashier's check or by wire transfer of immediately available
funds, IMS Delaware will deliver certificates for the Stock and the
Subordinated Notes in the principal amounts sold, all in the amounts set
forth opposite the Investors' respective names in Exhibit A hereto. At the
Closing, the parties will also enter into a Stockholders Agreement in
substantially the form of Exhibit D hereto.
1.5 Legends. In addition to any other legends required by the
Stockholders Agreement or otherwise, the certificates representing all
Securities shall be conspicuously endorsed as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE
ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL, SATISFACTORY TO
THE ISSUER, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF IMS DELAWARE
IMS Delaware represents and warrants to each Investor that, as of the
date of this Agreement and as of the Closing Date:
2.1 Corporate Status. IMS Delaware is duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of the
International IMS Entities is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
The Company has made available to the Investors true and complete copies of
the Certificate of Incorporation (or like charter document) and Bylaws (or
like charter document) of IMS Delaware and each of the International IMS
Entities, and all amendments thereto, if any. Such documents, in such form,
are in effect as of the date hereof and will be in effect as of the Closing
Date, other than the Certificate of Incorporation and Bylaws of IMS Delaware,
which will be amended and restated pursuant to Section 5.23 hereof.
2.2 Corporate Authorization. IMS Delaware has taken all corporate
action required to authorize the execution and delivery of this Agreement,
the Stockholders Agreement and the documents and instruments to be executed
by the Company in connection herewith and the issuance of the Securities to
the Investors. This Agreement has been duly executed and delivered and, when
executed, the Stockholder's Agreement and each such other document or
instrument will be duly executed by IMS Delaware, and this Agreement and each
such other document or instrument represent legal, valid and binding
obligations of IMS Delaware, enforceable against it in accordance with their
respective terms.
2.3 Securities. The Stock, when issued and upon payment of the
purchase price therefor, will be duly authorized, validly issued, fully paid
and non-assessable. Upon the Closing, IMS Delaware will have outstanding
4,460,000 shares of Common Stock and 4,000,000 shares of Preferred Stock. In
addition, IMS Delaware will have reserved up to 2,235,000 shares of Common
Stock for issuance on exercise of the options to acquire Common Stock
described in Section 2.4 below, and up to 200,000 shares of Common Stock for
issuance upon exercise of the Maxtor Warrant. Except as set forth above,
there are no outstanding options, warrants or other rights to purchase any of
the IMS Delaware's authorized and unissued capital stock. Except as set
forth in the Stockholders Agreement, the issuance by IMS Delaware of its
securities will not be subject to any preemptive rights or rights of first
refusal, and IMS Delaware is not under any contractual obligation to register
under the Securities Act of 1933, as amended (the "Securities Act"), any of
its securities.
2.4 Option Plans. As of the Closing Date, IMS Delaware will have
adopted a 1996 Stock Option Plan (the "Stock Plan") in the form of Exhibit E
hereto and authorized the grant of options to members of management of IMS
Delaware and its subsidiaries, effective as of the Closing, to purchase up to
1,540,000 shares of Common Stock at an exercise price of $1.1061945 per
share. Each stock option Agreement shall be in the form of one of the forms
attached to the Stock Plan. The allocation of stock options among the
members of management and the applicable form of stock option Agreement shall
be as set forth in a schedule agreed upon by the parties. The Company will
have reserved as of the Closing Date a total of 2,235,000 shares of Common
Stock for issuance upon exercise of options to be granted pursuant to the
Stock Plan.
2.5 Authority Regarding and Binding Nature of Transactional Agreements.
Each of IMS Delaware, the Holding Companies and the International IMS
Entities has the absolute and unrestricted right, power and authority to
enter into and to perform its obligations under each of the Transactional
Agreements to which it is or may become a party. The execution, delivery and
performance by each of IMS Delaware, the Holding Companies and the
International IMS Entities of the Transactional Agreements to which it is or
may become a party have been, or prior to the Closing will be, duly
authorized by all necessary action on the part of IMS Delaware, the Holding
Companies or any of the International IMS Entities, as the case may be, and
their respective stockholders and boards of directors. The Redemption
Agreement constitutes the legal, valid and binding obligation of IMS
Delaware, enforceable against it in accordance with its terms. Upon the
execution and delivery of each of the other Transactional Agreements at the
Closing, each of such other Transactional Agreements to which IMS Delaware or
any of the International IMS Entities is a party will constitute the legal,
valid and binding obligation of IMS Delaware and the International IMS
Entities, as the case may be, and will be enforceable against them in
accordance with its terms.
2.6 Redemption Agreement Representations and Warranties. Each of the
representations and warranties contained in Sections 2.1 and 3 of the
Redemption Agreement as they pertain to the Company are true and correct as
though made in this Agreement.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor severally, and not jointly, represents and warrants that:
3.1 Authorization. Such Investor has full legal capacity, power and
authority to execute and deliver this Agreement, the Stockholders' Agreement
and the other documents and instruments to be executed by it pursuant hereto
and to perform its obligations hereunder and thereunder. This Agreement, the
Stockholders' Agreement and each such other document or instrument have been
duly executed and delivered by such Investor and are the legal, valid and
binding obligations of such Investor enforceable against it in accordance
with their respective terms.
3.2 Restricted Securities. Such Investor has been advised that the
Securities have not been registered under the Securities Act or any state
securities laws and, therefore, cannot be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available. Such Investor is
aware that IMS Delaware is under no obligation to effect any such
registration with respect to the Securities (except solely to the extent
provided in the Stockholders' Agreement attached hereto as Exhibit D) or to
file for or comply with any exemption from registration. Such Investor is
purchasing the Securities to be acquired by such Investor hereunder for its
own account for investment and not with a view to, or for resale in
connection with, the distribution thereof. Such Investor has such knowledge
and experience in financial and business matters that such Investor is
capable of evaluating the merits and risks of such investment, is able to
incur a complete loss of such investment and is able to bear the economic
risk of such investment for an indefinite period of time. Such Investor is
an accredited investor as that term is defined in Regulation D under the
Securities Act.
3.3 Access to Information. Such Investor acknowledges that IMS
Delaware has given such Investor access to the corporate records and accounts
of the Company, has made its officers and representatives available for
interview by such Investor, and has furnished such Investor with all
documents and other information required for such Investor to make an
informed decision with respect to the purchase of the Securities. Without
limiting the generality of the foregoing, such Investor acknowledges that IMS
Delaware has furnished such Investor with copies of the Redemption Agreement
and the other documents contemplated by the Redemption Agreement.
3.4 Control of Securities. As a result of and immediately following
the Closing (all terms enclosed in quotation marks in this Section 3.4 having
the meanings set forth in the regulations set forth at 16 CFR Part 800 (the
"Regulations"), promulgated by the Federal Trade Commission under Section 7A
of the Clayton Act, 15 U.S.C. 18A, as added by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act")):
(a) Each Investor is an "acquiring person."
(b) Each Investor is an "entity" not "controlled" by any other
"entity" and is therefore an "ultimate parent entity."
(c) Each Investor will not "hold" an aggregate total amount of the
"voting securities" and "assets" of the "acquired person" in excess of $15
million.
(d) Each Investor will not "hold" "assets" of the "acquired
person" valued at more than $15 million.
(e) Each Investor will not "hold" "voting securities" conferring
"control" of the "acquired person" or any "issuer" controlled by the
"acquired person."
(f) No Investor is a party to or aware of any agreement, other
than the Stockholders Agreement, with regard to the voting of the securities
of the "acquired person."
(g) No Investor is a party to or aware of any transaction or other
device entered into or employed for the purpose of avoiding the obligation to
comply with the requirements of the HSR Act.
SECTION 4
COVENANTS
4.1 Access And Investigation. Maxtor and the Company shall ensure
that, at all times prior to the Closing:
(a) Each Investor and its Representatives and the Representatives
of the Lender providing the Senior Debt are given free and complete access to
the Company's Representatives, facilities, personnel and assets and to all
existing books, records, financial statements, Tax Returns, work papers and
other documents and information relating to the Company and the Business;
(b) Each Investor and its Representatives is provided such copies
of existing books, records, Tax Returns, work papers and other documents and
information relating to the Company and its business as such Investor may
request in good faith; and
(c) The Company and its Representatives compile and provide each
Investor and its Representatives with such additional financial, operating
and other data and information relating to the Company and its business as
such Investor may request in good faith.
4.2 Operation of Business. Maxtor and the Company shall ensure that,
prior to the Closing, without the written consent of a majority in interest
of the Investors:
(a) Maxtor does not directly or indirectly sell or otherwise
transfer, and does not agree, commit or offer (in writing or otherwise) to
sell or otherwise transfer, any capital stock in IMS Delaware, the Holding
Companies or any of the International Entities or any interest in or right
relating to any such capital stock, except for the actions described on Part
3.3 of the Disclosure Schedule of the Redemption Agreement as the
Reorganization Actions;
(b) Maxtor does not permit, and does not agree, commit or offer
(in writing or otherwise) to permit, any capital stock of IMS Delaware, the
Holding Companies or any of the International Entities to become subject,
directly or indirectly, to any Encumbrance;
(c) The Company conducts its operations exclusively in the
Ordinary Course of Business and in the same manner as such operations have
been conducted prior to the date of this Agreement, except for the investment
of capital equipment described in Section 4.10;
(d) The Company (i) uses reasonable commercial efforts to preserve
intact its current business organization, (ii) keeps available the services
of its current officers and employees, (iii) uses its reasonable commercial
efforts to maintain its relations and good will with all suppliers,
customers, landlords, creditors, licensors, licensees, employees, independent
contractors and other Persons having business relationships with the Company,
and (iv) promptly repairs, restores or replaces any material assets that are
destroyed or damaged;
(e) The Company keeps in full force all of its insurance policies;
(f) The Investors are notified immediately of any proposal, offer
or invitation to negotiate from any Person relating to any Acquisition
Transaction;
(g) Except for the actions described on Part 3.3 of the Disclosure
Schedule to the Redemption Agreement as Reorganization Actions, the Company
does not (i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock or other securities,
or (ii) repurchase, redeem or otherwise reacquire any shares of capital stock
or other securities;
(h) The Company does not sell or otherwise issue any shares of
capital stock or any other securities;
(i) The Company does not effect or become a party to any
Acquisition Transaction;
(j) Except for the actions described on Part 3.3 of the Disclosure
Schedule to the Redemption Agreement as Reorganization Actions, the Company
does not form any subsidiary or acquire any equity interest or other interest
in any other Entity, other than the acquisition either directly or indirectly
of all outstanding stock of the International IMS Entities;
(k) The Company does not enter into or permit any of its assets to
become bound by any Contract, except in the Ordinary Course of Business;
(l) Except for the Stock Plan, the Company does not establish or
adopt any Employee Benefit Plan, or, except in the Ordinary Course of
Business, pay any bonus or make any profit-sharing or similar payment to, or,
except in the Ordinary Course of Business, increase the amount of the wages,
salary, commissions, fees, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers, employees or
independent contractors;
(m) The Company does not change any of its methods of accounting
or accounting practices in any respect except as required by a concurrent
change in GAAP;
(n) The Company does not commence or settle any Proceeding, except
with respect to such matters as would not have a material impact on the
business of the Company;
(o) The Company does not enter into any transaction or take any
other action of the type referred to in Section 3.5 of the Redemption
Agreement;
(p) The Company does not enter into any transaction or take any
other action outside the Ordinary Course of Business;
(q) The Company does not enter into any transaction or take any
other action that might cause or constitute a Breach of any representation or
warranty made by Maxtor or the Company in this Agreement or in the Closing
Certificate;
(r) The Company does not enter into or amend any existing
transaction with any Related Person (including Maxtor), except to the extent
specifically contemplated by the Transactional Documents or the actions
described on Part 3.3 of the Disclosure Schedule to the Redemption Agreement
as the Reorganization Actions; and
(s) The Company does not agree, commit or offer (in writing or
otherwise) to take any of the actions described in clauses "(i)" through
"(r)" of this Section 4.2.
4.3 Filings And Consents. Each of IMS Delaware, Maxtor and the
Investors shall take all appropriate actions to make or obtain any filing,
notice or Consent that it is required to make or obtain in connection with
the Transactions contemplated herein, and shall cooperate with the other
parties by providing any documents or assistance they may reasonably require
to make or obtain any filing, notice or Consent required in connection with
the Transactions contemplated hereunder. In particular, IMS Delaware shall
take all reasonable steps to obtain from the California Department of
Corporations a Permit for Qualification pursuant to Section 25113 of the
California Corporate Securities Law to issue the Subordinated Notes.
4.4 Notification; Updates To Disclosure Schedule.
(a) Prior to the Closing, IMS Delaware and Maxtor shall promptly
notify each Investor in writing of:
(i) The discovery by Maxtor or IMS Delaware of any event,
condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a Breach of
any representation or warranty made by IMS Delaware in this Agreement or
made by Maxtor in the Redemption Agreement;
(ii) Any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause
or constitute a Breach of any representation or warranty made by IMS
Delaware in this Agreement or made by Maxtor in the Redemption Agreement
if (A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(iii) Any Breach of any covenant or obligation of Maxtor or IMS
Delaware; and
(iv) Any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth in Sections 5
or 6 of this Agreement or Sections 7 or 8 of the Redemption Agreement
impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to this Section 4.4 requires any change in the
Disclosure Schedule to the Redemption Agreement, or if any such event,
condition, fact or circumstance would require such a change assuming the
Disclosure Schedule were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstance, then Maxtor and IMS
Delaware shall promptly deliver to the Investors an update to the Disclosure
Schedule specifying such change; provided, however, that any update to the
Disclosure Schedule so delivered to the Investors shall not be deemed to
amend the representations and warranties of Maxtor or the Company unless the
Investors accept in writing any such updates. The Investors may terminate
this Agreement without liability if they determine in good faith that any
such update to the Disclosure Schedule involves a change in the Company's
circumstances or its rights or other information that materially adversely
affects their investment decision.
4.5 No Negotiation. Until the earlier of the Closing or the termination
or expiration of this Agreement, neither Maxtor nor IMS Delaware will (nor
will Maxtor or the Company permit any of their respective Representatives to)
directly or indirectly, take any of the following actions with any party
other than the Investors and their designees:
(a) Solicit, conduct discussions with or engage in negotiations
with any Person, relating to the possible acquisition of IMS Delaware or any
International IMS Entity (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise) (an "Alternative Acquisition") or any
material portion of its or their capital stock or assets (an "Equity
Transaction");
(b) Provide information with respect to the business of IMS
Delaware or any International IMS Entity to any Person, other than the
Investors or their designees, relating to any Alternative Acquisition or
Equity Transaction;
(c) Enter into an Agreement with any Person, other than the
Investors, providing for any Alternative Acquisition or Equity Transaction;
and
(d) Make or authorize any statement, recommendation or
solicitation in support of any Alternative Acquisition or Equity Transaction
by any Person, other than by the Investors.
If Maxtor or IMS Delaware (or any of their respective officers, directors,
agents, representative or affiliates) receives on or after the date hereof
any bona fide offer or proposal relating to any of the above, Maxtor shall
immediately notify the Investors thereof, including information as to the
identity of the offeror or the party making any such offer or proposal and
the specific terms of such offer or proposal, as the case may be.
4.6 Confidentiality. Prior to the Closing, none of IMS Delaware,
Maxtor, any Investor, or any of their Representatives shall issue or
disseminate any press release or other publicity or otherwise make any
disclosure of any nature (including to any supplier, customer, landlord,
creditor or employee of the Company) regarding any of the Transactions,
except to the extent required to obtain Consents necessary to consummate the
Transactions, to the extent necessary to obtain the Senior Debt or to the
extent that such party is required by law to make any such disclosure. If
any party is required by law to make any such disclosure, it shall distribute
copies to all other parties prior to actual public release. For a period of
thirty (30) days following the Closing, any party that proposes to issue or
disseminate any press release or other publicity regarding any of the
Transactions shall distribute copies to all other parties prior to actual
public release, and shall reasonably consider requested changes thereto that
another party may make.
4.7 Reasonable Commercial Efforts Prior to the Closing, IMS Delaware,
Maxtor and the Investors shall use reasonable commercial efforts to cause the
conditions set forth in Sections 5 and 6 of this Agreement and Sections 7 and
8 of the Redemption Agreement to be satisfied on a timely basis. As the sole
stockholder of IMS Delaware, Maxtor shall use its best efforts to cause IMS
Delaware to perform its obligations under this Agreement.
4.8 Redemption Agreement. Maxtor and IMS Delaware shall not terminate
the Redemption Agreement unless this Agreement is first terminated pursuant
to Section 7.5 hereof. Maxtor and IMS Delaware covenant to the Investors to
perform their respective obligations under the Redemption Agreement and not
to amend, waive any provision of or terminate the Redemption Agreement
without the written consent of a majority in interest of the Investors.
4.9 Audited March 30 Financial Statements.
(a) As soon as practicable after March 30, 1996, but in any event
prior to the Closing Date, Maxtor shall cause IMS Delaware to prepare and
deliver to the Investors audited consolidated balance sheets of IMS Delaware
and the International IMS Entities (and/or any predecessors, if appropriate)
as of March 30, 1996 (the "Combined Balance Sheet") and 1995 and related
statements of operations and cash flows for the three fiscal year periods
ended March 30, 1996 (collectively, the "Audited Financial Statements"). The
Combined Balance Sheet shall contain only those assets and those liabilities
in nature and amount appropriate for the normal operation of the Business in
the ordinary course. The Audited Financial Statements (i) shall be prepared
in accordance with GAAP consistent with the prior audited financial
statements included in the Financial Statements, (ii) shall satisfy the U.S.
Securities and Exchange Commission's requirements under Regulation S-X, and
(iii) shall not differ materially from the Unaudited Financial Statements.
In the event that the Audited Financial Statements do not comply with the
requirements of the foregoing sentence, the Investors shall be entitled to
terminate this Agreement.
(b) Notwithstanding the foregoing, if the Closing shall not have
occurred prior to June 29, 1996, then Maxtor shall cause IMS Delaware to
deliver, in addition to the Audited Financial Statements referred to in
Section 4.9(a), an unaudited consolidated balance sheet of IMS Delaware, the
Holding Companies and the International IMS Entities (and/or any
predecessors, if appropriate) as of June 29, 1996, and related statements of
operations and cash flows for the three month period then ended. In such
event, such June 29, 1996 financial statements shall (i) be prepared in
accordance with GAAP applied on a consistent basis with the Audited Financial
Statements, (ii) present fairly the financial position of the Company as of
the date thereof and the results of operations and cash flows of the Company
for the period covered thereby, (iii) be correct and complete in all material
respects, and (iv) be consistent with the books and records of the Company.
4.10 Reimbursement of Maxtor Advances. Prior to the Closing Date,
Maxtor shall provide to the Company and the Investors a schedule of
expenditures made by the Company out of intercompany advances from Maxtor or
by Maxtor on behalf of the Company subsequent to January 1, 1996, to enable
the Company to continue to operate and to expand the Business. Such schedule
shall be satisfactory in form and substance to the Company and the Investors.
Maxtor warrants that all such expenditures were incurred for the foregoing
purpose and in arm's-length transactions of a commercially reasonable nature.
At the Closing, the Company agrees to reimburse Maxtor for such intercompany
advances or expenditures in an aggregate amount not to exceed $1,000,000.
Additionally, at the Closing, Maxtor agrees to waive and deem as canceled any
such intercompany advances or expenditures that exceed $1,000,000; provided,
however, that in the event that the Closing is delayed beyond June 30, 1996,
and the $1,000,000 limitation will impair the start-up of the Company's
facility in the People's Republic of China, Maxtor, the Investors and the
Company shall negotiate in good faith as to any excess amount appropriate for
reimbursement.
4.11 Environmental Condition. Prior to the Closing, the Company and
the Investors shall have obtained, investigated and approved in their
discretion such reports and information concerning (i) the Hazardous
Materials Activities of the Company, (ii) the Hazardous Materials disposal
practices of Company, (iii) the presence or absence of Contamination on any
present or past Company facility, and (iv) the Applicable Environmental
Health and Safety Requirements and the contracts applicable to the Company,
its facilities and its Hazardous Materials Activities (collectively, the
"Environmental Matters") as they deem reasonably necessary. Prior to
Closing, the Company and the Investors and their consultants and other
representatives (i) shall have the right to enter upon any Company facility
to conduct such inspections and tests and taking such soil and groundwater
samples as it shall deem necessary, and (ii) shall have access to all records
in the possession or under the control of the Company or Maxtor relating to
the Environmental Matters. If such investigation discloses any Environmental
Matter which violates a representation set forth in the Redemption Agreement
or which, in the discretion of the Investors could aversely affect the
Company or its operations, then the Investors shall so notify Maxtor.
Thereafter, Maxtor and the Investors shall negotiate in good faith to resolve
the matter to the satisfaction of both parties. If no resolution of the
matter acceptable to the Investors is achieved on or before the earlier of
the Closing or August 15, 1996, then the Investors will have the right to
terminate this Agreement and the transactions contemplated hereby.
4.12 Restricted Actions. So long as (a) at least (1) 25% of (i) the
Preferred Stock and (ii) shares of Class A Common Stock or Class B Common
Stock issued or issuable upon conversion of Preferred Stock, (iii) shares of
Class A Common Stock issued or issuable upon conversion of shares of Class B
Common Stock and (iv) shares of Class B Common Stock issued or issuable upon
conversion of share of Class A Common Stock (collectively, the "Conversion
Stock") or (2) 25% of the principal amount of the Subordinated Notes remain
outstanding and (b) the Investors collectively own at least such percentage
of such shares or notes, without the prior written consent of the holders of
(A) two-thirds of the then outstanding Preferred Stock and Conversion Stock,
taken together and (B) if any Subordinated Notes shall be outstanding, the
holders of not less than 66-2/3% in principal amount of the Subordinated
Notes then outstanding, the Company shall not:
(a) take any action that would constitute a Voting Event (as
defined in the Certificate of Incorporation), regardless of whether such
Voting Event would otherwise be subject to a vote of the shareholders of the
Company;
(b) repurchase or redeem (or make any funds available for the
purchase or redemption of) any shares of capital stock, or options, warrants
or other rights to acquire shares of capital stock, of the Company, other
than pursuant to (i) Article Fourth, subdivision I of the Certificate of
Incorporation, (ii) the terms of any employment agreement, stock option plan,
restricted stock purchase plan or agreement or similar arrangement between
the Company and any employee approved by a majority of the board of directors
of the Company or (iii) the Redemption Agreement;
(c) incur or permit to exist obligations for borrowed money of the
Company, in the aggregate, in excess of $50,000,000 (other than the Maxtor
Notes and Subordinated Notes);
(d) engage in any transaction with any Affiliate other than (i) a
normal employment relationship, (ii) granting (and allowing the exercise of
and/or (subject to Section 4.12(b)) repurchase of shares issuable upon
exercise of) employee stock options pursuant to the Stock Plan relating to up
to 2,235,000 shares of Common Stock, (iii) as specifically contemplated
herein and in the Redemption Agreement, the Transactional Agreements, the
Manufacturing Services Agreement or the Transition Services Agreement or (iv)
on terms and conditions which are no less favorable to the Company as would
result from an arm's length transaction;
(e) become subject to any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's right to comply
with the terms of this Agreement, the Redemption Agreement, any of the
Transactional Agreements, the Certificate of Incorporation or its Bylaws;
(f) enter into any merger, combination, consolidation,
reorganization, recapitalization, liquidation or other similar transaction of
the Company or any agreement with respect to any of the foregoing, other than
a transaction for the purpose of changing the Company's domicile;
(g) sell, lease, convey or otherwise dispose of, in a single
transaction, all or substantially all of the Company's assets, as measured by
book value;
(h) amend the Certificate of Incorporation or Bylaws, or alter the
rights, preferences and privileges of the Subordinated Notes or the Preferred
Stock;
(i) issue any additional shares of capital stock or other equity
securities, or any warrants, options or other rights to purchase equity
securities at a price per share equal to or less than the price of the
Preferred Stock (except pursuant to the Stock Plan and upon conversion of any
Preferred Stock or Common Stock);
(j) acquire any other business for consideration in excess of
$1,000,000;
(k) enter into any business other than the Business.
4.13 Required Actions. So long as (i) at least (1) 25% of the
Preferred Stock and Conversion Stock or (2) 25% of the principal amount of
the Subordinated Notes remain outstanding and (ii) the Investors collectively
own at least such percentage of such shares or notes, the Company shall:
(a) maintain, preserve and renew its corporate existence and all
material licenses, authorizations and permits necessary to the conduct of its
business;
(b) maintain and keep its properties in good repair, working order
and condition, and make all necessary or desirable repairs, renewals and
replacements, so that its business may be properly and advantageously
conducted at all times;
(c) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and before
penalties accrue thereon) and all claims for labor, materials or supplies
which if unpaid would by law become a lien upon any of its property, unless
and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance
with GAAP consistently applied) have been established on its books with
respect thereto;
(d) comply with all other material obligations which it incurs
pursuant to any contract or agreement (including the Subordinated Notes),
whether oral or written, express or implied, as such obligations become due,
unless and to the extent that the same are being contested in good faith and
by appropriate proceedings and adequate reserves (as determined in accordance
with GAAP consistently applied) have been established on its books with
respect thereto;
(e) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which could have a Material
Adverse Effect;
(f) maintain with good and responsible insurance companies
adequate insurance covering risks of such types and in such amounts as are
customary for Comparable Entities; and
(g) maintain proper books of record and account which fairly
present its financial condition and results of operations and make provisions
on its financial statements for all such proper reserves as in each case are
required in accordance with GAAP consistently applied.
SECTION 5
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligations to purchase the Securities at the Closing
are subject to the fulfillment on or prior to the Closing Date of the
following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by IMS Delaware and the other Investors in Sections 2 and 3
hereof, as the case may be, shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if made on
such date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement and the Redemption Agreement to be performed by IMS Delaware
and the Investors on or prior to the Closing Date shall have been performed
or complied with.
5.3 Compliance Certificate. IMS Delaware shall have delivered to the
Investors a certificate of IMS Delaware executed by the President of IMS
Delaware dated as of the Closing Date, certifying as to the fulfillment of
the conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.4 Secretary's Certificate. IMS Delaware shall have delivered to the
Investors a certificate executed by the Secretary of IMS Delaware dated as of
the Closing Date, certifying as to the following matters: (i) resolutions
adopted by the transactions contemplated by this Agreement; (ii) Certificate
of Incorporation (or like charter document) of IMS Delaware and each of the
International IMS Entities, (iii) Bylaws (or like charter document) of IMS
Delaware and each of the International IMS Entities; (iv) incumbency of
officers of IMS Delaware and each of the International IMS Entities, and (v)
such other matters as the Investors may reasonably request.
5.5 Good Standing Certificates. IMS Delaware shall have delivered to
the Investors certificates dated as of a recent date issued by the Secretary
of State of the State of Delaware and each of the jurisdictions in which the
International IMS Entities are organized to the effect that IMS Delaware or
such International IMS Entity, as the case may be, is legally existing and in
good standing (to the extent such concepts have legal meaning in such
jurisdictions).
5.6 Stockholders Agreement. The Stockholders Agreement shall have been
executed and delivered by IMS Delaware, Maxtor and the Investors and shall be
in full force and effect as of the Closing.
5.7 HEA Side Letter. The Company and the Investors shall have received
a letter from Hyundai Electronics America ("HEA") in substantially the draft
form previously supplied to the Investors, indicating that HEA has not
elected and will not elect push-down accounting treatment with respect to the
acquisition of Maxtor by HEA.
5.8 Senior Debt. IMS Delaware shall have established credit facilities
(or at the Closing shall have established) for $32,000,000 of Senior Debt on
terms and conditions satisfactory to a majority in interest of the Investors.
5.9 Redemption Agreement. IMS Delaware and Maxtor shall have entered
into the Redemption Agreement, and all of the conditions to the Company's and
Maxtor's obligations (other than the closing of the transactions hereunder)
shall have been satisfied or waived by such party; provided, however, that
the Company shall not waive any such condition or obligation without the
prior written consent of the Investors.
5.10 HSR Act. If a filing shall be required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the waiting period
thereunder shall have been terminated or expired.
5.11 Permit to Issue Subordinated Notes. IMS Delaware shall have
obtained from the California Department of Corporations a Permit for
Qualification pursuant to Section 25113 of the California Corporate
Securities Law to issue the Subordinated Notes.
5.12 Blue Sky. IMS Delaware shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Common Stock,
Preferred Stock and Subordinated Notes pursuant to this Agreement or the
Common Stock issuable upon conversion of the Preferred Stock.
5.13 Governmental Authorizations, etc. All material governmental
authorizations, consents, approvals, exemptions or other actions required to
issue or purchase the Securities pursuant to this Agreement, and for the
conduct of the Business following the Closing, shall have been obtained and
shall be in full force and effect unless the failure to obtain such
authorizations, consents, approvals, exemptions or other actions would not
have a Material Adverse Effect.
5.14 Audited Financial Statements. The Investors shall have received
the Audited Financial Statements, which shall be in form and substance
satisfactory to the Investors.
5.15 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of the Unaudited Balance Sheet and, if the
Closing has not occurred prior to June 29, 1996, the results set forth in the
financial statements as of and for the period ended June 29, 1996, delivered
pursuant to Section 5.4(b) of the Redemption Agreement shall not differ
materially from the results for such period set forth in the financial
projections provided to the Investors on or prior to the date hereof and
attached as Schedule 7.4 to the Redemption Agreement.
5.16 No Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transactions shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the Transactions, which makes the consummation of the Transactions illegal.
5.17 Opinion of Company Counsel. Wilson Sonsini Goodrich & Rosati,
P.C., counsel to IMS Delaware, shall have delivered an opinion addressed to
the Investors, dated the Closing Date, substantially in the form attached
hereto as Exhibit F.
5.18 Opinions Delivered Pursuant to Redemption Agreement. The opinions
referred to in Section 7.5 of the Redemption Agreement shall have been
delivered to the Company and the opinions of foreign counsel referred to in
the Redemption Agreement shall also be addressed to the Investors.
5.19 Board of Directors. The directors of the Company at the Closing
shall be John A. Downer and Mark Rossi, as representatives of Prudential,
Fredric W. Harman and one director to be designated by Oak prior to the
Closing, as representatives of Oak, Patrick Verderico, as the representative
of Maxtor, Robert G. Behlman, William Almon and one director to be designated
by IMS Delaware prior to the Closing.
5.20 Other Agreements. Maxtor and IMS Delaware shall have entered into
the Manufacturing Services Agreement and the Transition Services Agreement,
and each such agreement shall be in full force and effect as of the Closing
Date.
5.21 Accounting Treatment. IMS Delaware shall have received advice
from the U.S. Securities and Exchange Commission that the transactions
contemplated by the Transactional Agreements will be accounted for as a
recapitalization for accounting purposes.
5.22 Termination of Existing Options, Warrants and Other Rights. Any
Option, warrant or other right to purchase capital stock of IMS Delaware or
any of the International IMS Entities pursuant to any IMS Plan or otherwise
shall have been canceled, redeemed or otherwise terminated on or prior to the
Closing Date.
5.23 Restated Certificate of Incorporation. The Certificate of
Incorporation of IMS Delaware shall have been amended and restated as set
forth in Exhibit B on or prior to the Closing Date and, as so amended, shall
be in full force and effect.
5.24 Restated Bylaws. The Bylaws of IMS Delaware shall have been
amended and restated as set forth in Exhibit G on or prior to the Closing
Date, and, as so amended, shall be in full force and effect.
5.25 Transition to Consignment Relationship with Maxtor. The
conversion of the commercial relationship between the Company and Maxtor from
a turnkey basis to a consignment basis shall have been accomplished to the
satisfaction of the Investors.
5.26 Environmental Matters. Maxtor and the Investors shall have
resolved all Environmental Matters as contemplated pursuant to Section 4.11
of this Agreement.
5.27 Compensation of Employees. Prior to the Closing, Maxtor shall
have paid to all employees, officers and directors of the Company, pursuant
to the IMS Delaware Management Incentive Plan, all bonuses as agreed to
between C.S. Park and Robert G. Behlman.
5.28 Indemnification Agreements. Prior to the Closing, Maxtor and each
of the officers and directors of IMS Delaware, each of the Holding Companies
and each of the International IMS Entities shall have entered into
indemnification agreements as contemplated by Section 5.7 of the Redemption
Agreement and in form and substance satisfactory to the Investors.
5.29 Reorganization Complete; Officers' Certificate. The
Reorganization Actions set forth in Part 3.3 of the Disclosure Schedule to
the Redemption Agreement shall have occurred, and Maxtor shall have delivered
to the Investors a certificate executed by Glenn Stevens and Nathan Kawaye,
dated as of the Closing Date, certifying that each of such Reorganization
Actions has been accomplished.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
IMS Delaware's obligations to sell and issue the Securities at the
Closing are subject to the fulfillment on or prior to the Closing Date of the
following conditions:
6.1 Representations. The representations made by the Investors in
Section 3 hereof shall be true and correct in all material respects as of the
Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement and the Redemption Agreement to be performed by the Investors
on or prior to the Closing Date shall have been performed or complied with.
6.3 Permit to Issue Subordinated Notes. IMS Delaware shall have
obtained from the California Department of Corporations a Permit for
Qualification pursuant to Section 25113 of the California Corporate
Securities Law to issue the Subordinated Notes.
6.4 HSR Act. If a filing shall be required under the HSR Act, the
waiting period thereunder shall have been terminated or expired.
6.5 Blue Sky. IMS Delaware shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Common Stock,
Preferred Stock or Subordinated Notes pursuant to this Agreement or the
Common Stock issuable upon conversion of the Preferred Stock.
6.6 Governmental Authorizations, etc. All material governmental
authorizations, consents, approvals, exemptions, or other actions required to
issue or purchase the Securities pursuant to this Agreement and for the
conduct of the Business following the Closing, shall have been obtained and
shall be in full force and effect unless the failure to obtain such
authorizations, consents, approvals, exemptions or other actions would not
have a material adverse effect on the business, financial condition or
results of operations of the Company, taken as a whole.
6.7 Redemption Conditions. IMS Delaware and Maxtor shall have entered
into the Redemption Agreement and all of the conditions to the obligations of
the Company to close the transactions under the Redemption Agreement (other
than the closing of the transactions hereunder) shall have been satisfied or
waived by the Company.
SECTION 7
INDEMNIFICATION, ETC.
7.1 Survival Of Representations And Covenants.
(a) The representations, warranties, covenants and obligations in
this Agreement (including the representations and warranties incorporated
herein pursuant to Section 2.6) and in the Redemption Agreement shall survive
(without limitation): (i) the Closing and the sale of the Securities to the
Investors, (ii) the sale by Maxtor of shares in the Company to the Company;
and (iii) the sale or dissolution of any party to this Agreement or the
Redemption Agreement, and (except for those set forth in Sections 2.1, 3.1,
3.3, 3.14, 3.17, 3.21 and 5.7 of the Redemption Agreement and incorporated in
this Agreement) shall expire on the second anniversary of the Closing Date.
Those representations and warranties set forth in Sections 3.14 and 3.17 of
the Redemption Agreement shall survive until 30 days after the expiration of
the applicable statute of limitations period, and the representations,
warranties, covenants and obligations set forth in Sections 2.1, 3.1, 3.3,
3.21 and 5.7 of the Redemption Agreement shall survive for an unlimited
period of time. No Indemnitee shall be entitled to indemnification resulting
from the Breach of a representation, warranty, covenant or obligation of
Maxtor unless Maxtor has received during the applicable survival period a
Claim Notice.
(b) Notwithstanding the foregoing, if a Claim Notice relating to
any representation, warranty, covenant or obligation is given to Maxtor on or
prior to the second anniversary of the Closing Date (or such longer survival
period as applicable), then, notwithstanding anything to the contrary
contained in Section 7.1(a), such representation or warranty shall not so
expire solely with respect to such claim, but rather shall remain in full
force and effect until such time as each and every claim specifically set
forth in such Claim Notice has been fully and finally resolved, either by
means of a written settlement agreement executed on behalf of Maxtor and the
Company or by means of a final, non-appealable judgment issued by a court of
competent jurisdiction.
(c) For purposes of this Agreement and the Redemption Agreement, a
"Claim Notice" relating to a particular representation or warranty shall be
deemed to have been given if any Indemnitee, acting in good faith, delivers
to Maxtor a written notice stating that such Indemnitee believes that there
is or has been a possible Breach of a representation or warranty and
containing (i) a brief description, providing reasonable detail, of the
circumstances supporting such Indemnitee's belief that there is or has been
such a possible Breach, and (ii) a non-binding, preliminary estimate of the
aggregate dollar amount of the actual and potential c that have arisen and
may arise as a direct or indirect result of such possible Breach.
(d) For purposes of this Agreement, each representation, warranty
covenant or obligation of Maxtor in the Redemption Agreement and each
statement or other item of information set forth in the Disclosure Schedule
or in any update to the Disclosure Schedule (to the extent such update is
accepted by the Investors as contemplated by Section 5.3 of the Redemption
Agreement) shall be deemed to be a representation, warranty, covenant or
obligation of Maxtor in this Agreement.
(e) Promptly after any Indemnitee (A) receives notice of any claim
or Damages or the commencement of any action or proceedings against it, (B)
has knowledge of any claim, Damages, action or proceeding against it, or (C)
has knowledge of any matter or Damages for which it intends to seek
indemnification hereunder, such Indemnitee shall, if a claim for
reimbursement with respect thereto is to be made against Maxtor hereunder,
give to Maxtor a Claim Notice relating to the possible Breach or the
commencement of the action or proceeding; provided, however, that failure to
give such notification shall not affect the indemnification hereunder except
to the extent that Maxtor (X) is unable to defend or verify such claim solely
as a result of such failure to notify or (Y) is required to pay a greater
amount or incurs additional expense with respect thereto solely as a result
of such failure to notify and then only to the extent of such excess.
7.2 Indemnification By Maxtor.
(a) Maxtor shall hold harmless and indemnify each of the
Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages that are suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
at any time (regardless of whether or not such Damages relate to any third-
party claim) and that arise from or as a result of, or are connected with:
(i) Any Breach of any of the representations, warranties,
covenants or obligations made by Maxtor in the Redemption Agreement (after
giving effect to any update to the Disclosure Schedule) or in the Closing
Certificate thereto, other than the representations and warranties set forth
in Section 3.14 of the Redemption Agreement, which shall be covered
exclusively under Section 11.2 of the Redemption Agreement;
(ii) Any Breach of any representation, warranty, statement,
information or provision contained in the Disclosure Schedule (after giving
effect to any update to the Disclosure Schedule) or in any other document
delivered or otherwise made available to the Investors, the Company or any of
their Representatives by or on behalf of Maxtor or any Representative of
Maxtor, other than the representations and warranties set forth in Section
3.14 of the Redemption Agreement, which shall be covered exclusively under
Section 11.2 of the Redemption Agreement; or
(iii) Any Proceeding relating to any Breach, alleged
Breach, Liability or matter of the type referred to in clauses "(i)" and
"(ii)" above (including any Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this Section 7).
(b) Maxtor shall not be required to make any indemnification
payment pursuant to Section 7.2(a) for any Breach of any of its
representations and warranties (other than Breach of the representations and
warranties contained in Sections 2.1, 3.1, 3.3, 3.21, 3.27 and 5.7 of the
Redemption Agreement) until such time as, and only to the extent that, the
total amount of all Damages (including the Damages arising from such Breach
and all other Damages arising from any other Breaches of its representations
or warranties) that have been directly or indirectly suffered or incurred by
Indemnitees, or to which Indemnitees have otherwise become subject, equals or
exceeds the amount of $500,000 in the aggregate, in which case Maxtor will be
liable for all such Damages including the first $500,000. The aggregate
indemnification payments that Maxtor is required to make pursuant to Section
7.2(a) shall in no event exceed $17,500,000 (except in the case of a Breach
of the representations and warranties contained in Sections 3.14, 3.17 and
5.7 of the Redemption Agreement in which case there shall be no maximum). In
the event that the Company actually recovers amounts under insurance policies
with respect to any loss (offset by any increase in insurance premiums or
other insurance costs as a result of any claim with respect to any loss) or
actually realizes a Tax benefit arising from the incurrence or payment of a
loss, each as set forth in the definition of "Damages" in Section 1.1 of the
Redemption Agreement, following Maxtor's payment of any Claim to which such
insurance recovery or Tax benefit relates, Maxtor shall be promptly
reimbursed by the party or parties indemnified (on a pro-rata basis) for the
amount recovered or benefit realized. Maxtor shall not be required to pay
any Claim more than once and in the event that a dispute arises between or
among Indemnitees over payment of a Claim, Maxtor shall pay to the Company
the amount claimed or the amount determined pursuant to Section 7.5 hereof
and shall have no further liability with respect to such Claim.
(c) The parties hereto acknowledge that notwithstanding the fact
that an Indemnitee is not a party to this Agreement, such Indemnitee is
entitled to the benefits of and to enforce all provisions hereof as an
intended third party hereof.
(d) The amount of Damages for which indemnification is provided
under this Section 7.2 shall be net of any amounts recovered or recoverable
by the Company or the Indemnitees under insurance policies.
(e) Any amount payable by Maxtor pursuant to this Section 7.2
shall be reduced by any reduction in the income tax liability of the Company
as a result of the payment or incurrence of Damages giving rise to such
indemnity payment; provided that in computing any such reduction in Income
Tax Liability, it shall be assumed that the Company (i) is subject to
federal, state and local income tax at the highest marginal statutory rates
(with respect to the income tax returns on which such reduction in income tax
liability is reported) and (ii) has sufficient income to utilize any
deductions, credits (other than foreign tax credits, the use of which shall
be determined on an actual basis) and other Tax benefits arising from such
payment of Damages.
(f) Maxtor, the Company and the other Indemnitees agree to treat
any payment of Damages pursuant to this Section 7.2 as a purchase price
adjustment with respect to both the redemption of the Company's stock held
by Maxtor and the purchase of the Company's stock by the Indemnitees.
However, to the extent any such payment is properly characterized by Maxtor
as a deduction on its income tax returns and by the Indemnitees as taxable
income on their income tax returns, and the payment does not represent
reimbursement of expenses of the Indemnitees which are or were deductions on
their income tax returns, the amount of such payment shall be increased by
the deemed increase in income tax liability of the Indemnitees. In computing
the deemed increase in income tax liability, it shall be assumed that the
Indemnitees are subject to federal, state and local income tax at the highest
marginal statutory rates (with respect to the income tax return on which such
income is reported, and taking into account the deductibility of state and
local taxes for federal income tax purposes).
(g) Maxtor agrees to indemnify, compensate and reimburse each of
the Indemnitees for any Damages exceeding $50,000HK that are suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject at any time (regardless of whether or not such
Damages relate to any third-party claim) and that arise from or as a result
of, or are connected with the HK Government Claim referred to in Part 3.17 of
the Disclosure Schedule to the Redemption Agreement. Maxtor shall further
defend, indemnify and hold harmless each of the Indemnitees from any and all
Damages arising out of or in connection with any and all claims for any and
all personal injuries sustained as a result of the Cleaning Matter referred
to in part 3.17 Disclosure Schedule. Maxtor's indemnification obligations
under this Section 7.2(g) are exclusive of and not subject to the $500,000
threshold for indemnification set forth in Section 7.2(b) above.
7.3 Exclusivity. The indemnification remedies and other remedies
provided in this Section 7 shall be the sole and exclusive right and remedy
exercisable by the Indemnitees or their permitted assigns with respect to the
matters described in Section 7.2(a) and the indemnification remedies and
other remedies set forth in Section 11.2 of the Redemption Agreement shall be
the sole and exclusive right and remedy exercisable by the Indemnitees or
their permitted assigns with respect to the breach of representations and
warranties set forth in Section 3.14 of the Redemption Agreement.
7.4 Defense Of Third Party Claims.
(a) In the event of the assertion or commencement by any Person of
any claim or Proceeding (whether against the Company, against any Indemnitee
or against any other Person) with respect to which Maxtor may become
obligated to indemnify, hold harmless, compensate or reimburse any Indemnitee
pursuant to this Section 7 or Section 11.2 of the Redemption Agreement, the
party hereto who becomes aware of such claim or Proceeding promptly shall
notify the other party, and the parties shall cooperate in investigating the
claim or Proceeding and determining the appropriate response.
(b) Maxtor shall have the right to compromise or defend, at its
own expense and by its counsel, any such matter involving the asserted
liability of the Indemnitee; provided, however, that:
(i) no compromise of any claim shall be made without the
consent of the Indemnitee, unless such compromise results in the full and
unconditional release of all claims against the Indemnitee by the party
asserting such claim; and
(ii) if the Company or the Indemnitee reasonably determines
that the matter is likely to involve (A) a compromise of any right by the
Company or the Indemnitee or otherwise involve interests significant to the
continuing operation of the Company and/or to the Indemnitee or (B) claims in
excess of Maxtor's maximum liability under this Section 7 (taking into
account all potential liabilities of Maxtor as a result of other claims made
hereunder), then the counsel chosen by Maxtor shall be subject to the
approval of the Company, which approval shall not be unreasonably withheld.
The opportunity to compromise or defend, as herein provided, shall be a
condition precedent to any liability of Maxtor under the provisions hereof.
If Maxtor shall undertake to compromise or defend any such asserted
liability, it shall promptly notify the Indemnitee of its intention to do so.
The Indemnitee, at Maxtor's expense, shall cooperate with Maxtor and its
Representatives in the defense against any such asserted liability and in any
compromise thereof. Such cooperation shall include, but not be limited to,
furnishing the Indemnitee with any books, records or information reasonably
requested by Maxtor. After Maxtor has notified the Indemnitee of its
intention to undertake to compromise or defend any such asserted liability,
Maxtor shall not be liable for any additional legal expenses incurred by the
Indemnitee (except as provided below) and the Indemnitee shall be indemnified
by Maxtor for the amount of any judgment or settlement and for all Damages
incurred by Maxtor in connection with the defense or settlement of such
claim. In addition, Maxtor shall keep the Indemnitee informed of all
material developments and events relating to such claim and in the event a
settlement, adjustment or compromise involves any compromise of any right of
the Company or the Indemnitee, then Maxtor shall not do so without the prior
written consent of the Indemnitee, which shall not be unreasonably withheld,
and provided further that if in the reasonable judgment of any Indemnitee a
conflict of interest may exist between Maxtor and any Indemnitees with
respect to such claim, Maxtor shall be obligated to reimburse with respect to
one additional counsel for each such Indemnitee for whom such a conflict
exists. Each of the Company and the Indemnitee shall have the right to
participate in the defense of such claim at its own expense, in which case
Maxtor shall cooperate in providing information to and consulting with the
Company and/or the Indemnitee about the claim. Unless and until Maxtor
assumes the defense of any such claim, the Indemnitee may defend against or
settle such claim in such manner and on such terms as it in good faith deems
appropriate, provided that the Indemnitee shall keep Maxtor informed of all
material developments and events relating to such claim, and in the event a
settlement, adjustment or compromise involves any compromise of any right of
Maxtor (other than pursuant hereto), then the Indemnitee shall not do so
without the prior written consent of Maxtor, which shall not be unreasonably
withheld. No compromise of any claims shall be made without Maxtor's
consent, unless the compromise results in the full unconditional release of
all claims by the party asserting such claim. If Maxtor elects not to assume
the defense of a claim, Maxtor will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by Maxtor with
respect to such claim, unless in the reasonable judgment of any Indemnitee a
conflict of interest may exist among the respective Indemnitees with respect
to such claim, in which case Maxtor shall be obligated to reimburse with
respect to one additional counsel for each such Indemnitee with for whom such
a conflict exists.
7.5 Dispute Resolution.
(a) Within the period of thirty (30) business days following
receipt by any Claim Notice Maxtor shall have the right to deliver a notice
(a "Dispute Notice") stating that Maxtor disputes the validity or the amount
specified in such Claim Notice or any portion thereof (a "Disputed Amount")
and providing in reasonable detail the reasons therefor. In case Maxtor
delivers a Claim Notice with regard to any claim or claims by an Indemnitee
made in any Claim Notice, the Indemnitee(s) will have thirty (30) business
days to respond in a written statement to the objection of Maxtor. If after
such thirty (30) business day period there remains a dispute as to any
claims, Maxtor and the Indemnitee(s) will attempt in good faith for sixty
(60) days to agree upon the rights of the respective parties with respect to
each of such claims. If Maxtor and the Indemnitee(s) should so agree, a
memorandum setting forth such agreement will be prepared and signed by both
parties and any agreed upon indemnification shall be paid promptly by Maxtor.
(b) If no such agreement can be reached after good faith
negotiation, either the Indemnitee(s) or Maxtor may, by written notice to the
other, demand arbitration of the matter unless the amount of the damage or
loss is at issue in pending litigation with a third party, in which event
arbitration will not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter will be
settled by arbitration conducted by three arbitrators.
(c) Within fifteen (15) business days after written notice demand
arbitration by one party is sent, the Indemnitee(s) (acting as one party) and
Maxtor will each select one arbitrator, and the two arbitrators so selected
will select a third arbitrator. In the event either party fails to select an
arbitrator within the fifteen (15) business days after written notice is
sent, the arbitrator selected by the other party shall select the second
arbitrator, and the two arbitrators shall select a third arbitrator. The
decision of the arbitrators as to the matter submitted will be binding and
conclusive upon the parties to this Agreement. Judgment upon any award
rendered by the arbitrators may be entered in any court having jurisdiction.
Any such arbitration will be held in San Jose, California under the
commercial rules then in effect of the American Arbitration Association. In
any arbitration hereunder, the Indemnitee(s) will be deemed to be the Non-
Prevailing Party unless the arbitrators award the Indemnitee(s) more than one-
half (1/2) of the amount in dispute, plus any amounts not in dispute;
otherwise, Maxtor will be deemed to be the Non-Prevailing Party. The Non-
Prevailing Party to an arbitration will pay its own expenses, the fees of
each arbitrator, the administrative fee of the American Arbitration
Association, and the expenses, including without limitation, attorneys' fees
and costs, incurred by the other party to the arbitration.
SECTION 8
MISCELLANEOUS
8.1 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding among the parties with respect
to the subject matter hereof and thereof.
8.2 Amendment. This Agreement can be amended only by an instrument in
writing signed by IMS Delaware, Maxtor and all Investors.
8.3 Defaults. If any Investor fails to invest the full amount set
forth opposite such Investor's name on Exhibit A hereto (a "Default"), then
any other Investor may cure such Default.
8.4 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and representatives; provided, however, that no Investor may assign any of
its rights hereunder except to any creditor of the Company as collateral
security for any creditor of the Company to an investment partnership under
common control with such Investor, to an affiliate of such Investor, or to
any member of such person's immediate family or any trust for the benefit of
such individual or family member. Maxtor expressly consents to the
assignment by the Company of this Agreement, the Manufacturing Services
Agreement and related agreements as collateral security for the benefit of
any creditor of the Company.
8.5 Termination. This Agreement may be terminated by any party hereto
by delivery of written notice to the other parties hereto to that effect if
the Closing shall not have occurred by August 15, 1996, other than as a
result of any failure on the part of the terminating party (or its
affiliates) to comply with or perform its covenants and obligations under
this Agreement. No party shall have liabilities of any nature to any other
party hereto for failure to close the transactions contemplated hereby,
unless such failure is attributable to the breach of a specific
representation, warranty, covenant or obligation of such party set forth
herein.
8.6 Survival or Representations and Warranties. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery hereof and transfer of any Securities.
8.7 Governing Law; Jurisdiction.
(a) This Agreement shall be governed by and construed in
accordance with and governed in all respects by the internal laws of the
State of California (without giving effect to principles of conflicts of
laws).
(b) The parties hereby consent to the jurisdiction of the courts
of the State of California and the federal courts of the Northern District of
California for all disputes arising under this Agreement.
8.8 Attorneys' Fees. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party
to this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
8.9 Allocation of Expenses.
(a) If the Closing occurs, the Company shall bear and pay all
fees, costs and expenses that have been incurred or that are in the future
incurred by, on behalf of or for the benefit of the Company, the Company's
Management or the Investors in connection with the Transactional Agreements
and the Transactions (including all fees, costs and expenses payable to the
environmental consultant engaged in connection with the Transactions, Price
Waterhouse LLP, Chemical Bank, Chemical Securities Asia Limited, Cravath,
Swaine & Moore, Wilson Sonsini Goodrich & Rosati, P.C., Kirkland & Ellis,
Johnson Stokes & Master, Chandler & Thong-Ek and Maples & Calder).
(b) If the Closing does not occur (i) because of a decision by
Maxtor not to consummate the Transactions or because of any other material
breach of the Transactional Agreements by Maxtor or the Company, then Maxtor
shall bear and pay only fees, costs and expenses in connection with the
Transactional Agreements and the Transactions payable to Chemical Bank,
Chemical Securities Asia Limited, Cravath, Swaine & Moore, Wilson Sonsini
Goodrich & Rosati, P.C., any environmental consultant engaged in connection
with the Transactions and Price Waterhouse LLP, provided that the fees of
Price Waterhouse LLP payable by Maxtor pursuant to this Section 8.9(b) shall
not exceed $100,000 and the fees, costs and expenses payable to Wilson
Sonsini Goodrich & Rosati, P.C. payable pursuant to this Section 8.9(b) shall
be only agreed upon reasonable fees, costs and expenses and shall not exceed
$175,000, and the Investors shall pay fees, costs and expenses of foreign
counsel acting on behalf of the Company and the Investors and the fees, costs
and expenses of Kirkland & Ellis; (ii) because of a decision by the Investors
not to consummate the Transactions not due to a material breach of the
Transactional Agreements by Maxtor or the Company or because of any other
material breach of the Transactional Agreements by the Investors, then the
Investors shall bear and pay only fees, costs and expenses in connection with
the Transactional Agreements and the Transactions payable to Chemical Bank,
Chemical Securities Asia Limited, Cravath, Swaine & Moore, Wilson Sonsini
Goodrich & Rosati, P.C., any environmental consultant engaged in connection
with the Transactions (and the Investors exclusively shall be entitled to own
and to use the work product of any such consultant) and Price Waterhouse LLP;
or (iii) for any reason other than as set forth in (i) or (ii) above, the
Investors shall bear and pay only fees, costs and expenses in connection with
the Transactional Agreements and the Transactions payable to Chemical Bank,
Chemical Securities Asia Limited, Cravath, Swaine & Moore, foreign counsel
acting on behalf of the Company and the Investors and Price Waterhouse LLP,
and Maxtor shall pay only fees, costs and expenses in connection with the
Transactional Agreements and the Transactions payable to Wilson Sonsini
Goodrich & Rosati, P.C., and any environmental consultant engaged in
connection with the Transactions, provided that the fees, costs and expenses
payable to Wilson Sonsini Goodrich & Rosati, P.C. payable pursuant to this
section shall only be agreed upon reasonable fees, costs and expenses and
shall not exceed $175,000, and provided in all events that Maxtor shall pay
the fees, costs and expenses of Gray Cary Ware & Freidenrich and foreign
counsel acting on behalf of Maxtor.
8.10 Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other parties hereto):
if to Maxtor, to: Maxtor Corporation
2190 Miller Drive
Longmont, Colorado 80501
Telecopier: 303-678-3111
Attention: Glenn H. Stevens, Esq.
with a copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Telecopier: 415-327-3699
Attention: Diane Holt Frankle, Esq.
If to IMS Delaware, to: International Manufacturing Services, Inc.
211 River Oaks Parkway
San Jose, California
Telecopier: 408-432-4337
Attention: Robert G. Behlman
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telecopier: 415-493-6811
Attention: Jeffrey D. Saper, Esq.
If to Investors to: Prudential Private Equity Investors III, L.P.
717 Fifth Avenue, 11th Floor
New York, New York 10022
Telecopier: 212-826-6798
Attention: Mark Rossi
John A. Downer
Oak Investment Partners
525 University Avenue, Suite 1300
Palo Alto, California 94301
Telecopier: 415-328-6345
Attention: Fredric W. Harman
with a copy to: Kirkland & Ellis
Citicorp Center
153 East 53rd Street, 39th Floor
New York, New York 10022
Telecopier: 212-446-4900
Attention: Frederick Tanne, Esq.
8.11 Construction.
(a) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
be applied in the construction or interpretation of this Agreement.
(b) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
8.12 Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
8.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound by
the terms hereof, have caused this Agreement to be executed, as of the date
first above written by their officers or other representatives thereunto duly
authorized.
INTERNATIONAL MANUFACTURING SERVICES, INC.
a Delaware corporation
By:
--------------------------------------
Robert G. Behlman
Title: President
--------------------------------------
MAXTOR CORPORATION
a Delaware corporation
By:
--------------------------------------
Title:
--------------------------------------
INVESTORS
Oak Investment Partners VI, L.P.
By:
--------------------------------------
Fredric W. Harman
Managing Member of Oak Associates VI, LLC,
The General Partner of Oak Investment Partners
VI,
Limited Partnership
Oak VI Affiliates Fund, L.P.
By:
--------------------------------------
Fredric W. Harman
Managing Member of Oak VI Affiliates, LLC
The General Partner of Oak VI Affiliates Fund,
Limited Partnership
EXECUTION COPY
Prudential Private Equity Investors III, L.P.
By: Prudential Equity Investors, Inc.
General Partner
By:
---------------------------------------
Name:
Title:
EXECUTION COPY
EXHIBIT A
LIST OF INVESTORS AND MANAGERS
Number Number AggregaPrincip Total
of Aggrega of te al Purchas
Shares te Shares PurchasAmount e
of Purchas of e of Price
Common e Series Price Subordi
Stock Price A for nated
for Preferr Series Notes
Common ed A Purchas
Stock Stock Preferr ed
ed
Stock
*Prudential 1,130,0 $ 2,000,0 $ 2.50 $ $
00 1.10619 00 6,250,0 12,500,
45 00 000
*Oak 1,130,0 2,000,0 2.50 6,250,0 12,500,
00 1.10619 00 00 000
45
Total 2,260,0 2,500,0 4,000,0 10,000, 12,500, 25,000,
00 00 00 000 000 000
$ $ $ $
*These Investors reserve the right to reallocate or assign their respective
shares of the Common Stock, Series A Preferred Stock and the Subordinated
Notes prior to Closing.
(1)
------------------
------------------
------------------
(2)
------------------
------------------
------------------
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT C
TERMS OF SUBORDINATED NOTES
EXHIBIT D
STOCKHOLDERS' AGREEMENT
EXHIBIT E
1996 STOCK PLAN
AND
FORM OF OPTION AGREEMENT
EXHIBIT F
LEGAL OPINION OF IMS DELAWARE COUNSEL
EXHIBIT G
FORM OF RESTATED BYLAWS OF IMS DELAWAR
RECAPITALIZATION AGREEMENT
INTERNATIONAL MANUFACTURING SERVICES, INC.,
a Delaware corporation
Dated as of May 16, 1996
EXECUTION COPY
TABLE OF CONTENTS
Page
SECTION 1 - PURCHASE, SALE AND TERMS OF STOCK AND NOTES 2
1.1 The Stock 2
1.2 The Notes 2
1.3 The Securities 2
1.4 The Closing of the Purchase and Sale of Stock and Notes. 2
1.5 Legends 3
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF IMS DELAWARE 3
2.1 Corporate Status 3
2.2 Corporate Authorization 3
2.3 Securities 3
2.4 Option Plans 4
2.5 Authority Regarding and Binding Nature of Transactional
Agreements 4
2.6 Redemption Agreement Representations and Warranties 4
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE INVESTORS 5
3.1 Authorization 5
3.2 Restricted Securities 5
3.3 Access to Information 5
3.4 Control of Securities 5
SECTION 4 - COVENANTS 6
4.1 Access And Investigation 6
4.2 Operation of Business 6
4.3 Filings And Consents. 8
4.4 Notification; Updates To Disclosure Schedule. 8
4.5 No Negotiation. 9
4.6 Confidentiality. 10
4.7 Reasonable Commercial Efforts. 10
4.8 Redemption Agreement. 10
4.9 Audited March 30 Financial Statements 10
4.10 Reimbursement of Maxtor Advances 11
4.11 Environmental Condition 11
4.12 Restricted Actions 12
4.13 Required Actions 13
SECTION 5 CONDITIONS TO CLOSING OF INVESTORS 14
5.1 Representations and Warranties Correct 14
5.2 Covenants 14
5.3 Compliance Certificate 14
5.4 Secretary's Certificate 14
5.5 Good Standing Certificates 14
5.6 Stockholders Agreement 15
5.7 HEA Side Letter 15
5.8 Senior Debt 15
5.9 Redemption Agreement 15
5.10 HSR Act 15
5.11 Permit to Issue Subordinated Notes 15
5.12 Blue Sky 15
5.13 Governmental Authorizations, etc. 15
5.14 Audited Financial Statements 15
5.15 No Material Adverse Change 15
5.16 No Illegality 16
5.17 Opinion of Company Counsel 16
5.18 Opinions Delivered Pursuant to Redemption Agreement 16
5.19 Board of Directors 16
5.20 Other Agreements 16
5.21 Accounting Treatment 16
5.22 Termination of Existing Options, Warrants and Other Rights 16
5.23 Restated Certificate of Incorporation 16
5.24 Restated Bylaws 17
5.25 Transition to Consignment Relationship with Maxtor 17
5.26 Environmental Matters 17
5.27 Compensation of Employees 17
5.28 Indemnification Agreements 17
5.29 Reorganization Complete; Officers' Certificate 17
SECTION 6 - CONDITIONS TO CLOSING OF COMPANY 17
6.1 Representations 17
6.2 Covenants 17
6.3 Permit to Issue Subordinated Notes 17
6.4 HSR Act 18
6.5 Blue Sky 18
6.6 Governmental Authorizations, etc 18
6.7 Redemption Conditions 18
SECTION 7 - INDEMNIFICATION, ETC. 18
7.1 Survival Of Representations And Covenants 18
7.2 Indemnification By Maxtor 19
7.3 Exclusivity 21
7.4 Defense Of Third Party Claims 22
7.5 Dispute Resolution 23
SECTION 8 - MISCELLANEOUS 24
8.1 Entire Agreement 24
8.2 Amendment 24
8.3 Defaults 24
8.4 Successors and Assigns 24
8.5 Termination 24
8.6 Survival or Representations and Warranties 24
8.7 Governing Law; Jurisdiction 24
8.8 Attorneys' Fees 25
8.9 Allocation of Expenses 25
8.10 Notices 26
8.11 Construction 27
8.12 Incorporation of Exhibits 27
8.13 Counterparts 27
EXHIBIT A LIST OF INVESTORS AND MANAGERS
EXHIBIT B RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT C TERMS OF SUBORDINATED NOTES
EXHIBIT D STOCKHOLDERS' AGREEMENT
EXHIBIT E 1996 STOCK PLAN AND FORM OF OPTION AGREEMENT
EXHIBIT F LEGAL OPINION OF IMS DELAWARE COUNSEL
EXHIBIT G FORM OF RESTATED BYLAWS OF IMS DELAWARE
INTERNATIONAL MANUFACTURING SERVICES, INC.
REDEMPTION AGREEMENT
THIS REDEMPTION AGREEMENT is entered into as of May 16, 1996, by and
between INTERNATIONAL MANUFACTURING SERVICES, INC., a Delaware corporation
(individually, "IMS Delaware" and together with the Holding Companies (as
hereinafter defined) and the International IMS Entities (as hereinafter
defined), the "Company"), and MAXTOR CORPORATION, a Delaware corporation
("Maxtor").
RECITALS
A. Maxtor owns 10,000,000 shares of Common Stock of IMS Delaware,
representing all of the issued and outstanding capital stock of the Company.
B. IMS Delaware wishes to redeem from Maxtor, and Maxtor wishes to sell
to IMS Delaware, 8,010,000 shares of Common Stock of IMS Delaware (the
"Shares") on the terms set forth in this Agreement and in accordance with the
Delaware General Corporation Law.
C. IMS Delaware, Maxtor and the investors named on Exhibit A thereto
(the "Investors") have entered into a Recapitalization Agreement, dated the
date hereof (the "Recapitalization Agreement"), pursuant to which,
immediately prior to the Closing (as hereinafter defined) and on the Closing
Date (as hereinafter defined), IMS Delaware will sell, and the Investors will
purchase, common stock and convertible preferred stock of IMS Delaware.
D. IMS Delaware contemplates that, in connection with the Transactions
(as hereinafter defined), it will obtain (i) senior debt financing in an
amount of not less than $32,000,000 (the "Senior Debt") and (ii) junior
subordinated debt financing in an amount of not less than $12,500,000 (the
"Junior Debt").
E. IMS Delaware and the Investors have required, as a condition to
entering into the Transactions and incurring the Senior Debt and the Junior
Debt, that Maxtor make certain representations and warranties and perform
certain covenants set forth in this Agreement.
F. IMS Delaware, the Investors and Maxtor contemplate that certain
reorganization actions, as set forth in Part 3.3 of the Disclosure Schedule
(the "Reorganization Actions"), will be taken prior to Closing.
G. Maxtor, the Investors and IMS Delaware contemplate that as a
condition to entering into the Transactions that Maxtor and IMS Delaware will
enter into the Manufacturing Services Agreement (as hereinafter defined) and
the Transition Services Agreement (as hereinafter defined).
AGREEMENT
The parties to this Agreement, intending to be legally bound, and in
consideration of the mutual promises and covenants set forth herein, in the
Recapitalization Agreement, the Manufacturing Services Agreement and the
Transition Services, agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions. For purposes of the Agreement, except as otherwise
expressly provided:
"Agreement" shall mean this Redemption Agreement, including the
documents referenced herein and the exhibits and schedules attached hereto
(including the Disclosure Schedule), as it may be amended from time to time.
A "Breach" of a representation, warranty, covenant, obligation or other
provision shall be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach (including any inadvertent or innocent breach) of, or
any failure (including any inadvertent failure) to comply with or perform,
such representation, warranty, covenant, obligation or other provision, or
(b) any claim by any Person or other circumstance that is inconsistent with
such representation, warranty, covenant, obligation or other provision; and
the term "Breach" shall be deemed to refer to any such inaccuracy, breach,
failure, claim or circumstance.
"Business" shall have the meaning specified in Section 3.6(c) of the
Agreement.
"Claim Notice" shall have the meaning specified in Section 10.1(c) of
the Agreement.
"Closing" shall have the meaning specified in Section 2.3(c) of the
Agreement.
"Closing Certificate" shall have the meaning specified in Section
2.3(b)(v) of the Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean International Manufacturing Services, Inc., a
Delaware corporation (or any successor thereto), together with the Holding
Companies and the International IMS Entities.
"Comparable Entities" shall mean Entities (other than the Company) that
are engaged in businesses similar to the business of the Company.
"Common Stock" shall mean the Class A Common Stock, $0.001 par value,
and Class B Common Stock, $0.001 par value, of IMS Delaware.
"Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"Contract" shall mean any written, oral, implied or other agreement,
contract, understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment,
covenant, assurance or undertaking of any nature.
"Damages" shall include any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, Settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee (excluding costs relating solely
to in-house attorneys), expert fee, accounting fee or advisory fee), charge,
cost (including any cost of investigation) (but excluding in-house costs of
investigation) or expense of any nature; provided, however, that the amount
of any Damages shall be net of (i) any amounts actually recovered by the
Company under insurance policies with respect to any loss (offset by any
increase in insurance premiums or other insurance costs as a result of any
claim with respect to any loss) and (ii) any Tax benefit actually realized by
the Company arising from the incurrence or payment of any such loss.
"Disclosure Schedule" shall mean the schedule (dated as of the date of
the Agreement) delivered to IMS Delaware on behalf of Maxtor.
"Employee Benefit Plan" shall mean (i) a plan described in Section 3(3)
of ERISA, and (ii) each salary, bonus, deferred compensation, incentive
compensation, fringe benefit, stock purchase, severance, termination pay
plan, program, agreement or arrangement.
"Encumbrance" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, equity, trust, equitable interest,
claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option,
right of first refusal, preemptive right, community property interest,
legend, defect, impediment, exception, reservation, limitation, impairment,
imperfection of title, condition or restriction of any nature (including any
restriction on the transfer of any asset, any restriction on the receipt of
any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
"Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any Entity that is (or at any time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with Maxtor or the Company
under Section 414 of the Code.
"Fully-Diluted Common Share Equivalents" shall mean all outstanding
shares of IMS Delaware's Common Stock and all shares of Common Stock issuable
upon conversion of outstanding Preferred Stock or upon exercise of
outstanding options or warrants.
"GAAP" shall mean generally accepted accounting principles, applied on a
basis consistent with the basis on which the Financial Statements were
prepared.
"Governmental Authorization" shall mean any:
(a) Permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement,
waiver, certification, designation, rating, registration, qualification or
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal Requirement;
or
(b) right under any Contract with any Governmental Body.
"Governmental Body" shall mean any:
(b) Nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any
nature;
(c) Federal, state, local, municipal, foreign or other government;
(d) Governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity and
any court or other tribunal);
(e) Multi-national organization or body; or
(f) Individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
"Hazardous Material" shall include:
(b) Any petroleum, waste oil, crude oil, asbestos, urea
formaldehyde or polychlorinated biphenyl;
(c) Any waste, gas or other substance or material that is
explosive or radioactive;
(d) Any "hazardous substance," "pollutant," "contaminant,"
"hazardous waste," "hazardous chemical" or "toxic chemical" as designated,
listed or defined (whether expressly or by reference) in any statute,
regulation or other Legal Requirement (including CERCLA and any other so-
called "superfund" or "superlien" law and the respective regulations
promulgated thereunder);
(e) Any compound, mixture, solution, product or other substance or
material that contains any substance or material referred to in clause "(a)",
"(b)" or "(c)" above.
"Holding Companies" shall mean IMS Borrower, a Delaware corporation to
be formed prior to the Closing, and IMS Holdco, a Delaware corporation to be
formed prior to the Closing (and any successors thereto or subsidiaries
thereof, respectively).
"Hong Kong Note" shall have the meaning specified in Section 2.2 of the
Agreement.
"IMS Affiliated Group" means any consolidated, combined or unitary Tax
group that includes one or more of IMS, the Holding Companies and the
International IMS Entities for any Tax period that (i) ends before the
Closing Date or (ii) includes any period through the Closing Date.
"IMS Contract" shall mean any Contract: (a) to which the Company is a
party; (b) by which the Company or any of its assets is or may become bound
or under which the Company has, or may become subject to, any obligation; or
(c) under which the Company has or may acquire any right or interest.
"IMS Delaware Note" shall have the meaning specified in Section 2.3 of
the Agreement.
"IMS Guarantee" shall have the meaning specified in Section 2.3 of the
Agreement.
"IMS Plan" shall mean any Employee Benefit Plan that is currently
maintained, sponsored or contributed to by Maxtor or the Company or any ERISA
Affiliate for the benefit of any current or former employee of the Company.
"Indemnitee" shall mean the Company and the Investors, and their
respective Representatives, successors and assigns.
"International IMS Entities" shall mean IMS International Manufacturing
Services Limited, an exempted Company incorporated in the Cayman Islands
("IMS Cayman"), IMS International Manufacturing Services (Thailand) Limited,
a Company organized under the laws of Thailand ("IMS Thailand"), and Maxtor
(Hong Kong) Limited ("IMS Hong Kong") (and any successors thereto or
subsidiaries thereof, respectively).
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign or other law, statute, legislation, constitution, principle of common
law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation issued,
enacted, adopted, passed, approved, promulgated, made, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
"Liability" shall mean any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet
prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable and includes the principal, notional or capitalized amount of
any liability or obligation, together with any unpaid interest, finance
charges, transactional costs, fees, expenses and any other amounts owing in
respect thereof.
"Manufacturing Services Agreement" shall have the meaning specified in
Section 2.4(b)(vi) of the Agreement.
"Material Adverse Change" means any material adverse change that has
occurred in the business, financial condition, assets, liabilities, results
of operations, financial performance, net income or prospects of the Company,
taken as a whole, including, without limitation any material adverse
legislation or rule making; provided, however, that any change directly
relating to the conversion of the commercial relationship between the Company
and Maxtor from a turnkey basis to a consignment basis shall not in and of
itself be deemed to be a Material Adverse Change.
"Material Adverse Effect" means any material adverse effect on the
business, financial condition, assets, liabilities, results of operations,
financial performance, net income or prospects of the Company, taken as a
whole.
"Material Contract" shall mean any
(b) Collective bargaining agreement;
(c) Mortgage, indenture, note or installment obligation or other
instrument or contract for or relating to any borrowing of an amount in
excess $100,000 by the Company;
(d) Guaranty of any obligation in excess of $100,000 by the
Company (excluding any endorsement made in the Ordinary Course of Business
for collection);
(e) License agreement involving the payment or receipt by the
Company of $100,000 or more during any 12-month period during the term
thereof;
(f) Lease of real or personal property under which the Company is
lessor involving annual rentals in excess of $100,000;
(g) Lease of real property under which the Company is lessee
involving annual rentals in excess of $100,000;
(h) Lease of personal property under which the Company is lessee
and which any such entity is obligated to make annual aggregate payments of
more than $100,000;
(i) Agreement for the purchase by the Company of equipment
involving outstanding commitments in excess of $100,000;
(j) Agreement purporting to limit the right of the Company to
compete in any line of business, with any person or other entity or in any
geographic area;
(k) Agreement for the purchase or sale of raw materials, products
or goods or the provision of services (i) involving payments in excess of
$100,000, (ii) at prices that vary from the prices therefor generally
prevailing in customary, arms-length transactions or (iii) that may not be
terminated by Company on not more than thirty (30) days' notice without
penalty;
(l) Contract with any Governmental Body or quasi-governmental
authority involving payments in excess $100,000;
(m) Bond, deposit, financial assurance requirement or insurance
coverage in excess of $100,000 individually required to be submitted to
customers of the Company, as the case may be, under any sale, lease or
service arrangement or to any Governmental Body under any Legal Requirement;
(n) Agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person
or entity;
(o) Agreement or commitment relating to the borrowing of money or
the guaranty or indemnity (direct or indirect) in respect of or the granting
of security for any obligation for the borrowing of money, by the Company in
excess of $100,000, including, without limitation, guarantees, accommodation
collateral, letters of credit, mortgages, deeds of trust, indentures, loan
agreements and credit agreements;
(p) Agreement or commitment relating to clean-up or remediation
involving Hazardous Materials;
(q) Agreement that creates an encumbrance or any restriction on
the ability of the Company to (i) pay dividends or make similar
distributions; (ii) make loans or advances to any person or entity, or (iii)
sell, lease or transfer any of their respective properties or assets, except
(in each case) for such restrictions or encumbrances existing under or by
reason of (A) applicable Legal Requirements, (B) customary non-assignment
provisions in leases and other contracts entered into in the ordinary course
of business, or (C) any instrument governing any outstanding debt of the
Company;
(r) Material indemnification obligations in favor of any person or
entity, and any escrow agreements related to any material indemnification or
obligation;
(s) Material confidentiality, secrecy, development or settlement
agreement pertaining to any Proprietary Asset;
(t) Other agreement, Contract or obligation of the Company calling
for or involving the payment, potential payment or accrued obligation by or
to the Company, as the case may be, from the date hereof through the earliest
date /such agreement, contract or obligation can be terminated unilaterally
without material penalty by the Company, as the case may be, of an amount in
excess of $100,000; or
(u) Any other Contract, the violation, breach, default or
termination of which could result in a Material Adverse Effect.
"Maxtor" shall mean Maxtor Corporation, a Delaware corporation, or any
successor thereof.
"Maxtor's Knowledge" shall mean, after reasonable investigation, the
current actual knowledge of any executive officer or director of each of
Maxtor, IMS Delaware, the Holding Companies or the International IMS
Entities, except for Melonie Brophy, Katherine Young, Patrick Ngo and Walter
Amaral.
"Maxtor Notes" shall have the meaning specified in Section 2.3 of the
Agreement.
"Maxtor Warrant" shall have the meaning specified in Section 2.2 of the
Agreement.
"Order" shall mean any:
(b) Order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award issued, made, entered, rendered or otherwise put into effect by
or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
(c) Contract with any Governmental Body entered into in connection
with any Proceeding.
"Ordinary Course of Business" shall mean any action taken by or on
behalf of the Company that:
(b) Is recurring in nature, is consistent with the past practices
of the Company and is taken in the ordinary course of the normal day-to-day
operations of the Company;
(c) Is taken in accordance with sound and prudent business
practices;
(d) Is not required to be authorized by the stockholder of the
Company, the board of directors of the Company or any committee of the board
of directors of the Company and does not require any other separate or
special authorization of any nature; and
(e) Is similar in nature and magnitude to actions customarily
taken, without any separate or special authorization, in the ordinary course
of the normal day-to-day operations of Comparable Entities.
"Person" shall mean any individual, Entity or Governmental Body.
"Pre-Closing Period" shall mean the period from the date of the
Agreement through the Closing Date.
"Preferred Stock" shall mean the convertible preferred stock of IMS
Delaware including the Series A Preferred Stock, $0.001 par value, and Series
B Preferred Stock and any subsequently created series.
"Proceeding" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or any arbitrator or arbitration panel.
"Proprietary Asset" shall mean any patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service mark (whether registered or unregistered),
service mark application, trade styles, trade dress, logos, other source of
business identifiers, copyright (whether registered or unregistered),
copyright application, maskwork, maskwork application, trade secret, know-
how, customer list, franchise, system, computer software, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset, and all
rights arising or derivative from, or associated with, any of the foregoing,
including without limitation license rights, renewals, extensions,
continuations, continuations-in-part, rights to sue for past infringement,
associated goodwill, formulae, algorithms, quality control procedures,
product and service specifications, and operating, production and quality
control manuals.
"Recapitalization Agreement" shall have the meaning set forth in Recital
C of the Agreement.
"Related Party" shall mean each of the following:
(b) Each individual (including Maxtor) who is, or who has at any
time been, an officer, director or stockholder of IMS Delaware or any
International IMS Entity;
(c) Each member of the family of each of the individuals referred
to in clause "(a)" above;
(d) Any Entity (other than IMS Delaware) in which any one of the
individuals referred to in clauses "(a)" and "(b)" above holds or held (or in
which more than one of such individuals collectively hold or held),
beneficially or otherwise, a controlling interest or a material voting,
proprietary or equity interest; and
(e) Any Entity (other than IMS Delaware) which possesses, directly
or indirectly, the power to direct or cause the direction of the management
and policies of IMS Delaware, whether through the ownership of voting
securities, by contract or otherwise.
"Representatives" shall mean officers, directors, employees, agents,
attorneys and advisors.
"Scheduled Closing Time" shall have the meaning specified in Section
2.3(a) of the Agreement.
"Stockholders Agreement" shall mean the Stockholders Agreement dated the
Closing Date among IMS Delaware, Maxtor and the other Investors pursuant to
the Recapitalization Agreement.
"Subsidiary Notes" shall have the meaning specified in Section 2.3 of
the Agreement.
"Tax" (and, with the correlative meaning, "Taxes" and "Taxable") shall
mean (i) any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any Governmental Body responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any
Taxable period and (ii) any liability for the payment of any amounts of the
type described in (i) or (ii) any liability for the payment of any amounts of
the type described in (i) or (ii) as a result of any express or implied
obligation to indemnify any other person.
"Tax Return" shall mean any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification,
form, election, certificate or other document or information that is, has
been or may in the future be filed with or submitted to, or required to be
filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with
any Legal Requirement relating to any Tax.
"Thailand Note" shall have the meaning specified in Section 2.2 of the
Agreement.
"Transactional Agreements" shall mean:
(b) The Agreement;
(c) The Recapitalization Agreement;
(d) The Stockholders' Agreement;
(e) The Maxtor Notes;
(f) The Subordinated Notes; and
(g) The Maxtor Warrant.
"Transactions" shall mean (a) the execution and delivery of the
respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including:
(i) The sale of the Shares by Maxtor to IMS Delaware in
accordance with the Agreement;
(ii) The sale by IMS Delaware to the Investors in the
Recapitalization Agreement of all securities called for thereby; and
(iii) The performance by IMS Delaware, Maxtor and the Investors
pursuant to the Recapitalization Agreement of their respective obligations
under the Transactional Agreements, and the exercise by IMS Delaware, Maxtor
and the Investors pursuant to the Recapitalization Agreement of their
respective rights under the Transactional Agreements.
"Transition Services Agreement" shall have the meaning specified in
Section 2.4(b)(vii) of the Agreement.
"Unaudited Financial Statements" shall mean: (i) the unaudited combined
balance sheets of IMS Delaware as of March 30, 1996 (the "Unaudited Balance
Sheet") and March 25, 1995, and the related combined statements of income,
stockholders' equity and cash flows for the fiscal years ended March 30,
1996, March 25, 1995 and March 26, 1994, and (ii) a pro forma combined
balance sheet as of March 30, 1996, giving effect to the conversion of the
commercial relationship between the Company and Maxtor from a turnkey basis
to consignment basis (the "Pro Forma Balance Sheet").
1.2 Interpretations. The words "herein," "hereof," and "hereunder,"
and other words of similar import refer to this Agreement as a whole and not
to any particular article, section or other subdivision of this Agreement.
SECTION 2
REDEMPTION AND RELATED TRANSACTIONS
2.1 Purchase of Shares. Maxtor shall cause to be sold, assigned,
transferred, conveyed and delivered to IMS Delaware at the Closing, good,
valid and marketable title to the Shares free of any Encumbrances on the
terms and subject to the conditions set forth in this Agreement.
2.2 Purchase Price. As consideration for the sale of the Shares to IMS
Delaware at the Closing, IMS Delaware shall (a) pay to Maxtor, by cashier's
check or by wire transfer of immediately available funds, $23,700,000, (b)
cause IMS Hong Kong to pay to Maxtor $1,300,000 in full satisfaction of a
promissory note of IMS Hong Kong to Maxtor (the "Hong Kong Note") (c) issue
to Maxtor a promissory note in the amount of $1,700,000 containing the terms
set forth in the Terms of Maxtor Notes (as hereinafter defined) attached
hereto as Exhibit B (the "IMS Delaware Note"), and (c) issue to Maxtor a
warrant to purchase 200,000 shares of IMS Delaware's Class A Common Stock
upon substantially the terms described in the Form of Warrant attached hereto
as Exhibit A (the "Maxtor Warrant").
2.3 Ownership of the Holding Companies and the International IMS
Entities. On or prior to the Closing, Maxtor shall have (a) caused IMS
Delaware to be the sole stockholder, either directly or indirectly, of each
of the Holding Companies, IMS Holdco to be the sole stockholder of IMS Hong
Kong and IMS Cayman, and IMS Cayman to be the sole stockholder of IMS
Thailand (other than directors' qualifying shares or the like, to the extent
required by local law) and the corporate structure to be as set forth on Part
2.3 of the Disclosure Schedule and (b) taken the Reorganization Actions set
forth on Part 3.3 of the Disclosure Schedule, including the issuance to
Maxtor by IMS Hong Kong and IMS Thailand of notes in the aggregate principal
amounts of $16,300,000 and $2,000,000, respectively (the "Subsidiary Notes"),
containing the terms set forth in the Terms of Maxtor Notes attached hereto
as Exhibit B (the IMS Delaware Note and the Subsidiary Notes are hereinafter
referred to collectively as the "Maxtor Notes"), and the issuance by IMS
Delaware of a guarantee with respect to the Maxtor Notes containing the terms
set forth in the term sheet attached hereto as Exhibit B (the "IMS
Guarantee").
2.4 Closing.
(a) The closing of the sale of the Shares to IMS Delaware (the
"Closing") shall take place at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California, 94304 at 10:00 a.m.
(Pacific Time) on May 31, 1996 (or at such other place or time as IMS
Delaware and Maxtor may jointly designate with the consent of the Investors).
For purposes of this Agreement, "Scheduled Closing Time" shall mean the time
and date as of which the Closing is required to take place pursuant to this
Section 2.4(a), and "Closing Date" shall mean the time and date as of which
the Closing actually takes place.
(b) At the Closing:
(i) Maxtor shall execute and deliver to IMS Delaware the
stock certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers);
(ii) IMS Delaware shall pay to Maxtor $23,700,000 by
cashier's check or by wire transfer of immediately available funds as
contemplated by Section 2.2(a);
(iii) IMS Delaware shall cause IMS Hong Kong to pay the
Hong Kong Note in full by cashier's check or by wire transfer of immediately
available funds as contemplated by Section 2.2(b).
(iv) IMS Delaware shall issue to Maxtor the IMS Delaware
Note;
(v) IMS Delaware shall issue to Maxtor the Maxtor Warrant
as contemplated by Section 2.2(b);
(vi) Maxtor shall execute and deliver to IMS Delaware a
certificate (the "Closing Certificate") certifying that (A) each of the
representations and warranties made by Maxtor in this Agreement was accurate
in all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date, (B) each of
the covenants and obligations that Maxtor is required to have complied with
or performed pursuant to this Agreement at or prior to the Closing has been
duly complied with and performed in all respects, and (C) except as expressly
set forth in the Closing Certificate, each of the conditions set forth in
Sections 7.3 and 7.4 has been satisfied in all respects;
(vii) IMS Delaware shall execute and deliver to Maxtor a
certificate (the "IMS Delaware Closing Certificate") certifying that (A) each
of the representations and warranties made by IMS Delaware in this Agreement
was accurate in all respects as of the date of this Agreement and is accurate
in all respects as of the Closing Date as if made on the Closing Date, (B)
each of the covenants and obligations that IMS Delaware is required to have
complied with or performed pursuant to this Agreement at or prior to Closing
has been duly complied with and performed in all respects; and (C) except as
expressly set forth in the IMS Delaware Closing Certificate, each of the
conditions in Section 8 has been satisfied in all respects;
(viii) Robert G. Behlman shall execute and deliver to
Maxtor a certificate in the form attached hereto as Exhibit C (the "IMS
Officer Certificate").
(ix) Maxtor, at its own expense and without any additional
consideration from the Company or the Investors, shall execute and deliver
all reasonable assignments and licenses and such other documents and
instruments as the Company may reasonably request for the purpose of
effecting the transfer or license from Maxtor to the Company of the assets
listed on Parts 3.6(c) and 3.9(c) of the Disclosure Schedule (it also being
understood that, to the extent following the Closing it is reasonably
determined that any other assets necessary to enable the Company to conduct
the Business have not been transferred or licensed to the Company, Maxtor
shall execute and deliver all reasonable assignments and licenses and such
other documents and instruments as the Company may reasonably request for the
purpose of effecting the transfer or license of such other assets from Maxtor
to the Company);
(x) Maxtor and IMS Delaware shall execute and deliver the
Manufacturing Services Agreement in substantially the form attached hereto as
Exhibit D (the "Manufacturing Services Agreement"); and
(xi) Maxtor and IMS Delaware shall execute and deliver the
Transition Services Agreement in substantially the form attached hereto as
Exhibit E (the "Transition Services Agreement").
SECTION 3
REPRESENTATIONS AND WARRANTIES OF MAXTOR
Maxtor represents and warrants, to and for the benefit of the Company
and the other Indemnities, except as set forth on the Disclosure Schedule,
which is numbered to correspond to the section numbers of this Agreement, as
follows:
3.1 Due Organization; Subsidiaries; Etc.
(a) IMS Delaware is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Except as set
forth in Part 3.1(a) of the Disclosure Schedule, each of the Holding
Companies will be prior to the Closing, and each of the International IMS
Entities is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation.
(b) Except as set forth in Part 3.3 of the Disclosure Schedule,
since January 1, 1996, neither IMS Delaware nor any of the Holding Companies
or the International IMS Entities has merged with, assumed any liabilities of
or acquired or succeeded to a substantial portion of the business of any
other Entity.
(c) Each of IMS Delaware and the International IMS Entities is,
and each of the Holding Companies will be on or prior to the time IMS Holdco
becomes the sole stockholder of IMS Hong Kong and IMS Cayman, duly qualified,
licensed or admitted to do business and is in good standing in those
jurisdictions specified in Part 3.1(c) of the Disclosure Schedule, which are
the only jurisdictions in which the ownership, use or leasing of each such
entity's assets and properties, or nature of its business, makes such
qualification, licensing or admission necessary, except for those
jurisdictions in which the adverse effects of all such failures by such
entity to be qualified, licensed or admitted or in good standing could not in
the aggregate reasonably be expected to have a Material Adverse Effect.
(d) As of the Closing Date, IMS Delaware will be the sole
stockholder, either directly or indirectly, of each of the Holding Companies
and the International IMS Entities (other than directors qualifying shares or
the like required by local law). As of the Closing Date the Holding
Companies will be formed as part of the Reorganization Actions set forth on
Part 3.3 of the Disclosure Schedule. Other than the International IMS
Entities themselves, neither IMS Delaware nor any of the International IMS
Entities owns, beneficially or otherwise, any shares or other securities of,
or has any direct or indirect interest of any nature in, any other Entity.
3.2 Certificate of Incorporation and Bylaws; Records.
(a) Except as set forth in Part 3.2(b) of the Disclosure Schedule,
the Company's records include accurate and complete copies of:
(i) The Certificate of Incorporation and Bylaws (or
equivalent charter documents) of IMS Delaware, each of the Holding Companies
and each of the International IMS Entities, including all amendments thereto;
(ii) The stock records of IMS Delaware, each of the Holding
Companies and each of the International IMS Entities, respectively; and
(iii) The minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of IMS Delaware, each of the
Holding Companies and each of the International IMS Entities, respectively,
the board of directors of IMS Delaware and each of the International IMS
Entities, respectively, and all committees of the board of directors of IMS
Delaware and each of the International IMS Entities, respectively.
(b) Except as set forth in Part 3.2(b) of the Disclosure Schedule,
the books of account, stock records, minute books and other corporate records
of IMS Delaware, each of the Holding Companies and each of the International
IMS Entities, respectively are accurate, up-to-date and complete. All of the
corporate records of IMS Delaware and each of the International IMS Entities,
respectively, are in the direct control of IMS Delaware.
3.3 Capitalization. Maxtor is, and will be as of the Closing Date, the
sole stockholder of IMS Delaware. Part 3.3 of the Disclosure Schedule sets
forth a complete description of the capitalization of IMS Delaware, each of
the Holding Companies and each International IMS Entity (i) as of March 30,
1996 (except with respect to the Holding Companies, which shall be formed
following the execution of this Agreement), and (ii) following the
Reorganization Actions set forth on Part 3.3 of the Disclosure Schedule.
Except as set forth in Part 3.3 of the Disclosure Schedule, other than as set
forth in the Transactional Agreements and as contemplated in Recital A of the
Recapitalization Agreement, there is no: (a) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to
acquire any shares of the capital stock or other securities of IMS Delaware,
any of the Holding Companies or any International IMS Entity; (b) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of IMS
Delaware, any of the Holding Companies or any International IMS Entity; or
(c) Contract under which IMS Delaware, any of the Holding Companies or any
International IMS Entity is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities.
3.4 Financial Statements. The Unaudited Financial Statements were, and
when delivered pursuant to Section 5.4 the Audited Financial Statements will
be, prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered (except that the Unaudited Financial Statements do not
have notes), present fairly the financial position of the Company as of the
respective dates thereof and the results of operations and cash flows of the
Company for the periods covered thereby, are correct and complete in all
material respects and are consistent with the books and records of the
Company.
3.5 Absence Of Changes. Except as set forth in Part 3.5 of the
Disclosure Schedule, since the date of the Unaudited Balance Sheet:
(a) There has not been any Material Adverse Change, and no event
has occurred that could reasonably be expected to have a Material Adverse
Effect.
(b) There has not been any material loss, damage or destruction
to, or any interruption in the use of, any of the tangible or intangible
assets of the Company (whether or not covered by insurance);
(c) Other than as set forth in Part 3.3 of the Disclosure
Schedule, the Company has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock or other securities, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) The Company has not purchased or otherwise acquired any asset
from any other Person having a value of greater than $100,000 individually or
$250,000 in the aggregate, except for supplies or inventory (or capital
equipment as provided under Section 3.4(f)) acquired by the Company in the
Ordinary Course of Business;
(e) The Company has not leased or licensed any asset from any
other Person having a value of greater than $100,000, except in the Ordinary
Course of Business;
(f) The Company has not made any capital expenditure having a
value of greater than $100,000 individually or $250,000 in the aggregate;
(g) The Company has not sold or otherwise transferred, leased or
licensed any asset to any other Person, except for sales of the Company's
products in the Ordinary Course of Business and sales of assets that are not
material;
(h) The Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable
or other indebtedness having a value of greater than $100,000 individually or
$250,000 in the aggregate;
(i) The Company has not made any loan or advance to any other
Person, except travel and other similar expense advances to employees made in
the Ordinary Course of Business;
(j) The Company has not (i) established or adopted any Employee
Benefit Plan, or (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fees,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers, employees or independent contractors, except wage and
salary increases made in connection with annual reviews in the Ordinary
Course of Business, none of which exceeded 10% of current salary;
(k) No Contract by which the Company or any of the assets owned or
used by the Company is or was bound, or under which the Company has or had
any rights or interest, has been amended or terminated (except for scheduled
terminations in accordance with the terms of such Contract) in a manner or
under circumstances that will have a Material Adverse Effect;
(l) The Company has not discharged any Encumbrance or discharged
or paid any indebtedness or other Liability having a value in excess of
$100,000 individually or $250,000 in the aggregate, except for accounts
payable that (i) are reflected as current liabilities in the "liabilities"
column of the Unaudited Balance Sheet or have been incurred by the Company
since the date of the Unaudited Balance Sheet in bona fide transactions
entered into in the Ordinary Course of Business, and (ii) have been
discharged or paid in the Ordinary Course of Business;
(m) The Company has not forgiven any debt or otherwise released or
waived any right or claim which has had or will have, in any case or in the
aggregate, a Material Adverse Effect;
(n) The Company has not changed any of its methods of accounting
or accounting practices in any material respect for financial, accounting or
Tax purposes;
(o) The Company has not incurred any Liability other than the
current Liabilities incurred, or obligations under Contracts entered into, in
the Ordinary Course of Business;
(p) The Company has not entered into any transaction or taken any
other action outside the Ordinary Course of Business which has had or could
have, in any case or in the aggregate, a Material Adverse Effect;
(q) The Company has not suffered any labor difficulty; and
(r) The Company has not agreed, committed or offered (in writing
or otherwise) to take any of the actions referred to in clauses "(c)" through
"(p)" above.
3.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all assets reflected
on the Unaudited Balance Sheet; (ii) all assets acquired by the Company since
the date of the Unaudited Balance Sheet; (iii) all assets referred to in Part
3.9 of the Disclosure Schedule identified as being owned by the Company; and
(iv) all other assets reflected in the books and records of the Company as
being owned by the Company. As of the Closing, all of said assets are owned
by the Company free and clear of any Encumbrances, except as set forth in
Part 3.6(a) of the Disclosure Schedule and except for Encumbrances incidental
to the conduct of the Company's business or the ownership of said assets (and
not incurred in connection with the borrowing of money or the acquisition of
said assets), which do not materially detract from the value of said assets
or impair the use thereof in the conduct of the Company's business or the
financing thereof.
(b) Part 3.6(b) of the Disclosure Schedule identifies all assets
that are being leased or licensed to the Company under agreements providing
for aggregate lease or license payments greater than $100,000.
(c) The assets owned by, and leased and licensed to, the Company
(including the assets reflected on the Pro Forma Balance Sheet) will
collectively constitute, as of the Closing Date, all of the properties,
rights, interests and other tangible and intangible assets reasonably
necessary to enable the Company to conduct its business in the manner in
which such business is currently being conducted (the "Business"). Maxtor
does not possess any assets which would be reasonably necessary to produce
the results set forth in the Financial Statements, except for the assets set
forth on Part 3.6(c) of the Disclosure Schedule.
(d) Since March 30, 1996, neither IMS Delaware nor any of the
International IMS Entities has changed its name or corporate structure.
Except as set forth in Parts 3.3 and 3.9 of the Disclosure Schedule, the
Company does not use any trade names.
3.7 Equipment, Etc. Each item of equipment, material, prototype, tool,
supply, vehicle, item of furniture, fixture, improvement and other tangible
asset owned by or leased to the Company (i) is in good condition and repair
(reasonable wear and tear excepted); (ii) complies in all material respects
with, and is being operated and otherwise used in material compliance with,
all applicable Legal Requirements; and (iii) is reasonably suitable for the
uses to which it is being put.
3.8 Real Property. The Company does not own any real property or any
leasehold interest in real property, except as identified in Part 3.8 of the
Disclosure Schedule. Part 3.8 of the Disclosure Schedule provides an
accurate and complete description of the premises owned or occupied by the
Company or covered by said leases and the facilities located on such
premises. The Company enjoys peaceful and undisturbed possession of such
premises. Except as set forth on Part 3.8 of the Disclosure Schedule, there
exists no event of default by the Company or Maxtor (nor any event which with
notice or lapse of time would constitute an event of default by the Company
or Maxtor) with respect to any agreement or instrument with regard to such
premises and facilities, and to the knowledge of Maxtor, there exists no
event of default by any of the other parties thereto (nor any event which
with notice or lapse of time would constitute an event of default by any of
the other parties thereto) with respect to any such agreement or instrument,
except where such default would not have a Material Adverse Effect on the
Business. Except as set forth on Part 3.8 of the Disclosure Schedule, all
such agreements and instruments are in full force and effect.
3.9 Proprietary Assets.
(a) Set forth on Part 3.9(a) of the Disclosure Schedule is a list
of all (i) patented or registered Proprietary Assets and pending applications
for the registration of Proprietary Assets, in each case owned by the Company
relating to the Business; (ii) trade or corporate names used by the Company
relating to the Business; (iii) material computer software and material third
party databases created or used by the Company related to the Business; (iv)
material unregistered trademarks owned or used by the Company relating to the
Company; and (v) material licenses and other rights granted by the Company to
any third party or material licenses granted by any third party to the
Company, in each case with respect to Proprietary Assets relating to the
Business.
(b) Except as set forth on Part 3.9(b) of the Disclosure Schedule,
(i) the Company owns all right, title and interest in or has a valid license
from a third party to use all Proprietary Assets reasonably necessary for the
operation of the Business, free and clear of any Encumbrances or adverse
claims; (ii) no claim by any third party contesting the validity, enforce
ability, ownership or use of any of the Proprietary Assets owned or used by
the Company relating to the Business has been made, is currently outstanding
or is threatened, and there are no grounds for the same; (iii) no loss or
expiration of any individual Proprietary Assets right or related group of
Proprietary Assets rights owned or used by the Company relating to the
Business is threatened, pending or foreseeable to Maxtor's Knowledge; (iv)
the Company has not received any notice of, and is not aware of any facts
which indicate a likelihood of, any infringement or misappropriation by, or
conflict with, any third party with respect to the Proprietary Asset owned or
used by the Company relating to the Business; (v) the Company has not
infringed, misappropriated or otherwise conflicted with any Proprietary Asset
of any third party, to Maxtor's Knowledge, nor received any claims of such
infringement, misappropriation or conflict from a third party, and, to
Maxtor's Knowledge, there is no infringement, misappropriation or conflict
which will occur as a result of the continued operation of the Business; and
(vi) the Company has taken all action reasonably necessary to maintain and
protect the Proprietary Assets relating to the Business owned or used by it
and will continue to reasonably maintain and protect such Proprietary Assets
prior to the Closing so as not to affect adversely the validity or
enforceability of such Proprietary Assets.
(c) Without limiting the foregoing, and except for Maxtor
Proprietary Assets which are licensed to and used by the Company to provide
services to Maxtor, none of the Proprietary Assets necessary to enable the
Company to conduct the Business is licensed to or from Maxtor, nor does
Maxtor have any ownership interest in or claim thereto, except as set forth
on Part 3.9(c) of the Disclosure Schedule, all of which interest will be
transferred to the Company.
(d) Except as set forth in Part 3.9(d) of the Disclosure Schedule,
each current and former employee of the Company has executed a non-disclosure
and invention assignment agreement in the Company's current standard form
thereof or in substantially similar form. Copies of all such agreements are
in the possession of the Company.
3.10 Contracts.
(a) Part 3.10(a) of the Disclosure Schedule identifies each IMS
Contract that is a Material Contract and to Maxtor's Knowledge provides an
accurate and complete description of all oral IMS Contracts that are Material
Contracts. The Company has in its actual possession and direct control
accurate and complete copies of all IMS Contracts that are Material
Contracts, including all amendments thereto. Each IMS Contract is valid and
in full force and effect.
(b) Except as set forth in Part 3.10(b) of the Disclosure
Schedule:
(i) No Person has violated or breached, or declared or
committed any default under, any IMS Contract, except for any violation,
breach or default which has not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect;
(ii) No event has occurred, and no circumstance or
condition exists, that could reasonably be expected to (with or without
notice or lapse of time) (A) result in a violation or breach of any of the
provisions of any IMS Contract, except for any violation or breach which
could not reasonably be expected to result in a Material Adverse Effect, (B)
give any Person the right to declare a default or exercise any remedy under
any IMS Contract, except for any default or remedy which could not reasonably
be expected to result in a Material Adverse Effect, (C) give any Person the
right to accelerate the maturity or performance of any IMS Contract, except
for any such acceleration in maturity or performance which could not
reasonably be expected to result in a Material Adverse Effect, or (D) give
any Person the right to cancel, terminate or modify any IMS Contract, except
for any such cancellation, termination or modification which could not
reasonably be expected to result in a Material Adverse Effect;
(iii) The Company has not received any notice or other
communication (in writing or otherwise) regarding any actual, alleged,
possible or potential violation or breach of, or default under, any IMS
Contract, except for any violation, breach or default which has not resulted
in, and could not reasonably be expected to result in, a Material Adverse
Effect; and
(iv) The Company has not knowingly waived any right under
any IMS Contract, except for any waiver which has not resulted in, and could
not reasonably be expected to result in, a Material Adverse Effect.
(c) Except as set forth in Part 3.10(a) of the Disclosure
Schedule, the Company has not guaranteed or otherwise agreed to cause, insure
or become liable for, and the Company has not pledged any of its assets to
secure, the performance or payment of any obligation or other Liability of
any other Person.
(d) The Contracts identified in Part 3.10(a) of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Company to conduct the Business prior to and following the Closing.
3.11 Liabilities. Except as set forth in Part 3.11 of the Disclosure
Schedule, the Company has no Liabilities, except for:
(a) Liabilities identified in the Unaudited Balance Sheet as and
to the extent reflected or reserved therein;
(b) Liabilities incurred by the Company in bona fide transactions
entered into in the Ordinary Course of Business since the date of the
Unaudited Balance Sheet, and not otherwise in contravention of this
Agreement;
(c) Obligations under the Contracts listed in Part 3.10(a) of the
Disclosure Schedule, to the extent that the existence of such obligations is
ascertainable by reference to such Contracts; and
(d) Obligations which individually and in the aggregate arose in
the Ordinary Course of Business, are not material to the Company and have not
resulted in, and could not reasonably be expected to result in, a Material
Adverse Effect.
3.12 Compliance With Legal Requirements. Except as set forth in Part
3.12 of the Disclosure Schedule:
(a) The Company is in compliance in all material respects with
each Legal Requirement that is applicable to it or reasonably necessary to
enable it to conduct the Business or to own or use any of its assets and to
occupy its facilities;
(b) Since March 30, 1996, the Company has at all times been in
compliance with each Legal Requirement, the default of which could have a
Material Adverse Effect, that is or was applicable to it or to the conduct of
its business or the ownership or use of any of its assets;
(c) No event has occurred, and no condition or circumstance
exists, that could (with or without notice or lapse of time) constitute or
result directly or indirectly in a violation by the Company of, or a failure
on the part of the Company to comply with, any Legal Requirement, the default
of which could reasonably be expected to have a Material Adverse Effect or
interfere with the consummation of the transactions contemplated hereby; and
(d) The Company has not received, at any time since March 30,
1996, any notice or other communication (in writing or otherwise) from any
Governmental Body or any other Person regarding (i) any actual, alleged,
possible or potential violation of, or failure to comply with, any Legal
Requirement, the violation or default of which could have a Material Adverse
Effect, or (ii) any actual, alleged, possible or potential obligation on the
part of the Company to undertake, or to bear all or any portion of the cost
of, any cleanup or any remedial, corrective or response action of any nature,
the violation or default of which could have a Material Adverse Effect.
3.13 Governmental Authorizations.
(a) Part 3.13(a) of the Disclosure Schedule identifies each
Governmental Authorization that is held by the Company. Each Governmental
Authorization identified in Part 3.13 of the Disclosure Schedule is valid and
in full force and effect.
(b) Except as set forth in Part 3.13(b) of the Disclosure
Schedule:
(i) The Company is and at all times since March 30, 1996,
has been in compliance with all of the terms and requirements of each
Governmental Authorization identified in Part 3.13(b) of the Disclosure
Schedule; and
(ii) No event has occurred, and to Maxtor's Knowledge no
condition or circumstance exists, that could (with or without notice or lapse
of time) (A) constitute or result directly or indirectly in a violation of or
a failure to comply with any term or requirement of any Governmental
Authorization identified in Part 3.13(b) of the Disclosure Schedule, or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization
identified in Part 3.13(b) of the Disclosure Schedule.
(c) The Governmental Authorizations held by the Company constitute
all of the Governmental Authorizations necessary (i) to enable the Company to
conduct the Business, (ii) to permit the Company to own and use its assets in
the manner in which they are currently owned and used, and (iii) to enable
and permit the Company, following the Closing, to do the same.
3.14 Tax Matters.
(a) All Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports)
required to be filed with any taxing authority with respect to any Taxable
period ending on or before the Closing, by or on behalf of the Company, and
each IMS Affiliated Group (collectively, the "Company Returns"), have been or
will be filed when due (including any extensions of such due date). All such
Company Returns were or will be correct and complete when filed. All Taxes
owed by the Company that are due have been paid. The Unaudited Balance Sheet
(i) fully accrues all actual and contingent liabilities for Taxes with
respect to all periods through the date thereof, and the Company will not
incur any Tax liability in excess of the amount reflected on the Unaudited
Balance Sheet with respect to such periods, and (ii) properly accrues in
accordance with GAAP all liabilities for Taxes payable after March 30, 1996,
with respect to all transactions and events occurring on or prior to such
date. Any and all information set forth in the notes to the Company's
consolidated financial statements relating to Tax matters is true, complete
and accurate in all respects.
(b) No Tax liability since March 30, 1996, has been incurred by
the Company or any IMS Affiliated Group other than in the Ordinary Course of
Business and adequate provision has been made for all Taxes since that date
in accordance with GAAP on at least a quarterly basis. The Company has
withheld and paid to the applicable financial institution or Governmental
Body, as the case may be, all amounts required to be withheld. All Company
Returns filed with respect to Taxable years of the Company through the
Taxable year ended March 28, 1992, have been examined and closed or are Tax
Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired.
Neither the Company nor any IMS Affiliated Group has granted any extension or
waiver of the limitation period applicable to any Taxes.
(c) There is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened against or with respect to the
Company or any IMS Affiliated Group in respect of any Tax or assessment. No
notice of deficiency or similar document of any Governmental Body has been
received by the Company or any IMS Affiliated Group, and there are no
liabilities for Taxes (including liabilities for interest, additions to tax
and penalties thereon and related expenses) with respect to the issues that
have been raised (and are currently pending) by any Governmental Body that
could, if determined adversely to the Company, materially and adversely
affect the liability of the Company or any IMS Affiliated Group for Taxes.
Neither the Company, nor any other person on behalf of the Company, has
entered into nor will it enter into any agreement or consent pursuant to
Section 341(f) of the Code. There are no liens for Taxes upon the assets of
the Company, except liens for current Taxes not yet due. Except as may be
required as a result of the transactions contemplated hereby, the Company has
not been and will not be required to include any adjustment in Taxable income
for any Tax period (or portion thereof) pursuant to Section 481 or 263A of
the Code or any comparable provision under state or foreign Tax laws as a
result of transactions, events or accounting methods employed prior to the
Closing.
(d) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or independent contractor or former employee or independent
contractor of the Company that, individually or collectively, could give rise
to the payment of any amount that would not be deductible pursuant to Section
280G, 162 or 404 of the Code. Other than pursuant to this Agreement and as
set forth in Part 3.14 of the Disclosure Schedule, the Company is not a party
to or bound by (or will prior to the Closing become a party to or bound by)
any tax indemnity, tax sharing or tax allocation agreement (whether written,
unwritten or arising under operation of federal law as a result of being a
member of a group filing consolidated tax returns, under operation of certain
state laws as a result of being a member of a unitary group, or under
comparable laws of other states or foreign jurisdictions) other than by
virtue of any obligation arising by operation of law as a result of being a
member of an IMS Affiliated Group of which Maxtor is the common parent. None
of the assets of the Company (i) directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code or (ii) is
"tax exempt use property" within the meaning of Section 168(h) of the Code.
The Company has not participated in (or will prior to the Closing participate
in) an international boycott within the meaning of Section 999 of the Code.
The Company has heretofore provided or made available to the Investors true
and correct copies of all Tax Returns, and, as reasonably requested by the
Investors prior to or following the date hereof, information statements,
reports, work papers, Tax opinions and memoranda and other Tax data and
documents.
(e) Part 3.14(e) of the Disclosure Schedule lists (i) any Tax
exemption, Tax holiday or other Tax-sparing agreement that the Company has in
any jurisdiction, including the nature, amount and lengths or such Tax
exemption, Tax holiday or other Tax-sparing arrangement and (ii) any
expatriate tax programs or policies affecting the Company. The Company is in
full compliance with all terms and conditions of any Tax exemption, Tax
holiday or other Tax-sparing agreement or order of a foreign government and
the consummation of the transactions contemplated hereby shall not have any
adverse effect on the continued validity and effectiveness of any such Tax
exemption, Tax holiday or other Tax sharing agreement or order.
3.15 Employee And Labor Matters. Except as set forth in Part 3.15 of
the Disclosure Schedule:
(a) The Company is not a party to or bound by any employment
agreement or any union contract, collective bargaining agreement or similar
Contract.
(b) The employment of the employees of the Company is terminable
by the Company at will. The Company has in its actual possession and direct
control accurate and complete copies of all employee manuals and handbooks,
disclosure materials, policy statements and other materials relating to the
employment of the current and former employees of the Company.
(c) The Company is not engaged in any unfair labor practice of any
nature. Since January 1, 1994, there has never been any slowdown, work
stoppage, labor dispute or union organizing activity, or any similar activity
or dispute, affecting the Company or any of its employees, and no Person has
threatened to commence any such slowdown, work stoppage, labor dispute or
union organizing activity or any similar activity or dispute.
(d) The Company has at all times conducted its business in
compliance in all respects with the local labor laws of all jurisdictions in
which the Company has conducted its business and the United States Fair Labor
Standards Act, to the extent applicable, except for any noncompliance which
could not be reasonably expected to have a Material Adverse Effect.
(e) The Company is not a party to or bound by any employment
agreement which obligates the Company to pay separation, severance,
termination or similar benefits as a result of or arising out of any of the
Transactions.
3.16 Benefit Plans; ERISA.
(a) Part 3.16(a) of the Disclosure Schedule identifies each IMS
Plan. The Company has not incurred any Liability with respect to any IMS
Plan, except as set forth in Part 3.16(a) of the Disclosure Schedule.
(b) No IMS Plan:
(i) Provides or provided any benefit guaranteed by the
Pension Benefit Guaranty Corporation;
(ii) Is or was a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA; or
(iii) Is or was subject to the minimum funding standards of
Section 412 of the Code or Section 302 of ERISA.
(iv) Obligates the Company to pay separation, severance,
termination or similar benefits as a result of or arising out of any of the
Transactions.
(c) The Company has in its actual possession and direct control,
with respect to each IMS Plan:
(i) An accurate and complete copy of such IMS Plan and all
amendments thereto (including any amendment that is scheduled to take effect
in the future);
(ii) An accurate and complete copy of each Contract
(including any trust agreement, funding agreement, service provider
agreement, insurance agreement, investment management agreement or
recordkeeping agreement) relating to such IMS Plan; an accurate and complete
copy of any description, summary, notification, report or other document that
has been furnished to any employee of the Company with respect to such IMS
Plan;
(iii) An accurate and complete copy of any form, report,
registration statement or other document that has been filed with or
submitted to any Governmental Body with respect to such IMS Plan; and
(iv) An accurate and complete copy of any determination
letter, notice or other document that has been issued by, or that has been
received by the Company from, any Governmental Body with respect to such IMS
Plan.
(d) Each IMS Plan is being and at all times has been operated and
administered in compliance with the provisions thereof. Each contribution or
other payment that is required to have been accrued or made under or with
respect to any IMS Plan has been duly accrued and made on a timely basis.
(e) Each IMS Plan at all times has complied and been operated and
administered in compliance with all applicable reporting, disclosure and
other requirements of ERISA and the Code and all other applicable Legal
Requirements. The Company has not incurred any Liability to the Internal
Revenue Service or any other Governmental Body with respect to any IMS Plan;
and no event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) give rise directly or
indirectly to any such Liability. Neither the Company, nor any Person that
is or was an administrator or fiduciary of any IMS Plan (or that acts or has
acted as an agent of the Company or any such administrator or fiduciary), has
engaged in any transaction or has otherwise acted or failed to act in a
manner that has subjected or may subject the Company to any Liability for
breach of any fiduciary duty or any other duty. No IMS Plan, and no Person
that is or was an administrator or fiduciary of any IMS Plan (or that acts or
has acted as an agent of any such administrator or fiduciary) has in any
respect:
(i) Engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code;
(ii) Failed to perform any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA; or
(iii) Taken any action that (A) may subject such IMS Plan
or such Person to any Tax, penalty or Liability relating to any "prohibited
transaction," or (B) may directly or indirectly give rise to or serve as a
basis for the assertion (by any employee or by any other Person) of any claim
under, on behalf of or with respect to such IMS Plan.
(f) Except as set forth in Part 3.16(f) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or other
related Transactional Agreements by Maxtor or the Company nor the
consummation of the Transactions contemplated hereby or the related
Transactions will result in the acceleration or creation of any rights of any
person to benefits under any IMS Plan (including, without limitation, the
acceleration of the vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any IMS Plan or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
3.17 Environment, Health and Safety.
(a) For the purpose of this Section the following terms are
defined as set forth below:
"Contamination" is the presence of any Hazardous Material in
the soil, groundwater, surface water, ambient air, or building materials of
any real property in a concentration exceeding a level which would require
any investigation, remediation, removal, or monitoring pursuant to Applicable
Environmental Health and Safety Requirements, or which would otherwise exceed
the concentrations allowed by Applicable Environmental Health and Safety
Requirements.
"Applicable Environmental Health and Safety Requirement" are
all currently applicable Legal Requirements (including common laws and
equitable principles) regulating, prohibiting or relating to any Hazardous
Material, any Hazardous Material Activity, public health, worker health or
safety, pollution, protection of the environment, and any currently
applicable order, injunction, settlement agreement, consent decree, or
guideline issued by any court of competent jurisdiction or any Governmental
Body pursuant to or with respect to any of the foregoing.
"Hazardous Materials" are any materials or substances
prohibited or regulated by any Applicable Environmental Health and Safety
Requirement or designated by any Governmental Body to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment,
(including without limitation solvents, petroleum, crude oil fractions,
pesticides, asbestos containing materials, radon gas, radioactive materials,
blood, biological substances used in or produced from the diagnosis,
treatment or immunization of human beings or animals or from research or
testing pertaining thereto, and medical "sharps" waste). For the purposes of
this agreement, Hazardous Materials do not include janitorial or office
materials in customary quantities used solely for office and janitorial
purposes, provided no permit or approval is required by any Governmental Body
for such use.
"Hazardous Materials Activity" is the transportation,
transfer, recycling, storage, use, handling, treatment, manufacture,
investigation, removal, remediation, release, exposure of others to, sale, or
distribution of any Hazardous Material or any product or material containing
a Hazardous Material.
(b) Compliance With Applicable Environmental Health and Safety
Requirements and Agreements. Except as set forth on Part 3.17 of the
Disclosure Schedule, to Maxtor's Knowledge, all Hazardous Materials
Activities of the Company have been conducted in compliance with Applicable
Environmental Health and Safety Requirements, except any non-compliance with
which will not have a Material Adverse Effect on the Company. Except as set
forth on Part 3.17 of the Disclosure Schedule, the current Hazardous
Materials Activities of the Company comply in all material respects with
Applicable Environmental Health and Safety Requirements and with any Contract
currently binding upon Company with respect to the Hazardous Materials
Activities currently conducted by the Company.
(c) Contamination. Except as disclosed on Part 3.17 of the
Disclosure Schedule, the Company is not discharging, releasing, or disposing
of, Hazardous Materials to the soil, groundwater, surface water or building
materials of any facility currently occupied by the Company nor any manner
which violates any Applicable Environmental Health and Safety Requirement or
contract binding upon the Company's Hazardous Materials Activities. Except
as disclosed on Part 3.17 of the Disclosure Schedule, to Maxtor's Knowledge,
the Company has not discharged, released, disposed of or emitted any
Hazardous Materials to the soil, groundwater, surface water or building
materials of any facility in an amount or in a manner that would, if known by
a Governmental Body having jurisdiction over such matters, result in any fine
or monetary obligation or require investigation, containment, remediation,
monitoring, or removal under Applicable Environmental Health and Safety
Requirements that would in the aggregate have a Material Adverse Effect.
Except as disclosed on Part 3.17 of the Disclosure Schedule, to Maxtor's
knowledge as of the Closing, no Contamination which would be the legal
responsibility of the Company in whole or in part (a) is present at any real
property which is now operated, or which has anytime been owned, by the
Company; (b) was present at any real property operated by the Company at the
time the Company's legal and possessory rights in the property ended, or (c)
is present at any other real property to which Hazardous Materials produced,
generated or transported by the Company have been delivered that would in the
aggregate have a Material Adverse Effect.
(d) Permits. Except as set forth on Part 3.17 of the Disclosure
Schedule, all approvals, permits, licenses, environmental clearances and
consents required for the conduct of Hazardous Materials Activities of the
Company as presently conducted ("Environmental Permits") are in full force
and effect, and the Company is in compliance in material respects with all
covenants and conditions of said Permits. Except as set forth on Part 3.17
of the Disclosure Schedule, the occurrence of the Transaction, in and of
themselves, will not cause any such Environmental Permit to be revoked,
modified, or rendered non-renewable upon payment of typical permit fees and
no filing is required with any governmental authority issuing an
Environmental Permit in connection with the occurrence of the Transactions.
(e) Environmental Expenditures. Except as set forth on Part 3.17
of the Disclosure Schedule, as of the Closing, except for expenditures which
have been reserved against in the Company's Unaudited Financial Statements
and Audited Financial Statements or which in the aggregate do not exceed
$100,000, neither the Company nor Maxtor has received any notice that (and
neither is otherwise aware that) any Applicable Environmental Health and
Safety Requirement or any Contract currently binding upon the Company with
respect to its Hazardous Materials Activities currently requires (a) the
making of any capital improvement or repair, (b) the making of any
modification, cessation or removal of any manufacturing, storage, or assembly
process or equipment; or (c) the investigation, monitoring, removal,
remediation or monitoring of any Contamination.
3.18 Insurance. The Company has in its actual possession and direct
control accurate and complete copies of all of the insurance policies
(including all renewals thereof and endorsements thereto) maintained by or on
behalf of the Company. Each of such policies is valid, enforceable and in
full force and effect, and such insurance policies are in coverage amounts,
scope and terms of a nature as is customary for Comparable Entities and
reasonably sufficient to insure the Company against the risks associated with
the Business. All of the information contained in the applications submitted
in connection with said policies was (at the times said applications were
submitted) accurate and complete in all material respects, and all premiums
and other amounts owing with respect to said policies have been paid in full
on a timely basis.
3.19 Related Party Transactions. Except as set forth in Part 3.3 or
Part 3.19 of the Disclosure Schedule or as contemplated by the Transaction
Agreements:
(a) No Related Party has any ownership interest of any nature in
any of the assets of the Company;
(b) No Related Party is indebted to the Company;
(c) The Company is not indebted to any Related Party; and
(d) No Related Party currently has any direct or indirect
financial interest in, any Contract, transaction or business dealing of any
nature involving the Company (other than employee non-disclosure and
invention assignment agreements entered into in the Ordinary Course of
Business).
3.20 Proceedings; Orders.
(a) Except as set forth in Part 3.20 of the Disclosure Schedule,
there is no pending Proceeding, nor, to Maxtor's Knowledge, any threat
thereof by any Person:
(i) That involves the Company, any of its assets or the
Shares or that otherwise relates to or might affect the Business or any of
the Company's assets or the Shares or the Company's interest in the Shares
following the Closing (whether or not the Company is named as a party
thereto); or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of
the Transactions.
Except as set forth in Part 3.20 of the Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists,
that could directly or indirectly to give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) The Company has in its actual possession and direct control
accurate and complete copies of all pleadings, correspondence and other
written materials (to which Maxtor or the Company has access) that relate to
the Proceedings required to be identified in Part 3.20 of the Disclosure
Schedule and all other Proceedings completed since January 1, 1994.
(c) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject. Neither Maxtor nor any other
Related Party is subject to any Order could reasonably be expected to have a
Material Adverse Effect.
(d) To Maxtor's Knowledge, no employee of the Company is subject
to any Order that may prohibit such officer or employee from engaging in or
continuing any conduct, activity or practice involving his or her employment
by the Company.
(e) To Maxtor's Knowledge, there is no proposed Order that, if
issued or otherwise put into effect, (i) could reasonably be expected to have
a Material Adverse Effect or materially adversely affect the ability of
Maxtor or the Company to comply with or perform any covenant or obligation
under any of the Transactional Agreements, or (ii) may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
3.21 Authority; Binding Nature of Agreements. Each of Maxtor, IMS
Delaware, the Holding Companies and the International IMS Entities has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under each of the Transactional Agreements to which
it is or may become a party. The execution, delivery and performance by each
of Maxtor, IMS Delaware, the Holding Companies and the International IMS
Entities of the Transactional Agreements to which it is or may become a party
have been, or prior to Closing will be, duly authorized by all necessary
action on the part of Maxtor, IMS Delaware, the Holding Companies or the
International IMS Entities, as the case may be, and their respective
stockholders, boards of directors and officers. This Agreement constitutes
the legal, valid and binding obligation of each of Maxtor and IMS Delaware,
enforceable against each of them in accordance with its terms. Upon the
execution and delivery of each of the other Transactional Agreements at the
Closing, each of such other Transactional Agreements to which Maxtor, IMS
Delaware, the Holding Companies or any of the International IMS Entities is a
party will constitute the legal, valid and binding obligation of each of
Maxtor, IMS Delaware, the Holding Companies and the International IMS
Entities, as the case may be, and will be enforceable against each of them in
accordance with its terms.
3.22 Non-Contravention; Consents. Except as set forth in Part 3.22 of
the Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions (excluding any consummation or performance to occur after the
Closing), will directly or indirectly (with or without notice or lapse of
time):
(a) Contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Maxtor or the Company, or any of the assets
of the Company, is subject;
(b) Contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or any employee of the Company;
(c) Contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any IMS Contract, except
for any contravention, conflict, violation, breach or default which could not
reasonably be expected to result in a Material Adverse Effect;
(d) Give any Person the right to (i) declare a default or exercise
any remedy under any IMS Contract, except where any such default or exercise
of a remedy could not reasonably be expected to result in a Material Adverse
Effect, (ii) accelerate the maturity or performance of any IMS Contract,
except where such acceleration could not reasonably be expected to result in
a Material Adverse Effect, or (iii) cancel, terminate or modify any IMS
Contract, except where any such cancellation, termination or modification
could not reasonably be expected to result in a Material Adverse Effect;
(e) Contravene, conflict with or result in a violation or breach
of or a default under any provision of, or give any Person the right to
declare a default under, any Contract to which Maxtor is a party or by which
Maxtor is bound; or
(f) Result in the imposition or creation of any Encumbrance upon
or with respect to any of the Shares or the assets of the Company.
Except as set forth in Part 3.22 of the Disclosure Schedule, and assuming the
representations in Section 3 of the Recapitalization Agreement are accurate,
neither Maxtor nor the Company was, is or will be required to make any filing
with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.
3.23 Notes and Accounts Receivable. All notes and accounts receivable
of the Company comprising part of the assets of the Company are reflected
properly on its books and records in accordance with GAAP consistently
applied, are current (according to the historical accounting practices of IMS
Delaware and each of the International IMS Entities) and are valid
receivables subject to no Encumbrances, setoffs or counterclaims, except for
an allowance for doubtful accounts set forth on the face of the Unaudited
Balance Sheet, as reasonably adjusted for the passage of time through the
Closing Date.
3.24 Inventory. Except as set forth on Part 3.24 of the Disclosure
Schedule, the inventory of the Company consists of raw materials and
supplies, manufactured and purchased parts, goods in process and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged
or defective, subject only to the reserve for inventory write down set forth
on the face of the Pro Forma Balance Sheet (rather than in any notes
thereto), as reasonably adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company.
3.25 Product Warranty. Each product manufactured, sold, leased or
delivered by the Company has been manufactured, sold, leased or delivered in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company does not have any liability (and to
Maxtor's Knowledge there is no basis for any present or future action, suit,
Proceeding, claim or demand against the Company giving rise to any liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims as set forth on the
face of the Unaudited Balance Sheet (rather than in any notes thereto) as
reasonably adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company. Except as set
forth on Part 3.25 of the Disclosure Schedule, no product manufactured, sold,
leased or delivered by the Company is subject to any guarantee, warranty or
other indemnity beyond the Company's applicable standard terms and conditions
of sale or lease.
3.26 Product Liability. To Maxtor's Knowledge, the Company does not
have any liability (and there is no basis for any present or future action,
suit, Proceeding, claim or demand against the Company giving rise to any
liability) arising out of any injury to individuals or property as a result
of the ownership, possession or use of any product manufactured, sold, leased
or delivered by the Company.
3.27 Brokers. Neither Maxtor nor any of its officers or directors has
agreed to or become obligated to pay, or has taken any action that might
result in any Person claiming to be entitled to receive, any brokerage
commission, finder's fee or similar commission or fee in connection with any
of the Transactions.
3.28 Manufacturing Services Agreement. To Maxtor's Knowledge, Maxtor
has no current reason to believe that products to be manufactured by the
Company for Maxtor pursuant to the Manufacturing Services Agreement will not
be competitive in terms of price or quality, provided that Maxtor's future
assertion of its right not to purchase products under the Manufacturing
Services Agreement if the Company is not competitive in terms of price and
quality shall not be deemed to be a breach of this representation and shall
not be limited in any manner by this representation.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF IMS DELAWARE
IMS Delaware represents and warrants, to and for the benefit of Maxtor,
as follows:
4.1 Brokers. Neither IMS Delaware nor its officers or directors has
agreed or become obligated to pay, or has taken any action that might result
in any Person claiming to be entitled to receive, any brokerage commission,
finders' fee or similar commission or fee from Maxtor in connection with any
of the Transactions.
SECTION 5
CLOSING COVENANTS OF MAXTOR
5.1 Access And Investigation. At all times from and after the date
hereof and until the Closing, Maxtor shall provide the Company, its
Representatives and the Investors: (i) full access during normal business
hours to all facilities and existing books, records, Tax Returns, work papers
and other documents and other information relating to the Company and the
Business; and (ii) all such additional financial, operating and other data
and information with respect to the business and affairs of the Company and
the Business as they may reasonably request. Such investigation shall be
conducted in a manner which does not unreasonably interfere with the Company
or the Business.
5.2 Filings And Consents. Maxtor shall ensure that all filings,
notices and Consents required to be made, given and obtained by Maxtor in
order to consummate the Transactions (including the filings, notices and
Consents referred to in Part 3.22 of the Disclosure Schedule and including,
if applicable, any filings by Maxtor or the Company required under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated
thereunder) are made, given and obtained on a timely basis.
5.3 Notification; Updates To Disclosure Schedule
(a) During the Pre-Closing Period, Maxtor shall promptly notify
the Company and the Investors in writing of:
(i) The discovery by Maxtor of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material Breach of any
representation or warranty made by Maxtor in this Agreement;
(ii) Any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would
cause or constitute a Breach of any representation or warranty made by Maxtor
in this Agreement if (A) such representation or warranty had been made as of
the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(iii) Any Breach of any covenant or obligation of Maxtor;
and
(iv) Any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Section 7
or Section 8 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Maxtor shall promptly deliver to IMS Delaware and
the Investors an update to the Disclosure Schedule specifying such change,
provided, however, that any update to the Disclosure Schedule so delivered to
the Company and the Investors shall not be deemed to amend the
representations and warranties of Maxtor unless each of the Company and the
Investors accept in writing any such updates.
5.4 Audited March 30 Financial Statements.
(a) As soon as practicable after the date hereof, but in any event
prior to the Closing Date, Maxtor shall cause IMS Delaware to prepare and
deliver to the Investors audited consolidated balance sheets of IMS Delaware
and the International IMS Entities (and/or any predecessors, if appropriate)
as of March 30, 1996 (the "Combined Balance Sheet") and 1995 and related
statements of operations and cashflows for the three fiscal year periods
ended March 30, 1996 (collectively, the "Audited Financial Statements"). The
Combined Balance Sheet shall contain only those assets and those liabilities
in nature and amount appropriate for the normal operation of the Business in
the ordinary course. The Audited Financial Statements (i) shall be prepared
in accordance with GAAP, consistent with the prior audited financial
statements included in the Financial Statements, (ii) shall satisfy the U.S.
Securities and Exchange Commission's requirements under Regulation S-X, and
(iii) shall not differ materially from the Unaudited Financial Statements.
(b) Notwithstanding the foregoing, if the Closing shall not have
occurred prior to June 29, 1996, then Maxtor shall cause IMS Delaware to
deliver, in addition to the Audited Financial Statements referred to in
Section 5.4(a), an unaudited consolidated balance sheet of IMS Delaware, the
Holding Companies and the International IMS Entities (and/or any
predecessors, if appropriate) as of June 29, 1996, and related statements of
operations and cashflows for the three month period then ended. In such
event, such June 29, 1996 financial statements shall (i) be prepared in
accordance with GAAP applied on a consistent basis with the Audited Financial
Statements, (ii) present fairly the financial position of the Company as of
the date thereof and the results of operations and cash flows of the Company
for the period covered thereby, (iii) be correct and complete in all material
respects, and (iv) be consistent with the books and records of the Company.
5.5 Reasonable Commercial Efforts. During the Pre-Closing Period,
Maxtor shall use reasonable commercial efforts to cause the conditions set
forth in Sections 7 (it being acknowledged that the condition set forth in
Section 7.7 hereof is not under Maxtor's control or supervision) and 8 to be
satisfied on a timely basis.
5.6 Maintenance of Records. From and after the Closing Date, Maxtor
shall use reasonable care to maintain the books, records, Tax Returns, work
papers and other documents and information in its possession relating to the
Company arising prior to the Closing and, damage by fire or other casualty or
accident excepted, shall not for a period of six (6) years after the Closing
Date destroy or dispose of any such records unless it shall first have
notified the Company of its intention to do so and shall have afforded the
Company an opportunity to take possession thereof. From and after the
Closing Date, Maxtor shall afford the Company access to all preclosing
business record and information of the Company in its possession, including
data processing information, upon reasonable notice during ordinary business
hours for all reasonable business purposes, and Maxtor shall permit the
Company to make copies of any such records and retain possession of such
copies.
5.7 Indemnification Agreements. Prior to the Closing Date Maxtor shall
have, entered into indemnification agreements with each officer or director
of IMS Delaware, each of the Holding Companies and each of the International
IMS Entities, pursuant to which Maxtor shall indemnify any such officer or
director to the maximum extent permitted by law in connection with any action
taken by any such officer or director in his or her capacity as an officer or
director of IMS Delaware, the Holding Companies and/or the International IMS
Entities relating to the Transactions and the Reorganization Actions. Maxtor
further agrees to indemnify the Company for any and all liabilities and/or
expenses incurred by the Company as a result of any claim relating to any
such action taken by any such officer or director in connection with the
Transactions and the Reorganization Actions. Maxtor's obligation to
indemnify such officers and directors and the Company with regard to such
actions shall survive the Closing for an unlimited period of time.
SECTION 6
COVENANTS OF IMS DELAWARE
6.1 Reasonable Commercial Efforts. During the Pre-Closing Period, IMS
Delaware shall use its reasonable commercial efforts to cause all of the
conditions to the obligations of Maxtor and the Company under this Agreement
which are within its control to be satisfied as promptly as practicable, and
will not undertake any course of action inconsistent therewith or which would
make any of such representations or warranties contained herein untrue at or
prior to the Closing and will not undertake any course of action inconsistent
therewith or which makes its representations or warranties contained herein
untrue at or prior to the Closing.
6.2 Filings and Consents. IMS Delaware shall ensure that all filings,
notices and Consents required to be made, given and obtained by IMS Delaware
in order to consummate the Transactions (including, if applicable, any
filings by IMS Delaware required under the HSR Act and the rules promulgated
thereunder) are made, given and obtained on a timely basis.
6.3 Notification. During the Pre-Closing Period, IMS Delaware shall
promptly notify Maxtor in writing of any event, condition, fact or
circumstance that may make the timely satisfaction of any of the conditions
set forth in Section 7 or Section 8 impossible or unlikely.
6.4 Maintenance of Records. From and after the Closing Date, the
Company shall use reasonable care to maintain the books, records, Tax
Returns, work papers and other documents and information in its possession
relating to the Company arising prior to the Closing and, damage by fire or
other casualty or accident excepted, shall not for a period of six (6) years
after the Closing Date destroy or dispose of any such records unless it shall
first have notified Maxtor of its intention to do so and shall have afforded
Maxtor an opportunity to take possession thereof. From and after the Closing
Date, the Company shall afford Maxtor access to all preclosing business
record and information of the Company in its possession, including data
processing information, upon reasonable notice during ordinary business hours
for all reasonable business purposes, and the Company shall permit Maxtor to
make copies of any such records and retain possession of such copies.
6.5 Release from Guarantees. Promptly after the Closing, the Company
shall take such commercially reasonable actions as may be necessary to
relieve Maxtor from any guarantee with respect to the funded debt or
operating liens of the Company with G.E. Capital and Comdisco set forth in
Part 3.10(a) of the Disclosure Schedule.
6.6 Reimbursement for Capital Expenditures. At the Closing, the
reimbursement of expenditures under Section 4.10 of the Recapitalization
Agreement shall be paid to Maxtor.
SECTION 7
CONDITIONS PRECEDENT TO IMS DELAWARE'S OBLIGATION TO CLOSE
IMS Delaware's obligation to purchase the Shares, and to issue the IMS
Note and the Warrant and take the other actions required to be taken by IMS
Delaware at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
IMS Delaware in whole or in part, in writing, and with the written consent of
the Investors):
7.1 Accuracy of Representations. The representations and warranties
made by Maxtor in this Agreement shall be accurate in all respects as of the
Closing Date as if made at the Closing Date except that to the extent any
such representation or warranty relates expressly to another date, such
representation or warranty shall be accurate in all respects as of such date,
and the Recapitalization Agreement shall not have been terminated pursuant to
Section 4.4(b) thereof.
7.2 Performance of Obligations.
(a) The transactions contemplated by Section 2.3 hereof shall have
been consummated.
(b) Each of the documents referred to in Sections 2.4(b)(i),
2.4(b)(vi), 2.4(b)(ix), 2.4(b)(x) and 2.4(b)(xi) shall have been executed by
each of the parties thereto and delivered to IMS Delaware.
(c) All covenants, conditions and agreements contained in this
Agreement to be performed by Maxtor on or prior to the Closing, shall have
been duly complied with and performed in all respects.
7.3 Consents. Each of the Consents identified in Part 3.22 of the
Disclosure Schedule shall have been obtained and shall be in full force and
effect, except for such consents, the failure to obtain such consents would
not either individually or in the aggregate result in a Material Adverse
Effect with regard to the Company or any of the International IMS Entities.
7.4 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of the Unaudited Balance Sheet, and, if the
Closing has not occurred prior to June 29, 1996, the results set forth in the
financial statements as of and for the period ended June 29, 1996, delivered
pursuant to Section 5.4(b) hereof shall not differ materially from the
results for such period set forth in the financial projections provided to
the Investors on or prior to the date hereof and attached as Schedule 7.4 to
this Agreement.
7.5 Additional Documents. The Company shall have received the
following documents:
(a) An opinion letter from Gray Cary Ware & Freidenrich with
respect to matters relating to Maxtor and IMS Delaware, an opinion letter of
Stephenson Harwood & Co. as to matters relating to IMS Hong Kong and an
opinion letter of Ian Boxall & Co. as to matters relating to IMS Cayman, in
substantially the respective forms set forth as Exhibit F. With respect to
an opinion letter of Baker & McKenzie as to matters relating to IMS Thailand
the Company shall have received an opinion in a form reasonably acceptable to
the Company and the Investors.
(b) Such other documents as IMS Delaware may reasonably request in
good faith at least five (5) business days prior to the Closing Date for the
purpose of (i) evidencing the accuracy of any representation or warranty made
by Maxtor, (ii) evidencing the compliance by Maxtor with, or the performance
by Maxtor of, any covenant or obligation set forth in this Agreement, (iii)
evidencing the satisfaction of any condition set forth in this Section 7, or
(iv) otherwise facilitating the consummation or performance of any of the
Transactions.
7.6 No Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transactions shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the
foregoing be pending, nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the Transactions, which makes the consummation of the Transactions illegal.
7.7 Financing. The Company shall have obtained commitments to provide
the debt and equity financings contemplated by the Transactional Agreements,
all Transactional Agreements and definitive agreements for such debt
financings reasonably satisfactory in form and substance to the Company and
the Investors shall have been entered into by all parties thereto, and all
conditions to such commitments and to the parties' obligations to close the
transactions contemplated thereby (including such financings) (other than
the closing of the transactions hereunder) shall have been satisfied or
waived.
7.8 Termination of Existing Options, Warrants and Other Rights. Any
Option, warrant or other right to purchase the capital stock of any of IMS
Delaware, the Holding Companies or the International IMS Entities pursuant to
any IMS Plan or otherwise shall have been canceled, redeemed or otherwise
terminated on or prior to the Closing Date.
7.9 HEA Side Letter. The Company and the Investors shall have received
a letter from Hyundai Electronics America ("HEA") in substantially the form
previously supplied in draft form to the Investors indicating that it has not
elected and will not elect push-down accounting treatment with respect to the
acquisition of Maxtor by HEA.
7.10 Compensation of Employees. Prior to the Closing, Maxtor shall
have paid all accrued salary and bonus obligations to any and all employees,
officers and directors of the Company pursuant to any employment agreement,
arrangement or understanding.
7.11 Indemnification Agreements. Prior to the Closing, Maxtor and each
of the officers and directors of IMS Delaware, each of the Holding Companies
and each of the International IMS entities shall have entered into
indemnification agreements as contemplated by Section 5.7 hereof and in form
and substance satisfactory to the Investors.
SECTION 8
CONDITIONS PRECEDENT TO MAXTOR'S OBLIGATION TO CLOSE
Maxtor's obligation to sell the Shares and to take the other actions
required to be taken by Maxtor at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Maxtor, in whole or in part, in writing):
8.1 Accuracy of Representations. All of the representations and
warranties made by the Company in this Agreement and by the Investors in the
Recapitalization Agreement shall have been accurate as of the date of this
Agreement and shall be accurate as of the Closing Date as if made at the
Closing Date.
8.2 Company's Performance.
(a) The Transactions contemplated by Section 2.3 hereof and the
Reorganization Actions shall have been consummated.
(b) IMS Delaware shall have paid $23.7 million to Maxtor shall
have caused IMS Hong Kong to repay the Hong Kong Note, and shall have issued
the IMS Delaware Note and the Maxtor Warrant to Maxtor.
(c) The certificate from IMS Delaware required under Section 2.4
hereof, the Stockholders Agreement, the Manufacturing Services Agreement and
the Transition Services Agreement shall have been executed by each of the
parties thereto and delivered to Maxtor.
(d) All of the other covenants, conditions and agreements
contained in this Agreement to be performed by the Company on or prior to the
Closing shall have been duly complied with and performed in all respects.
8.3 No Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transactions shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the Transactions, which makes the consummation of the Transactions illegal.
8.4 Financing. The Company shall have obtained commitments to provide
the debt and equity financings contemplated by the Transactional Agreements,
all Transactional Agreements shall have been entered into by all parties
thereto, and all conditions to such commitments and to the parties' obligated
to close such agreements (other than the closing of the transactions
hereunder) shall have been satisfied or waived.
8.5 Additional Documents. Maxtor shall have received the following:
(a) A certificate from the Investors to the effect that the
representations of the Investors in Section 3 of the Recapitalization
Agreement are accurate as of the Closing and that all covenants, agreements
and conditions contained in the Recapitalization Agreement to be performed by
the Investors on or prior to the Closing Date shall have been performed or
complied with.
(b) The IMS Officer Certificate.
8.6 Key Employees Confidentiality Agreements. Key employees of the
Company and the International IMS entities shall have signed or reaffirmed
confidentiality agreements with Maxtor in consideration of Maxtor entering to
the Transactional Agreements.
8.7 Legal Opinion. Maxtor shall have received an opinion letter from
Wilson Sonsini Goodrich & Rosati, P.C. as to the valid and binding effect of
the IMS Guarantee in form and substance reasonably satisfactory to Maxtor.
SECTION 9
TERMINATION
9.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) By the Company or Maxtor, if the Recapitalization Agreement
shall have been terminated;
(b) By the Company if the Closing has not taken place on or before
August 15, 1996 (other than as a result of any failure on the part of the
Company to comply with or perform any covenant or obligation under this
Agreement);
(c) By Maxtor if the Closing has not taken place on or before
August 15, 1996 (other than as a result of any failure on the part of Maxtor
to comply with or perform any covenant or obligation set forth in this
Agreement); or
(d) By the Company, in the event that the Company and the
Investors have not accepted any update to the Disclosing Schedule delivered
by Maxtor pursuant to Section 5.3 hereof, or Maxtor, the Company and the
Investors have not reached a resolution as to Environmental Matters as
contemplated by Section 4.11 of the Recapitalization Agreement.
9.2 Termination Procedures. If the Company wishes to terminate this
Agreement, the Company shall deliver to Maxtor a written notice stating that
the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Purchaser is terminating this
Agreement. If Maxtor wishes to terminate this Agreement, Maxtor shall
deliver to the Company a written notice stating that Maxtor is terminating
this Agreement and setting forth a brief description of the basis on which
Maxtor is terminating this Agreement.
9.3 Effect Of Termination. If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this Agreement
shall terminate and, subject to the proviso of this sentence, neither Maxtor,
on the one hand, nor the Company and the other Indemnitees, on the other,
shall have any obligations to the other for any Damages in connection with or
arising out of this Agreement; provided, however, that: (a) no party shall be
relieved of any obligation or other Liability arising from any Breach by such
party of any provision of this Agreement; and (b) the parties shall, in all
events, remain bound by and continue to be subject to the provisions set
forth in Section 12.3.
SECTION 10
SURVIVAL OF REPRESENTATIONS AND COVENANTS
10.1 Survival Of Representations And Covenants
(a) The representations, warranties, covenants and obligations of
each party to this Agreement shall survive (without limitation): (i) the
Closing and the sale of the Shares to the Company; (ii) any sale or other
disposition of any or all of the Shares by the Company; and (iii) the sale or
dissolution of any party to this Agreement, and (except for those set forth
in Sections 2.1, 3.1, 3.3, 3.14, 3.17, 3.21 and 5.7) shall expire on the
second anniversary of the Closing Date. Those representations and warranties
set forth in Sections 3.14 and 3.17 shall survive until 30 days after the
expiration of the applicable statute of limitations period, and the
representations, warranties, covenants and obligations set forth in Sections
2.1, 3.1, 3.3, 3.21 and 5.7 shall survive for an unlimited period of time.
No party shall be entitled to any remedy resulting from the Breach of a
representation, warranty, covenant or obligation of the other party unless
the Breaching party has received during the applicable survival period a
Claim Notice (as defined in the Recapitalization Agreement). Notwithstanding
the foregoing, if a Claim Notice relating to any representation, warranty,
covenant or obligation is given to Maxtor on or prior to the second
anniversary of the Closing Date (or such longer survival period as
applicable), then, notwithstanding anything to the contrary contained in this
Section 10.1(a), such representation or warranty shall not so expire, but
rather shall remain in full force and effect solely with respect to such
claim until such time as each and every claim specifically set forth in such
Claim Notice has been fully and finally resolved, either by means of a
written settlement agreement executed on behalf of Maxtor and the Company or
by means of a final, non-appealable judgment issued by a court of competent
jurisdiction.
(b) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made
by Maxtor in this Agreement.
SECTION 11
CERTAIN POST-CLOSING COVENANTS
11.1 Publicity. Maxtor and the Company shall ensure that, on and at
all times after the date hereof, neither the Company nor Maxtor will furnish
any communication to the public generally if the subject matter thereof
describes any substantive provision of the Transactions without the prior
approval of the other of them as to the content thereof, which approval shall
not be unreasonably withheld; provided that the foregoing shall not be deemed
to prohibit any disclosure required by any applicable law, the rules and
regulations of any securities exchange or automated quotation system on which
such party is listed or traded or by any competent Governmental Body.
11.2 Tax Indemnification and Returns
(a) Maxtor shall be responsible for and shall pay or cause to be
paid (i) any and all Taxes (other than IMS' Taxes, as defined below) with
respect to or relating to the Company, whensoever arising, including any
transferee or secondary liability for Taxes, that are attributable to any
taxable period ending on or prior to the Closing Date and, in the case of a
taxable period that includes, but does not end on the Closing Date, the
portion of such taxable period that ends on the Closing Date, (ii) any and
all Taxes of Maxtor and its affiliates, whensoever arising, including any
transferee or secondary liability for Taxes, (x) for which the Company is or
would be liable or responsible as a result of having been (or ceasing to be)
a member of any affiliated, consolidated, combined or unitary group which
included Maxtor and its affiliates or (y) attributable to the transactions
contemplated by this Agreement, and (iii) any and all Taxes arising out of a
breach of any representation or warranty contained in Section 3.14 hereof
("Maxtor's Taxes"); provided, however, that, with respect to Taxes for any
period described in (i) above, Maxtor shall be responsible for and shall pay
such Taxes only to the extent that they exceed $1,145,245 (the "Current
Income Taxes Payable"). For purposes of this Section 11.2(a), Maxtor will
not be liable to the Company as a result of the eventual reversal of the
deferred tax liability of $299,016 accrued on the Company's Unaudited Balance
Sheet, which equals the difference between the Company's total income tax
liability on the Unaudited Balance Sheet and the Current Income Taxes
Payable.
(b) The Company shall be responsible for and shall timely pay or
cause to be paid (i) any and all Taxes (other than Maxtor's Taxes) with
respect to the Company, whensoever arising, including any transferee or
secondary liability for Taxes, that are attributable to any taxable period
commencing after the Closing Date and, in the case of a taxable period that
includes, but does not end on, the Effective Time, the portion of such
taxable period that begins on the day after the Closing Date, (other than any
liability for the Taxes of Maxtor and its affiliates (other than the Company)
which arises pursuant to Treas. Reg. '1.1502-6 or a corresponding provision
of state, local, or foreign law) and (ii) Taxes of the Company for which
Maxtor is otherwise responsible (because such Taxes are attributable to
taxable periods ending on or prior to the Closing Date), where such Taxes
arise as a result of actions taken by the Company after the Closing, and
relate to the loss, in whole or in part, of a Tax exemption, Tax holiday, or
other Tax-sparing arrangement ("IMS' Taxes").
(c) If the Company files any Tax Return which includes payment of
Maxtor's Taxes, Maxtor shall promptly reimburse the Company for such Maxtor's
Taxes when such Return is filed. If Maxtor files any Return which includes
payments of IMS' Taxes, the Company shall promptly reimburse Maxtor for such
IMS' Taxes when such Return is filed. Maxtor shall timely provide to the
Company all information and documents within the possession of Maxtor (or its
auditors, advisors or affiliates) and signatures and consents necessary for
the Company to properly prepare and file the Returns described in the second
preceding sentence or in connection with the determination of any Tax
liability or any audit, examination or proceeding. The Company shall timely
provide to Maxtor all information and documents within its possession or the
possession of its auditors, advisors or affiliates and signatures and
consents necessary for Maxtor to properly prepare and file the Returns
described in the second preceding sentence or in connection with the
determination of any Tax liability or any audit, examination or proceeding.
Each party hereto shall reasonably cooperate with the other (at their own
expense) party to obtain other information or documents necessary or
appropriate to prepare and file Returns or elections or necessary or
appropriate in connection with the determination of any Tax liability or any
audit, examination or proceeding. Any amount payable pursuant to this
Section 11.2 shall not be payable unless and until the party requesting
payment has made available all information reasonably necessary to verify the
amount of the requested payment. The party responsible for the payment of
Taxes under the indemnity provisions of this Agreement shall have ultimate
control, in an audit, with respect to decisions related to items for which it
is responsible.
(d) For all United States Federal income tax purposes, and, to the
extent not prohibited by applicable law, for purposes of United States state
and local income tax laws, Maxtor shall include the Closing Date in their
holding period for the non-U.S. subsidiaries of the Company.
11.3 Agreement Not to Compete.
(a) Maxtor understands that the Company shall be entitled to
protect and preserve the going concern value of the Business to the extent
permitted by law and that IMS Delaware would not have entered into this
Agreement absent the provisions of this Section 11.3 and, therefore, Maxtor
agrees that Maxtor will not (except for activities contemplated by the
Manufacturing Services Agreement) (i) prior to the third anniversary of the
Closing Date, directly or indirectly engage in any business competing with
the Business, and (ii) at any time communicate or divulge any secret or
confidential information, knowledge or data related to the Business to any
Person other than the Company, all of which it agrees to hold in confidence
and protect as it protects its own confidential information for the benefit
of the Company; provided that nothing contained in this Agreement shall in
any way restrict or impair Maxtor's right to use, disclose or otherwise deal
with information which at the time of disclosure is generally available to
the public through no act of Maxtor. For purposes of this Section 11.3, the
phrase "directly or indirectly engage in" shall include having a direct or
indirect ownership interest (other than ownership of less than 5% of the
outstanding voting securities of a Person) in any Person which is primarily
engaged in a business competing with the Business and shall not include any
pre-existing or current activities by Hyundai Electronics Industries ("HEI")
or its subsidiaries other than activities conducted by Maxtor and its
subsidiaries.
(b) Notwithstanding any other provision of this Agreement, it is
understood and agreed that the remedy of indemnity payments pursuant to
Section 10 hereof and other remedies at law would be inadequate in the case
of any Breach of the covenants contained in Section 11.3(a) and Maxtor agrees
that the Company shall be entitled to equitable relief, including the remedy
of specific performance, with respect to any breach or attempted breach of
such covenants.
11.4 Waiver of Defense. IMS Delaware hereby agrees that neither it nor
any of the Holding Companies or the International IMS Entities will assert as
a defense to the enforcement by Maxtor of any Transactional Agreement (i) the
failure of any such entity to have the absolute and unrestricted right, power
and authority to enter into and to perform its obligations under each such
agreement, or (ii) the failure of each such agreement to be executed and
delivered by such entity to have been duly authorized by all necessary action
on the part of such entity and its board of directors.
SECTION 12
MISCELLANEOUS PROVISIONS
12.1 Obligations of Maxtor. The obligations and liability of Maxtor
under this Agreement and the other Transactional Agreements shall not be
limited in any way by:
(a) The dissolution or insolvency of, or the appointment of any
receiver, conservator or liquidator for, or the commencement of any
bankruptcy, reorganization, moratorium, arrangement or other proceeding by,
against or with respect to, the Company or Maxtor;
(b) Any merger of the Company with or into any other Entity; or
(c) Any right or claim, including with respect to indemnification,
that Maxtor may have under the Recapitalization Agreement or the Stockholders
Agreement.
12.2 Further Assurances. Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may
reasonably request (prior to, at or after the Closing) for the purpose of
carrying out or evidencing any of the Transactions.
12.3 Fees And Expenses.
(a) Maxtor shall bear and pay (i) all fees, costs and expenses
that have been incurred or that are in the future incurred by, on behalf of
or for the benefit of Maxtor in connection with the Transactional Agreements
and the Transactions and (ii) all legal fees, costs and expenses payable to
Gray Cary Ware & Freidenrich and, Stephenson Harwood & Co., Baker & McKenzie
and Ian Boxall & Co. in connection with the Transactional Agreements and the
Transactions. The Company shall indemnify and hold Maxtor harmless from any
brokerage commissions, finders fee or similar commission or fees incurred by
the Company or its management in connection with any of the Transactions.
(b) If the Closing occurs, the Company shall bear and pay all
fees, costs and expenses that have been incurred or that are in the future
incurred by, on behalf of or for the benefit of the Company, the Company's
management or the Investors in connection with the Transactional Agreements
and the Transactions (including all fees, costs and expenses payable to the
environmental consultant engaged in connection with the Transactions, Price
Waterhouse LLP, Chemical Bank, Chemical Securities Asia Limited, Cravath,
Swaine & Moore, Wilson Sonsini Goodrich & Rosati, P.C., Kirkland & Ellis,
Johnson Stokes & Master, Chandler & Thong-Ek and Maples & Calder).
(c) If the Closing does not occur (i) because of a decision by
Maxtor not to consummate the Transactions or because of any other material
breach of the Transactional Agreements by Maxtor or the Company, then Maxtor
shall bear and pay only fees, costs and expenses in connection with the
Transactional Agreements and the Transactions payable to Chemical Bank,
Chemical Securities Asia Limited, Cravath, Swaine & Moore, Wilson Sonsini
Goodrich & Rosati, P.C., any environmental consultant engaged in connection
with the Transactions and Price Waterhouse LLP, provided that the fees of
Price Waterhouse LLP payable by Maxtor pursuant to this Section 12.3(c) shall
not exceed $100,000 and the fees, costs and expenses payable to Wilson
Sonsini Goodrich & Rosati, P.C., payable pursuant to this Section 12.3(c)
shall be only agreed upon reasonable fees, costs and expenses and shall not
exceed $175,000, and the Investors shall pay fees, costs and expenses of
foreign counsel acting on behalf of the Company and the Investors and the
fees, costs and expenses of Kirkland & Ellis; (ii) because of a decision by
the Investors not to consummate the Transactions not due to a material breach
of the Transactional Agreements by Maxtor or the Company or because of any
other material breach of the Transactional Agreements by the Investors, then
the Investors shall bear and pay only fees, costs and expenses in connection
with the Transactional Agreements and the Transactions payable to Chemical
Bank, Chemical Securities Asia Limited, Cravath, Swaine & Moore, Wilson
Sonsini Goodrich & Rosati, P.C., any environmental consultant engaged in
connection with the Transactions (and the Investors exclusively shall be
entitled to own and to use the work product of any such consultant) and Price
Waterhouse LLP; or (iii) for any reason other than as set forth in (i) or
(ii) above, the Investors shall bear and pay only fees, costs and expenses in
connection with the Transactional Agreements and the Transactions payable to
Chemical Bank, Chemical Securities Asia Limited, Cravath, Swaine & Moore,
foreign counsel acting on behalf of the Company and the Investors and Price
Waterhouse LLP, and Maxtor shall pay only fees, costs and expenses in
connection with the Transactional Agreements and the Transactions payable to
Wilson Sonsini Goodrich & Rosati, P.C., and any environmental consultant
engaged in connection with the Transactions, provided that the fees, costs
and expenses payable to Wilson Sonsini Goodrich & Rosati, P.C. payable
pursuant to this section shall only be agreed upon reasonable fees, costs and
expenses and shall not exceed $175,000, and provided in all events that
Maxtor shall pay the fees, costs and expenses of Gray Cary Ware & Freidenrich
and foreign counsel acting on behalf of Maxtor.
12.4 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement is brought against any party to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may be entitled).
12.5 Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other parties hereto):
If to Maxtor, to: Maxtor Corporation
2190 Miller Drive
Longmont, Colorado 80501
Telecopier: 303-678-3111
Attention: Glenn H. Stevens, Esq.
with a copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Telecopier: 415-327-3699
Attention: Diane Holt Frankle, Esq.
If to the Company, to: International Manufacturing Services, Inc.
211 River Oaks Parkway
San Jose, California 95134
Telecopier: 408-432-4337
Attention: Robert G. Behlman
with copies to: Prudential Private Equity Investors III, L.P.
717 Fifth Avenue, 11th Floor
New York, New York 10022
Telecopier: 212-826-6798
Attention: Mark Rossi
John A. Downer
Oak Investment Partners
525 University Avenue, Suite 1300
Palo Alto, California 94301
Telecopier: 415-328-6345
Attention: Fredric W. Harman
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telecopier: 415- 493-6811
Attention: Jeffrey D. Saper, Esq.
Kirkland & Ellis
Citicorp Center
153 East 53rd Street, 39th Floor
New York, New York 10022-4675
Telecopier: 212-446-4900
Attention: Frederick Tanne, Esq.
12.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
12.7 Governing Law.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) The parties hereby consent to the jurisdiction of the courts
of the State of California and the federal courts of the Northern District of
California for all disputes arising under this Agreement.
(c) Nothing in this Section 12.7 shall be deemed to limit or
otherwise affect the right of any Indemnitee to commence any legal proceeding
or otherwise against Maxtor in any forum or jurisdiction.
12.8 Successors And Assigns; Parties In Interest.
(a) This Agreement shall be binding upon the Company and its
successors and assigns (if any), and Maxtor and its successors and assigns
(if any). This Agreement shall inure to the benefit of the Company, Maxtor,
the other Indemnitees, and the respective successors and assigns (if any) of
the foregoing.
(b) Except for an assignment of rights for the benefit of any
creditor of the Company, neither Maxtor nor the Company shall be permitted to
assign any of its rights or delegate any of its obligations under this
Agreement.
(c) Except for the provisions of Sections 5.1, 10, 12.1, 12.3 and
12.8 hereof, none of the provisions of this Agreement is intended to provide
any rights or remedies to any Person other than the parties to this Agreement
and their respective successors and permitted assigns, if any.
12.9 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative and not alternative.
Maxtor and the Company agree that:
(a) In the event of any Breach or threatened Breach either party
of any covenant, obligation or other provision set forth in this Agreement,
the other party shall be entitled (in addition to any other remedy that may
be available to it) to (i) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant,
obligation or other provision, and/or (ii) an injunction restraining such
Breach or threatened Breach; and
(b) No Party shall be required to provide any bond or other
security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.
12.10 Severability. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance
hereof shall not be deemed to constitute a waiver of any other default or any
succeeding breach or default.
12.11 Amendments. This Agreement may not be amended, modified, altered
or supplemented, and no provision of this Agreement may be waived, other
than by means of a written instrument duly executed and delivered on behalf
of Maxtor and IMS Delaware, which instrument shall be satisfactory in form
and substance to, and consented to in writing by, the Investors.
12.12 Waiver. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such
provision to Persons or circumstances, other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be
impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
12.13 Entire Agreement. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof
and supersede all prior agreements and understandings among or between any of
the parties relating to the subject matter thereof.
12.14 Construction. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement. As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation." Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed and delivered as of , 1996.
---------------
INTERNATIONAL MANUFACTURING SERVICES, INC.
a Delaware corporation
By:
----------------------------------
Robert G. Behlman
Its: President
MAXTOR CORPORATION
a Delaware Corporation
By:
----------------------------------
----------------------------------
Its:
----------------------------------
EXECUTION COPY
REDEMPTION AGREEMENT
between
INTERNATIONAL MANUFACTURING SERVICES, INC.,
a Delaware corporation;
and
MAXTOR CORPORATION,
a Delaware corporation
---------------------------
Dated as of May 16, 1996
---------------------------
EXECUTION COPY
TABLE OF CONTENTS
Page
SECTION 1 - DEFINITIONS 2
1.1 Definitions 2
1.2 Interpretations 12
SECTION 2 - REDEMPTION AND RELATED TRANSACTIONS 12
2.1 Purchase of Shares 12
2.2 Purchase Price 12
2.3 Ownership of the Holding Companies and the International IMS
Entities 12
2.4 Closing 13
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF MAXTOR 14
3.1 Due Organization; Subsidiaries; Etc. 15
3.2 Certificate of Incorporation and Bylaws; Records 15
3.3 Capitalization 16
3.4 Financial Statements 16
3.5 Absence Of Changes 16
3.6 Title to Assets 18
3.7 Equipment, Etc. 19
3.8 Real Property 19
3.9 Proprietary Assets 19
3.10 Contracts 21
3.11 Liabilities 22
3.12 Compliance With Legal Requirements 22
3.13 Governmental Authorizations 23
3.14 Tax Matters 23
3.15 Employee And Labor Matters 25
3.16 Benefit Plans; ERISA 26
3.17 Environment, Health and Safety 27
3.18 Insurance 29
3.19 Related Party Transactions 30
3.20 Proceedings; Orders 30
3.21 Authority; Binding Nature of Agreements 31
3.22 Non-Contravention; Consents 31
3.23 Notes and Accounts Receivable 32
3.24 Inventory 32
3.25 Product Warranty 33
3.26 Product Liability 33
3.27 Brokers 33
3.28 Manufacturing Services Agreement 33
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF IMS DELAWARE 33
4.1 Brokers 34
SECTION 5 - CLOSING COVENANTS OF MAXTOR 34
5.1 Access And Investigation 34
5.2 Filings And Consents 34
5.3 Notification; Updates To Disclosure Schedule 34
5.4 Audited March 30 Financial Statements 35
5.5 Reasonable Commercial Efforts 36
5.6 Maintenance of Records 36
5.7 Indemnification Agreements 36
SECTION 6 - COVENANTS OF IMS DELAWARE 36
6.1 Reasonable Commercial Efforts 36
6.2 Filings and Consents 37
6.3 Notification 37
6.4 Maintenance of Records 37
6.5 Release from Guarantees 37
6.6 Reimbursement for Capital Expenditures 37
SECTION 7 - CONDITIONS PRECEDENT TO IMS DELAWARE'S OBLIGATION TO CLOSE 37
7.1 Accuracy of Representations 37
7.2 Performance of Obligations 38
7.3 Consents 38
7.4 No Material Adverse Change 38
7.5 Additional Documents 38
7.6 No Illegality 39
7.7 Financing. 39
7.8 Termination of Existing Options, Warrants and Other Rights 39
7.9 HEA Side Letter 39
7.10 Compensation of Employees 39
7.11 Indemnification Agreements 39
SECTION 8 - CONDITIONS PRECEDENT TO MAXTOR'S OBLIGATION TO CLOSE 40
8.1 Accuracy of Representations 40
8.2 Company's Performance 40
8.3 No Illegality 40
8.4 Financing 40
8.5 Additional Documents 41
8.6 Key Employees Confidentiality Agreements 41
8.7 Legal Opinion 41
SECTION 9 - TERMINATION 41
9.1 Termination Events 41
9.2 Termination Procedures 41
9.3 Effect Of Termination 42
SECTION 10 - SURVIVAL OF REPRESENTATIONS AND COVENANTS 42
10.1 Survival Of Representations And Covenants 42
SECTION 11 - CERTAIN POST-CLOSING COVENANTS 43
11.1 Publicity 43
11.2 Tax Indemnification and Returns 43
11.3 Agreement Not to Compete 44
11.4 Waiver of Defense 45
SECTION 12 - MISCELLANEOUS PROVISIONS 45
12.1 Obligations of Maxtor 45
12.2 Further Assurances 46
12.3 Fees And Expenses 46
12.4 Attorneys' Fees 47
12.5 Notices 47
12.6 Counterparts 48
12.7 Governing Law 48
12.8 Successors And Assigns; Parties In Interest 49
12.9 Remedies Cumulative; Specific Performance 49
12.10 Severability 49
12.11 Amendments 49
12.12 Waiver 50
12.13 Entire Agreement 50
12.14 Construction 50
EXHIBITS
Exhibit A: Form of Maxtor Warrant
Exhibit B: Terms of Maxtor Notes and Terms of IMS Guarantee
Exhibit C: Form of IMS Officer Certificate
Exhibit D: Form of Manufacturing Services Agreement
Exhibit E: Form of Transition Services Agreement
Exhibit F: Forms of Opinion Letters from Gray Cary Ware & Freidenrich and
Foreign Counsel
PA1\481630.17
**CONFIDENTIAL TREATMENT - EDITED DOCUMENT**
MANUFACTURING SERVICES AGREEMENT
This Manufacturing Services Agreement ("Agreement") is entered into by
and between Maxtor Corporation, a Delaware corporation, with its principal
place of business at 211 River Oaks Parkway, San Jose, California 95134,
U.S.A. ("Maxtor") and International Manufacturing Services, Inc., a Delaware
corporation, with its principal place of business at 211 River Oaks Parkway,
San Jose, California 95134 U.S.A. ("IMS"). This Agreement is effective as of
June 13, 1996 ("Effective Date").
RECITALS
WHEREAS, Maxtor wishes to procure certain products and manufacturing services
from IMS;
WHEREAS, IMS is willing to provide such products and services on the terms
and conditions set forth below;
WHEREAS, concurrent with the execution of this Agreement, Maxtor and IMS will
close certain related transactions set forth in that certain Recapitalization
Agreement dated as of May 16, 1996 and that certain Redemption Agreement and
Stockholders Agreement of even date therewith (the "Related Agreements");
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein and in the Related Agreements, the parties agree as follows:
AGREEMENT
1. Product Appendix. IMS will sell and Maxtor will purchase the
products set forth in Exhibit A, as amended from time to time by mutual
agreement ("Products"). For each Product, Maxtor will specify, from time to
time, (i) a bill of materials listing the components of the Product; (ii)
which components are to be procured by IMS and which are to be consigned to
IMS by Maxtor; and (iii) approved vendors from whom IMS must source
particular components. The parties shall agree in writing on any Product-
specific tooling (manufacturing or test) and any other equipment which is
required to be acquired by IMS solely for use in manufacturing or testing
such Product, along with the financial and ownership arrangements for such
tooling and equipment. IMS shall not change any vendor of a Product
component or any manufacturing process for any Product without Maxtor's prior
written approval.
2. Orders and Forecasts. Every [REDACTED], Maxtor shall issue to IMS
binding purchase orders ("Orders") for Products, covering a [REDACTED] period
from such issue date and a nonbinding forecast for an additional subsequent
[REDACTED]. No Order shall be binding upon IMS unless accepted by IMS in
writing, subject to Section 7.3 ("Sales Commitment"), provided that if such
written acceptance is not received by Maxtor within [REDACTED] from date of
Order issuance, said Order shall be deemed accepted.
3. Purchase Price. Purchase prices under this Agreement are set forth
in Exhibit A as amended from time to time by both parties in writing.
Purchase prices will be [REDACTED] and do not include any foreign, federal,
state, local or other taxes or duties or charges of any kind that may be
applicable. When IMS has the legal obligation to collect such taxes, the
appropriate amount (excluding taxes based on IMS' net income) will be added
to Maxtor's invoice and paid by Maxtor unless Maxtor provides IMS with a
valid tax exemption certificate authorized by the appropriate taxing
authority. IMS agrees to keep its prices competitive and shall use
reasonable commercial efforts to achieve ongoing cost reductions and to lower
prices proportionately. The parties shall meet at least [REDACTED], and more
often if appropriate in the reasonable judgment of either party, to negotiate
price changes. At such meetings, IMS will disclose to Maxtor all cost
elements related to the Products.
4. Payment Terms. Payment terms shall be [REDACTED] from receipt of
invoice by Maxtor. All invoices shall be paid in U.S. dollars. If IMS
terminates this Agreement for cause pursuant to Section 14 ("Term and
Termination"), all outstanding invoices will [REDACTED] and will become
[REDACTED].
5. Shipping Terms, etc.
5.1 Shipping Terms. All Products shall be packed for shipment in
accordance with reasonable industrial practice and marked for shipment to
Maxtor's designated shipping destination and delivered to Maxtor's carrier
agent FOB IMS' applicable manufacturing facility. IMS will obtain Maxtor's
written approval prior to any change from IMS' present packaging. IMS will
mark all containers with necessary lifting, handling and shipping information
and with Order information, date of shipment and the names of the consignee
and consignor. An itemized packing list will accompany each shipment which
shall include (i) Order information, and (ii) the description, part number,
revision level and quantity of the Products so shipped. RISK OF LOSS SHALL
PASS TO MAXTOR AT IMS' SHIPPING LOCATION UPON DELIVERY TO MAXTOR'S CARRIER
AGENT. Maxtor shall select the carrier. All freight, insurance and other
shipping expenses, including without limitation any special packaging
expenses, shall be paid by [REDACTED]. Delivery shall not occur until IMS
has obtained any export license or other official authorization necessary for
export of the Products. Export licensing shall be the sole responsibility
and at the sole expense of [REDACTED].
5.2 Miscellaneous. Maxtor's Order number must appear on all
invoices, packing lists and bills of lading and shall appear on each package,
container or envelope on each shipment. Either an invoice or delivery order
may be used when making deliveries, with each set containing three (3)
copies. A complete packing list specifying Maxtor's applicable Order number,
quantity of goods shipped and part number shall be enclosed with each
shipment. Bills of lading shall be mailed in triplicate to the destination
address shown on the face of each Order, or to the consignee of the Order, on
the day shipment is made.
6. Order Cancellation and Rescheduling.
6.1 Rescheduling. Maxtor may gives notice to IMS, either by
facsimile transmission, in other written form, or orally with follow-up
written confirmation, requesting rescheduling of Products for which purchase
orders have been accepted by IMS. IMS shall reply within [REDACTED]. The
following rules shall apply based on the number of calendar weeks notice IMS
is given prior to the scheduled shipment date:
Time Prior to Limits on Rescheduling
Delivery
[REDACTED] [REDACTED].
[REDACTED] [REDACTED].
[REDACTED] [REDACTED].
[REDACTED] [REDACTED].
Maxtor's request for new ship date(s) more than [REDACTED] beyond the
original ship date(s) shown on the affected purchase order shall be deemed a
cancellation of the original purchase order governed by Section 7.2. If
Maxtor's reschedule request represents an acceleration or increase, IMS will
use its best efforts to meet the requested delivery dates.
6.2 Cancellation. Any purchases of material by IMS shall be
solely for the account of IMS, except for raw materials detailed in the bills
of materials for the corresponding Products. IMS shall not purchase any
materials to be consigned by Maxtor. Maxtor shall not be responsible for
excess and obsolete inventory which is not covered by a Maxtor Purchase Order
or other written form of authorization from Maxtor. Maxtor shall be
responsible for [REDACTED]. Beyond that, IMS shall use reasonable commercial
efforts to mitigate the costs incurred by IMS on account of any such
cancellation, and any and all resulting liability of Maxtor. Once formal
notification of cancellation has been received, IMS shall promptly cease all
efforts in fulfillment of canceled Orders and shall promptly cancel orders to
suppliers (in consultation with Maxtor where a cancellation penalty may be
incurred). At the option of IMS, [REDACTED]. Maxtor must settle all valid
claims from IMS regarding surplus inventory within [REDACTED] of receipt of
IMS' written demand setting for the grounds of the claim in reasonable
detail. [REDACTED]. The foregoing remedies shall also apply to Products
manufactured by IMS for contractors of Maxtor named on Exhibit D, which
Exhibit may be amended by Maxtor from time to time.
6.3 Product Mix Changes. It is understood that market conditions
or requirements by Maxtor's customers may require changes in Product mix and
it is anticipated that such changes may occur frequently. [REDACTED]. Maxtor
and IMS agree to work together to respond to such changes in a timely manner.
7. Purchase and Sale Commitments.
7.1 Purchase Commitment. Maxtor agrees to place Orders with IMS,
which Orders IMS shall accept, and Maxtor agrees to accept corresponding
conforming shipments from IMS aggregating as follows:
Period Quarterly Unit
Volume
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] and (ii) if applicable, the remedies set forth in Section 6.2
("Cancellation"). All purchases of Products by contractors of Maxtor named
on Exhibit D shall be considered purchases of Products by Maxtor for purposes
of this Section 7 ("Purchase and Sale Commitments").
7.2 Condition of Purchase Obligation. Maxtor's commitment to
purchase the amounts set forth in Section 7.1 ("Purchase Commitment") is
[REDACTED]. If Maxtor qualifies, pursuant to the qualification criteria set
forth in Exhibit E, which criteria may be amended from time to time by
[REDACTED]
7.3 Sales Commitment. IMS agrees to accept Orders placed by
Maxtor and to manufacture and sell such Products to Maxtor in the amounts
specified in Section 7.1 ("Purchase Commitment") above. IMS acknowledges
that due to the [REDACTED] nature of the Products, it is important that IMS
maintain the ability to increase its manufacturing capacity upon Maxtor's
reasonable request. IMS shall provide for [REDACTED]. Without limiting the
foregoing and subject to availability of material and [REDACTED] notice,
[REDACTED], and to maintain such [REDACTED] for as long as required by Maxtor
based on Maxtor's [REDACTED]. If Maxtor provides [REDACTED] notice, and/or
requests an increase of [REDACTED] IMS shall use its commercially reasonable
efforts to comply. IMS will be responsible for processing sufficient Product
starts, procuring sufficient inventory (except those components to be
procured by Maxtor pursuant to Section 9 ("Product Materials")) and taking
all other actions to provide Maxtor with the quantity of Product set forth in
accepted Orders.
8. Inspection and Acceptance.
8.1 Testing. IMS will ensure that each Product meets Maxtor
specifications and is tested prior to shipment in accordance with quality and
reliability testing methods and procedures for such Product as specified by
Maxtor from time to time. IMS will provide to Maxtor only those Products
conforming to the applicable test requirements unless IMS has obtained prior
written approval from Maxtor for any deviation from such requirements.
8.2 Acceptance. Maxtor shall inspect each shipment and return all
non-conforming units to IMS with a return authorization number obtained from
IMS with shipping cost to be borne by IMS. All returned Products must be
accompanied by a written notice describing with reasonable particularity any
defects rendering the Products non-conforming. IMS shall, at its expense,
[REDACTED]. In addition to any such [REDACTED], IMS shall promptly
[REDACTED]. Within [REDACTED] of IMS' receipt of any non-conforming Product,
IMS will perform [REDACTED]and provide Maxtor with a [REDACTED] detailing the
actions IMS shall take to avoid or minimize similar defects in the future.
9. Consignment. Maxtor may consign to IMS certain component parts,
equipment and/or other materials (the "Materials") for use in assembling and
testing Products. IMS agrees to [REDACTED]. IMS shall provide such services
with respect to Materials stored by IMS for up to [REDACTED] at [REDACTED].
The parties shall negotiate in good faith on reimbursement to IMS for IMS'
actual incremental costs incurred in connection with storage of Material in
excess of [REDACTED]. IMS shall be responsible and liable for all Materials
consigned by Maxtor to IMS, unless IMS provides Maxtor within [REDACTED]of
arrival of any consigned Materials with written notice and an accompanying
receipt showing a discrepancy between the amount and/or type of Materials
actually received by IMS and the amount and/or type consigned by Maxtor, as
shown on applicable shipping documents. Notwithstanding IMS' management and
storage of the consigned Materials, Maxtor will retain all rights, title and
interest to such Materials. IMS agrees that all Maxtor consigned Materials
are the property of Maxtor and shall not mortgage, pledge, assign or borrow
against such Materials or otherwise create or attempt to create a security
interest in the Materials. IMS will post signs, make public filings, and
take such other steps reasonably calculated to notify third parties
concerning Maxtor's ownership of such Materials. IMS agrees to maintain fire
and extended insurance, including all risk and earthquake coverage, on the
building containing and contents of the Materials in an amount agreed upon by
the parties. IMS shall name Maxtor as an additional assured with respect to
the contents of the Materials and shall, if required by Maxtor, furnish
certificates or adequate proof of the foregoing insurance. IMS will be
liable to Maxtor for damages for loss of, or injury to, the consigned
Materials caused by IMS' failure to exercise such care in regard to the
Materials as a reasonably careful person would exercise under like
circumstances. IMS agrees to accept responsibility for the actual cash value
of any Materials while such Materials are in IMS' custody. In the event of
any canceled Orders involving Materials, IMS shall ship such Materials to
Maxtor (at Maxtor's expense). The amount and type of Materials consigned to
IMS may vary over time, in Maxtor's sole discretion. IMS requests that
consigned components are received by IMS at least five (5) business days
prior to the scheduled Product shipment date and in sufficient quantities to
allow for normal component attrition.
10. Limited Warranty. IMS warrants that the Products sold to Maxtor
shall conform to the corresponding written product specification provided by
Maxtor to IMS and current at the time of Maxtor's Order ("Specification") and
be free from defects in materials and workmanship for a period of [REDACTED].
The materials portion of this warranty shall not apply to the extent of
defects in the Product directly attributable to the failure of any Materials
consigned or supplied to IMS by Maxtor. All claims for breach of warranty
with respect to any unit of the Products must be received by IMS no later
[REDACTED]. The warranty does not extend to any Products (i) which have been
subjected to misuse, neglect, excessive deterioration or erosion, abuse,
accident, improper installation, extreme electrical or physical stress, or
any other use by Maxtor in violation of or contrary to IMS' instructions;
(ii) which have been repaired or altered in any manner by anyone other than
IMS or persons expressly authorized by IMS; or (iii) which are defective as a
result of causes external to the Product. IMS' sole and exclusive obligation
with respect to defective Products returned under warranty shall be, at IMS'
option, repair or replacement thereof or refund of the purchase price. THE
EXPRESS WARRANTY AND WARRANTY REMEDIES PROVIDED IN THIS SECTION ARE MAXTOR'S
SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF THE WARRANTIES IN THIS SECTION.
IMS MAKES, AND HAS MADE, NO OTHER WARRANTIES TO MAXTOR, AND IMS HEREBY
EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, WRITTEN OR ORAL, EXPRESS,
IMPLIED, OR STATUTORY, IN ANY MANNER OR FORM WHATSOEVER, INCLUDING, BUT NOT
LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR
PURPOSE OR NONINFRINGEMENT OF THIRD PARTY RIGHTS (EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 17 ("INDEMNIFICATION")). [REDACTED].
11. Epidemic Failure. In the event of an epidemic failure of a
Product, the parties shall [REDACTED]to identify the nature of the failure
and to determine whether the failure results from certain components of the
Product or manufacture of the Product. For purposes of this Section,
"epidemic failure" shall mean a group of failures occurring within a
[REDACTED] period of a same or similar nature where the failure rate for
such[REDACTED]period is [REDACTED]or more above the failure rate for the
particular Product over the term of this Agreement prior to such event.
Maxtor and IMS shall agree on an [REDACTED]of resolving the problem vis-a-vis
Maxtor's customers and in regard to the relevant component(s) vendors which
shall depend on whether the primary source of the problem is Maxtor's
procurement of Materials for the Products or IMS' procurement of components
for or manufacture of the Product. Maxtor and IMS shall cooperate in good
faith to identify the most cost-effective solution to the problem.
12. Limitation of Liability. [REDACTED]. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR ANY
SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES,
HOWEVER CAUSED, WHETHER FOR BREACH OF CONTRACT, NEGLIGENCE OR OTHERWISE
(INCLUDING, WITHOUT LIMITATION, DAMAGES BASED ON LOSS OF PROFITS OR BUSINESS
OPPORTUNITY), AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY
FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
13. Engineering or Process Changes.
13.1 Definition. The term "Engineering Change(s)" shall mean
those mechanical, electrical, piece part or subassembly design or
Specification changes, made to the Products or to any manufacturing, assembly
or testing method, procedure or process ("Process"), or, which, if made,
could affect the schedule, performance, reliability, availability,
serviceability, appearance, dimensions, tolerances, safety or costs, such
determination to be made solely by Maxtor.
13.2 IMS Change(s). IMS will notify Maxtor of any Engineering
Change proposed to be made by IMS to the Products or Process, and will supply
a written description of the expected effect of the Engineering Change on the
Products, including its effect on price, performance, reliability and
serviceability. Maxtor may elect to evaluate the [REDACTED]. Maxtor agrees
to use commercially reasonable efforts to respond, within [REDACTED]after
receipt of IMS' request for [REDACTED] changes and within [REDACTED] for
[REDACTED] changes, as to whether or not Maxtor will negotiate with IMS as to
a transition plan and time frame for implementing such Engineering Changes.
IMS will not change or modify the Products or Process by implementation of
such Engineering Change without Maxtor's prior written approval. Maxtor, in
its reasonable discretion, may reject any and all IMS requested changes.
13.3 Maxtor Change(s). Maxtor may request, in writing and in a
manner similar to IMS' request as set forth in Section 13.2 ("IMS
Change(s)"), that IMS incorporate any [REDACTED] Engineering Change into the
Products, and IMS will provide to Maxtor its written response within
[REDACTED] after receipt of Maxtor's request. For [REDACTED] Engineering
Changes, as determined by Maxtor, IMS will respond within [REDACTED] of
Maxtor's written request. IMS' response will state [REDACTED]. If Maxtor
requests IMS to incorporate an Engineering Change into the Products, the
applicable Specifications will be amended as required subject to mutual
agreement on [REDACTED] as a result of the Engineering Change. IMS will not
unreasonably refuse to incorporate Maxtor's Engineering Changes into the
Products.
14. Term and Termination. The term of this Agreement shall begin on
the Effective Date and continue for [REDACTED] thereafter unless earlier
terminated as provided herein. Either party may terminate this Agreement for
default by the other party of any material obligation, unless the defaulting
party cures such material breach within thirty (30) days after receipt of
written notice from the non-defaulting party. In the event this Agreement is
terminated by IMS upon Maxtor's default, Maxtor shall be responsible for
[REDACTED]. In the event this Agreement is terminated by Maxtor for IMS'
default, IMS shall be responsible for [REDACTED].
15. Maxtor Equipment. IMS shall be responsible for diligence and care
in the use, routine calibration and repair, maintenance and protection of any
Maxtor furnished equipment, including without limitation any Product-specific
tooling and equipment, and shall be liable for repairs or replacement due to
normal failure or wear and tear, and maintenance costs, provided, that
[REDACTED].
16. Customer and Technical Support. IMS will supply Maxtor on an on-
going basis at [REDACTED] with technical support, including without
limitation: (i) reasonable amounts of [REDACTED] in English by telephone and
e-mail, with [REDACTED]; (ii) English language [REDACTED] necessary to permit
Maxtor to [REDACTED]; and (iii) all [REDACTED] (translated into the English
language) defining symptoms, solutions or work-arounds for Product problems.
On-site problem support for Products shall be as mutually agreed by Maxtor
and IMS. In addition, in consideration of the Orders to be placed by Maxtor
hereunder, IMS shall provide Maxtor with the following services:
(I) [REDACTED]
(ii) [REDACTED]
(iii) [REDACTED]
(iv) [REDACTED]
The services described in clauses (i) and (ii) shall be at [REDACTED]. The
services described in clauses (iii) and (iv) shall be at [REDACTED] for the
[REDACTED]. If Maxtor, at its option, desires to procure such services for a
longer period, the parties shall negotiate in good faith as to a [REDACTED]
for such services provided [REDACTED].
17. Indemnification.
17.1 Indemnification by Maxtor for Products. [REDACTED]. Such
indemnification obligation will be conditioned upon IMS (i) giving Maxtor
prompt notification in writing as to any such action; (ii) tendering full
control of the defense of such action to Maxtor; and (iii) providing Maxtor
with full information and assistance (at Maxtor's expense) for such defense.
IMS may participate in any such defense with counsel of its choosing at its
expense. Maxtor will not be responsible for any settlement or compromise
made without its consent.
17.2 Indemnification by IMS. IMS shall defend, indemnify and hold
Maxtor, its successors and assigns, harmless from and against all actions,
claims, liabilities, losses and expenses (including reasonable attorneys'
fees) arising out of or relating to any claim of infringement or
misappropriation by the Products or components thereof supplied by IMS, or
the processes used by IMS to manufacture Products, of any patent, copyright,
trade secret, or any other intellectual property right of any third party,
[REDACTED]. Such indemnification obligation will be conditioned upon Maxtor
(i) giving IMS prompt notification in writing as to any such action; (ii)
tendering full control of the defense of such action to IMS; and (iii)
providing IMS with full information and assistance (at IMS' expense) for such
defense. Maxtor may participate in any such defense with counsel of its
choosing at its expense. IMS will not be responsible for any settlement or
compromise made without its consent.
17.3 Infringement Indemnification by Maxtor. Maxtor shall defend,
indemnify and hold IMS, its successors and assigns, harmless from and against
all actions, claims, liabilities, losses and expenses (including reasonable
attorneys' fees) [REDACTED]. Such indemnification obligation will be
conditioned upon IMS (i) giving Maxtor prompt notification in writing as to
any such action; (ii) tendering full control of the defense of such action to
Maxtor; and (iii) providing Maxtor with full information and assistance (at
Maxtor's expense) for such defense. IMS may participate in any such defense
with counsel of its choosing at its expense. Maxtor will not be responsible
for any settlement or compromise made without its consent.
18. Confidentiality; Intellectual Property Rights.
18.1 Confidential Information. Each party (the "Disclosing
Party", as applicable) agrees during the term of this Agreement and
thereafter to take all steps reasonably necessary to hold the Confidential
Information of the other party (the "Receiving Party", as applicable) in
trust and confidence. "Confidential Information" includes, but is not
limited to, technical and business information relating to the Disclosing
Party's inventions or products, research and development, production,
manufacturing and engineering processes, costs, profit or margin information,
employee skills and salaries, finances, customers, marketing, and production
and future business plans, and any third party's proprietary or confidential
information disclosed to the Receiving Party in the course of providing
services to the Disclosing Party. Notwithstanding the other provisions of
this Agreement, nothing received by the Receiving Party will be considered to
be the Disclosing Party's Confidential Information if (1) it has been
published or is otherwise readily available to the public other than by a
breach of this Agreement; (2) it has been rightfully received by the
Receiving Party from a third party without confidential limitations; (3) it
has been independently developed for the Receiving Party by personnel or
agents having no access to the Disclosing Party's Confidential Information;
or (4) it was known to the Receiving Party prior to its first receipt from
the Disclosing Party. The Receiving Party shall use the Disclosing Party's
Confidential Information only for the purposes of providing and receiving
Products and services to and from the Disclosing Party as set forth herein,
unless otherwise mutually agreed in writing. The Receiving Party may
disclose the Disclosing Party's Confidential Information to affiliates and to
third persons, including contractors, solely for the purposes of this
Agreement or as otherwise allowed herein (e.g., Section 18.4 ("License of IMS
Rights")), including consultation regarding the purchase or provision of
Products and services, but only under the terms of a written confidentiality
agreement with such third person containing confidentiality and use terms
substantially similar to those imposed herein upon a Receiving Party. The
foregoing shall not affect Maxtor's rights under Section 18.4 ("License of
IMS Rights"), except that Maxtor shall require third persons who receive such
Section 18.4 IMS Intellectual Property which is IMS Confidential Information,
to execute such written confidentiality agreement.
18.2 No Conflict of Interest. Each party agrees during the term
of this Agreement not to accept work, enter into a contract or accept an
obligation inconsistent or incompatible with such party's obligations under
this Agreement or the scope of services rendered for the other party
hereunder. Each party warrants that to the best of its knowledge, there is
no other existing contract or duty on such party's part inconsistent with
this Agreement. The parties agree that the foregoing obligations shall not
be construed in any manner to supersede or conflict with the terms and
conditions of Section 7.2 ("Condition of Purchase Obligation") above.
18.3 Ownership of Proprietary Rights. Nothing in this Agreement
shall convey to either party any proprietary or intellectual property rights,
including without limitation, copyrights, trademarks, trade secrets, patents,
moral rights, contract rights and licensing rights (the "Intellectual
Property Rights") belonging to the other party, or be deemed to license
either party to use any such Intellectual Property Rights of the other party,
except for the express limited purposes set forth herein.
18.4 License of IMS Rights. [REDACTED]. IMS Intellectual Property
Rights which are Confidential Information shall be held in confidence by
Maxtor in accordance with Section 18.1 ("Confidential Information") above and
may be provided or disclosed to third parties in accordance with the
requirements of such section.
18.5 Joint Work Product. The term "Joint Work Product" means any
new or useful art, discovery, improvement or invention whether or not
patentable, and all related know-how, designs, mask works, trademarks,
formulae, processes, manufacturing techniques, trade secrets, ideas, artwork,
software or other copyrightable or patentable works, where the conception or
reduction to practice thereof occurs subsequent to the Effective Date and one
or more personnel of both Maxtor and IMS contribute materially to such
conception or reduction to practice. Maxtor and IMS [REDACTED].
18.6 Return of Maxtor Property. The term "Maxtor Work Product"
means any new or useful art, discovery, improvement or invention whether or
not patentable, and all related know-how, designs, mask works, trademarks,
formulae, processes, manufacturing techniques, trade secrets, ideas, artwork,
software or other copyrightable or patentable works developed by Maxtor
without the material contribution of IMS or otherwise acquired or licensed by
Maxtor. [REDACTED]:
(a) [REDACTED]
(b) Upon termination of this Agreement for any reason or in
any manner, or at any earlier time upon Maxtor's request, IMS agrees to
promptly deliver all Maxtor property, including but not limited to all
tangible embodiments of the Maxtor Work Product, and all copies of Maxtor
property in IMS' possession to Maxtor, or promptly destroy all such Maxtor
property and promptly certify in writing to its destruction.
19. Miscellaneous Provisions.
19.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties regarding the subject matter hereof and
supersedes all prior agreements and understandings between the parties
relating thereto. This Agreement may not be modified except by a writing
signed by an authorized representative of both parties.
19.2 Independent Contractor. The relationship of the parties
established by this Agreement is that of independent contractors, and nothing
contained herein shall be constructed to constitute either party as the agent
of the other party or as partners, joint ventures, co-owners or otherwise as
participants in a joint or common undertaking.
19.3 Advertising. No advertising by either party shall display or
contain any trademarks or references to the other party without the other
party's prior written approval.
19.4 Assignment and Subcontracting. This Agreement [REDACTED],
either party may assign this Agreement to any affiliate or subsidiary or
pursuant to a merger, sale of all or substantially all of its assets, or
other corporate reorganization. IMS shall not subcontract any of its rights
or obligations hereunder to any third party without Maxtor's prior written
approval, which shall not be unreasonably withheld.
19.5 Force Majeure. Except for Maxtor's payment obligations,
neither party shall be liable to the other party arising out of delays or
failures to perform under the Agreement to the extent that any such delays or
failures result from any cause beyond the reasonable control of the party
affected by a force majeure event; provided, that the party affected by any
such cause shall promptly inform the other of all relevant information. If
any such force majeure event extends beyond [REDACTED], either party shall
have the right to terminate this Agreement upon written notice to the other
party.
19.6 Governing Law. This Agreement shall be governed by the laws
of the State of California, without reference to conflict of laws principles.
The United Nations Convention on Contracts for the International Sale of
Goods is specifically excluded from application to this Agreement.
19.7 Venue. All disputes arising under this Agreement shall be
brought in the Superior Court of the State of California in Santa Clara
County or the Federal District Court of San Jose, California, as permitted by
law. The Superior Court of Santa Clara County and the Federal District Court
of San Jose shall each have exclusive jurisdiction over disputes under this
Agreement. IMS consents to the personal jurisdiction of the above courts.
19.8 English Language. This Agreement is executed in the English
language only, and any translations hereof are of no force and effect.
19.9 Invalidity. If any provisions or portion thereof of this
Agreement is held to be unenforceable or invalid, the remaining provisions
and portions thereof shall nevertheless be given full force and effect.
19.10 No Waiver. No failure to delay on the part of either party
in exercising any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or of any other right or
remedy. No provision of this Agreement may be waived except in a writing
signed by the party granting such waiver.
19.11 No Licenses Created. Nothing contained in this Agreement
shall be construed as conferring any license, right to use or other right
with respect to information, trademark or tradenames of either party.
19.12 Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall constitute one single
agreement between the parties.
19.13 Limitation of Action. No action, regardless of form,
arising out of this Agreement, may be brought by either party more than
[REDACTED] after the cause of action has arisen, or in the case of
nonpayment, [REDACTED] from the date the last payment was due.
19.14 Survival. Sections 10, 11, 12, 15, 17, 18 and 19 shall
survive any expiration or termination of this Agreement.
19.15 Construction. This Agreement has been negotiated by the
parties and their respective counsel. This Agreement will be fairly
interpreted in accordance with its terms and without any strict construction
in favor of or against any party. Any ambiguity will not be interpreted
against the drafting party.
IN WITNESS WHEREOF, Maxtor and IMS have caused this Manufacturing
Services Agreement to be executed by their respective officers, duly
authorized.
MAXTOR: IMS:
Maxtor Corporation International Manufacturing Services, Inc.
By: \s\ Glenn H. Stevens By: \s\ Robert Behlman
------------------------------ ---------------------------
Name: Glenn H. Stevens Name: Robert Behlman
------------------------------ -------------------------
Title:Vice President Title:President
---------------------------- -------------------------
Exhibit A
PRODUCTS AND PRICES
[REDACTED]
CONSIGNED PARTS LIST
PART NO.
DESCRIPTION
[REDACTED]
Exhibit B
THIS EXHIBIT IS INTENTIONALLY OMITTED
Exhibit C
CANCELLATION WINDOWS
--------------------------
- ----------------
COMMODITY
CANCELLATION
(NOT TO EXCEED)
[REDACTED]
Exhibit D
MAXTOR SPECIFIED CONTRACTORS
SUPPLIER SELECTION MATRIX
[REDACTED]
Exhibit
E
QUALIFICATION CRITERIA
MAX. POINT WEIGHTAGE
MAX. WEIGHT
[REDACTED]
**CONFIDENTIAL TREATMENT - EDITED DOCUMENT**
