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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 3, 1998
OR
[)] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10658
MICRON TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-1618004
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8000 S. FEDERAL WAY, P.O. BOX 6, BOISE, IDAHO 83707-0006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (208) 368-4000
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<S> <C>
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.10 PER SHARE NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based upon the closing price of such stock on September 3, 1998, as
reported by the New York Stock Exchange, was approximately $4.4 billion. Shares
of common stock held by each officer and director and by each person who owns 5%
or more of the outstanding common stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of outstanding shares of the registrant's common stock on October
23, 1998 was 246,514,854.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for registrant's 1998 Annual Meeting of
Shareholders to be held on January 14, 1999, are incorporated by reference into
Part III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
The following discussion may contain trend information and other forward-
looking statements (including statements regarding future operating results,
future capital expenditures and facility expansion, new product introductions,
the effect of the Acquisition, technological developments and industry trends)
that involve a number of risks and uncertainties. The Company's actual results
could differ materially from the Company's historical results of operations and
those discussed in the forward-looking statements. Factors that could cause
actual results to differ materially include, but are not limited to, those
identified in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Subsequent Events and Certain Factors."
All period references are to the Company's fiscal periods ended September 3,
1998, August 28, 1997 or August 29, 1996, unless otherwise indicated.
GENERAL
Micron Technology, Inc. and its subsidiaries (hereinafter referred to
collectively as the "Company" or "MTI") principally design, develop, manufacture
and market semiconductor memory products and personal computer ("PC") systems.
The Company's PC systems business and semiconductor component recovery business
("SpecTek") are operated through Micron Electronics, Inc. ("MEI"), a 64% owned,
publicly-traded subsidiary of MTI.
The Company's semiconductor memory operations focus on the design,
development, manufacture and marketing of semiconductor memory components
primarily for use in PC systems. The Company's primary semiconductor products
are dynamic random access memory ("DRAM") components which are sold and
supported through sales offices in North America, Europe, Asia Pacific and
Japan.
The Company's PC systems operations develop, market and manufacture PC systems
sold and supported through the direct sales channel. The Company's PC systems
include a wide range of memory-intensive, high performance desktop and notebook
PC systems and multiprocessor network servers.
MTI was incorporated in Idaho in 1978 and reincorporated in Delaware in 1984.
The Company's executive offices and principal manufacturing operations are
located at 8000 South Federal Way, Boise, Idaho 83716-9632 and its telephone
number is (208) 368-4000. MEI's executive offices and principal manufacturing
operations are located at 900 East Karcher Road, Nampa, Idaho, 83687-3045 and
its telephone number is (208) 898-3434.
RECENT EVENTS
The following transactions occurred after the Company's 1998 year end and to
the extent appropriate are reflected in the following discussions.
On September 30, 1998, the Company completed its acquisition (the
"Acquisition") of substantially all of the semiconductor memory manufacturing
operations of Texas Instruments Incorporated ("TI"). The Acquisition was
consummated through the issuance of debt and equity securities. TI received
approximately 28.9 million shares of MTI common stock, $740 million principal
amount of convertible subordinated notes (the "Convertible Notes") and $210
million principal amount of subordinated notes (the "Subordinated Notes"). In
addition to TI's memory assets, the Company received $550 million in cash. The
Company and TI also entered into a ten-year, royalty-free, life-of-patents,
patent cross license that commences on January 1, 1999. The parties have also
agreed to make cash adjustments to ensure that current assets minus the sum of
current and noncurrent assumed liabilities of the acquired operations is $150
million as of September 30, 1998.
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The Company granted certain registration rights to TI for the MTI common stock
and Convertible Notes that commence on March 31, 1999. The Convertible Notes
and the Subordinated Notes issued in the transaction bear interest at the rate
of 6.5% and have a term of seven years. The Convertible Notes are convertible
into approximately 12.3 million shares of MTI common stock at a conversion price
of $60 per share. The Subordinated Notes are subordinated to the Convertible
Notes, the Company's outstanding 7% Convertible Subordinated Notes due July 1,
2004, and substantially all of the Company's other indebtedness.
The assets acquired by the Company in the Acquisition include a wafer
fabrication operation in Avezzano, Italy, an assembly/test operation in
Singapore, and a wafer fabrication facility in Richardson, Texas. TI closed the
Richardson memory manufacturing operation in June 1998. Also included in the
Acquisition was TI's interest in two joint ventures and TI's rights to 100% of
the output of the joint ventures: TECH Semiconductor Singapore ("TECH"), owned
by TI, Canon, Inc., Hewlett-Packard Singapore (Private) Limited, a subsidiary of
Hewlett-Packard Company, and EDB Investments Pte. Ltd., which is controlled by
the Economic Development Board of the Singapore government; and KTI
Semiconductor ("KTI") in Japan owned by TI and Kobe Steel, Ltd. MTI acquired
TI's approximate 30% interest in TECH and 25% interest in KTI. The Company
filed Form 8-K/A on October 16, 1998, which incorporates historical and pro
forma financial information with respect to the Acquisition.
On October 19, 1998, the Company issued to Intel Corporation ("Intel")
approximately 15.8 million stock rights (the "Rights") exchangeable into non-
voting Class A Common Stock (upon MTI shareholder approval of such class of
stock) or into common stock of the Company for a purchase price of $500 million.
The Rights at the time of issuance represented approximately 6% of the Company's
outstanding common stock. The Rights (or Class A Common Stock) will
automatically be exchanged for (or converted into) the Company's common stock
upon a transfer to a holder other than Intel or a 90% owned subsidiary of Intel.
The Company has agreed to seek shareholder approval to amend its Certificate of
Incorporation to create the non-voting Class A Common Stock at the Company's
next Annual Meeting of Shareholders. In the event the Company's shareholders
approve the amendment, the Rights will be automatically exchanged for Class A
Common Stock upon the filing in Delaware of the amended Certificate of
Incorporation. In the event the Company's shareholders do not approve the
amendment, the Rights will remain exchangeable into the Company's common stock.
In order to exchange the Rights for the Company's common stock, Intel would be
required to provide the Company with written evidence of compliance with the
Hart-Scott-Rodino Act ("HSR") filing requirements or that no HSR filings are
required. In addition, the Company granted certain registration rights to Intel
that commence on March 31, 1999. Intel also has the right to designate a
nominee acceptable to the Company to the Company's Board of Directors.
In consideration for Intel's investment, the Company has agreed to commit to
the development of direct Rambus DRAM ("RDRAM") products, to meet certain
production and capital expenditure milestones and to make available to Intel a
certain percentage of its semiconductor memory output over a five-year period,
subject to certain limitations. The exchange ratio of the Rights and conversion
ratio of the Class A Common Stock is subject to adjustment under certain
formulae at the election of Intel in the event MTI fails to meet the production
or capital expenditure milestones. No adjustment will occur to the exchange
ratio or conversion ratio under such formulae (i) if the Company achieves the
production and capital expenditure milestones, or (ii) unless the price of the
Company's common stock for a twenty day period ending two days prior to such
milestone dates is lower than $31.625 (the market price of the Company's common
stock at the time of the investment). In addition, in no event will the Company
be obligated to issue more than: (a) a number of additional shares of Class A
Common Stock (or common stock) having a value exceeding $150 million; or (b) a
number of additional shares exceeding the number of Rights originally issued.
On September 11, 1998, the Company completed a stock-for-stock merger with
Rendition, Inc. ("Rendition"). Rendition designs, develops and markets high-
performance, low-cost, multi-functional graphics accelerators to the personal
computer market. The merger was accounted for as a business combination using
the pooling-of-interests method. Shareholders of Rendition received
approximately 3.7 million shares of the Company's common stock.
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PRODUCTS
The Company's principal product categories are semiconductor memory products
(primarily DRAM) and PC systems.
SEMICONDUCTOR MEMORY PRODUCTS
The Company's semiconductor manufacturing operations focus primarily on the
design, development and manufacture of semiconductor memory products for
standard memory applications, with various packaging and configuration options,
architectures and performance characteristics. Manufacture of the Company's
semiconductor memory products utilizes proprietary advanced complementary metal-
oxide-semiconductor ("CMOS") silicon gate process technology.
DYNAMIC RANDOM ACCESS MEMORY. A DRAM is a high density, low cost per bit
random access memory component which stores digital information in the form of
bits and provides high-speed storage and retrieval of data. DRAMs are the most
widely used semiconductor memory component in most PC systems. Synchronous DRAM
("SDRAM") is a memory component which operates faster than standard DRAM, due in
part to the addition of a clock input that synchronizes all operations and
allows PC systems to transfer data at faster rates, allowing subsystems to
maintain pace with the fastest CPU's and graphics engines.
The Company's primary product during 1998 was the 16 Meg DRAM, available in
multiple configurations, speeds and package types. The Company is in the
process of ramping volume production of the 64 Meg DRAM. Bit crossover from the
16 Meg DRAM to the 64 Meg DRAM at the Boise, Idaho, operations occurred in
August 1998, and unit crossover is expected in October 1998. DRAM sales
represented approximately 43%, 48% and 57% of the Company's total net sales in
1998, 1997 and 1996, respectively. In 1998, SDRAM was the Company's primary
DRAM technology and substantially all SDRAM components were designed for PC-100
compatibility. At year end 1998, over 70% of the Company's Boise, Idaho,
production volume as measured by wafer starts was 64 Meg SDRAM.
OTHER SEMICONDUCTOR MEMORY PRODUCTS. Other semiconductor memory products
produced by the Company include Static Random Access Memory ("SRAM") devices,
Flash ("Flash") memory components and SpecTek component recovery memory
products.
SRAM is a semiconductor device which performs memory functions much the same
as DRAM, but does not require memory cells to be electronically refreshed and
operates faster than DRAM. The Company focuses on the high-performance, or
"Very Fast," sector of SRAMs which are used in applications that require a
"buffer" or "cache" of high speed memory between the CPU and main DRAM memory.
SRAM sales represented 2%, 1% and 2% of the Company's total net sales in 1998,
1997 and 1996, respectively.
Flash components are non-volatile semiconductor devices that retain memory
content when the power is turned off and are electrically erasable and
reprogrammable. Flash devices can be updated with new revisions of code,
different user parameters or settings and data collected over time. Flash
devices are used in digital cellular phones, networking applications,
workstations, servers and PCs. The Company is currently running production of
the 2 Meg, 4 Meg and 8 Meg 3.3 Volt and 5 Volt Boot Block Flash. Flash sales
represented less than 1% of the Company's semiconductor memory sales in 1998 and
1997.
The Company's SpecTek memory products operation processes and markets various
grades of nonstandard DRAM components under the SpecTek brand name in either
component or module forms. Nonstandard memory components are tested and
generally graded to their highest level of functionality. Higher grade
components meeting industry specifications are available for use in memory
modules. Certain reduced specification components may be used in nonstandard
memory modules or sold to strategic OEM customers for use in specific
applications.
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PERSONAL COMPUTER SYSTEMS
The Company develops, markets, manufactures, sells and supports a wide range
of memory intensive, high performance desktop and notebook PC systems and
network servers and sells and supports a variety of additional peripherals,
software and services. These systems use Pentium, Pentium Pro and Pentium II
microprocessors manufactured by Intel and are assembled to order with differing
memory and storage configurations as well as various operating and application
software. The Company also offers a variety of other components and peripherals
with its PC systems and network servers, including monitors, modems, graphics
cards, accelerators, and CD-ROM and DVD drives.
The Company's current product lines include the Millennia(R) line of PC
systems targeted for technology-savvy consumer, business and government users.
The ClientPro(R) is a flexible and affordable line of managed PC's designed as
a network solution for businesses demanding computing stability and
performance. The GoBook(TM) is the Company's line of thin, lightweight
notebook products featuring high speed microprocessors and large displays. The
Transport Trek(TM) notebook is designed for affordable desktop-like
performance for business applications. NetFRAME(R) series workgroup servers
provide cost-effective server solutions specifically designed for small to
medium sized businesses and for decentralized remote locations and
departments. The Company's new mPower(TM) program is a comprehensive PC
lifecycle management program to address personal computer obsolescence,
upgrading and financing tailored specifically to provide businesses and
consumers flexibility and value for their information technology expenditures.
Net sales of PC systems, exclusive of sales of MTI semiconductor memory
products incorporated in MEI PC systems, represented 48%, 42% and 31% of the
Company's total net sales for 1998, 1997 and 1996, respectively.
MANUFACTURING
SEMICONDUCTOR MEMORY PRODUCTS
The manufacturing of the Company's semiconductor products is a complex process
and involves a number of precise steps, including wafer fabrication, assembly,
burn-in and final test. Efficient production of the Company's semiconductor
memory products requires utilization of advanced semiconductor manufacturing
techniques. Manufacturing cost per unit is primarily a function of die size
(since the potential number of good die per wafer increases with reduced die
size), number of mask layers, the yield of acceptable die produced on each wafer
and labor productivity. Other contributing factors are wafer size, number of
fabrication steps, cost and sophistication of the manufacturing equipment,
equipment utilization, process complexity, package type and cleanliness. The
Company is engaged in ongoing efforts to enhance its production processes,
reduce the die size of existing products and increase capacity utilization.
Wafer fabrication occurs in a highly controlled, clean environment to minimize
dust and other yield- and quality-limiting contaminants. Despite stringent
manufacturing controls, equipment does not consistently perform flawlessly and
minute impurities, defects in the photomasks or other difficulties in the
process may cause a substantial percentage of the wafers to be scrapped or
individual circuits to be nonfunctional. The success of the Company's
manufacturing operations will be largely dependent on its ability to minimize
such impurities and to maximize its yield of acceptable, high-quality circuits.
In this regard, the Company employs rigorous quality controls throughout the
manufacturing, screening and testing processes.
After fabrication, each silicon wafer is separated into individual die.
Functional die are connected to external leads by extremely fine wire and are
assembled into plastic packages. Each completed package is then inspected,
sealed and tested. The assembly process uses high-speed automatic systems such
as wire bonders, as well as semi-automatic plastic encapsulation and solder
systems. The Company tests its products at various stages in the manufacturing
process, performs high temperature burn-in on finished products and conducts
numerous quality control inspections throughout the entire production flow. In
addition, through the utilization of its proprietary
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AMBYX line of intelligent test and burn-in systems, the Company simultaneously
conducts circuit testing of all die during the burn-in process, capturing
quality and reliability data, and reducing testing time and cost.
The Company's semiconductor manufacturing facility in Boise, Idaho, includes
two 8 inch-wafer fabs equipped with diffusion tubes, photolithography systems,
ion implant equipment, chemical vapor deposition reactors, sputtering systems,
plasma and wet etchers, and automated mask inspection systems. The Boise,
Idaho, production facility operates in 12-hour shifts, 24 hours per day and 7
days per week to reduce down time during shift changes, and to reduce total
fabrication costs by maximizing utilization of fabrication facilities.
As of September 30, 1998, the Company acquired additional manufacturing
operations including a wafer fabrication facility in Avezzano, Italy, an
assembly/test facility in Singapore, and interests in the TECH and KTI wafer
fabrication joint ventures. The Company expects to transfer its product and
process technology into the acquired wafer fabrication facilities over the next
12 to 18 months. To the extent practicable, the Company expects to operate
these acquired manufacturing facilities using manufacturing methods similar to
those used in its Boise, Idaho, operations. There may be differences, however,
attributable to governmental constraints, labor organizations or cultural
differences that necessitate variances. There can be no assurance that the
Company will successfully integrate these operations or that the product and
process technology transfer to such facilities will be successful. The success
of these acquired operations is dependent on the Company's ability to achieve
high yields and generate high-quality circuits at a low cost. There can be no
assurance that the Company will be successful in achieving the same level of
manufacturing efficiencies in the acquired facilities as has been achieved in
its Boise, Idaho, facilities.
The acquired wafer fabrication facility in Richardson, Texas, is currently
being used by the Company as a design engineering center. Timing of the
completion of MTI's semiconductor manufacturing facility in Lehi, Utah, which
was suspended in February 1996 as a result of the decline in average selling
prices for semiconductor memory products, is dependent upon market conditions.
PERSONAL COMPUTER SYSTEMS
The Company's PC system manufacturing process is designed to provide custom-
configured PC products to its customers, and includes assembling components,
loading software and testing each system prior to shipment. The Company's PC
systems are generally assembled to order based on customer specifications.
Parts and components required for each customer order are selected from
inventory and are prepared for assembly into a customized PC system. The
Company's desktop PC systems are generally assembled in the Company's
facilities. The Company's notebook PC systems are designed to include feature
sets defined by the Company, are assembled by third party suppliers and tested
according to the Company's standards.
AVAILABILITY OF RAW MATERIALS
SEMICONDUCTOR MEMORY PRODUCTS
The raw materials utilized by the Company's semiconductor memory manufacturing
operations generally must meet exacting product specifications. The Company
generally uses multiple sources of supply, but the number of suppliers capable
of delivering certain raw materials is very limited. The availability of raw
materials, such as silicon wafers, molding compound and lead frames, may decline
due to the increase in worldwide semiconductor manufacturing. Although
shortages have occurred from time to time and lead times in the industry have
been extended on occasion, to date the Company has not experienced any
significant interruption in operations as a result of a difficulty in obtaining
raw materials for its semiconductor memory manufacturing operations.
Interruption of any one raw material source could adversely affect the Company's
operations.
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PERSONAL COMPUTER SYSTEMS
The Company relies on third-party suppliers for its PC system components and
seeks to identify suppliers able to provide state-of-the-art technology, product
quality and prompt delivery at competitive prices. The Company purchases
substantially all of its PC components, subassemblies and software from
suppliers on a purchase order basis and generally does not have long-term supply
arrangements with its suppliers. Although the Company attempts to use standard
components, subassemblies and software available from multiple suppliers,
certain of its components, subassemblies and software are available only from
sole suppliers or a limited number of suppliers. The microprocessors used in
the Company's PC systems are manufactured exclusively by Intel. From time to
time, the Company has been unable to obtain a sufficient supply of the latest
generation Intel microprocessors. Any interruption in the supply of any of the
components, subassemblies and software currently obtained from a single source
or relatively few sources, or a decrease in the general availability of any
other components, subassemblies or software used in the Company's PC systems,
could result in production delays and adversely affect the Company's PC systems
business and results of operations.
MARKETING AND CUSTOMERS
SEMICONDUCTOR MEMORY PRODUCTS
The semiconductor memory industry is characterized by rapid technological
change, relatively short product life cycles, frequent product introductions and
enhancements, difficult product transitions and volatile market conditions.
Historically, the semiconductor industry, and the DRAM market in particular,
have been highly cyclical.
The Company's primary semiconductor memory products are essentially
interchangeable with, and have similar functionality to, products offered by the
Company's competition. Customers for the Company's semiconductor memory
products include major domestic computer manufacturers and others in the
computer, telecommunications and office automation industries. The Company
markets its semiconductor memory products worldwide through independent sales
representatives, distributors and its own direct sales force. The Company
maintains semiconductor sales offices in the United States, United Kingdom,
Germany, Singapore, Japan and Taiwan. Sales representatives are compensated on
a commission basis and obtain orders subject to final acceptance by the Company.
The Company makes shipments against these orders directly to the customer.
Distributors carry the Company's products in inventory and typically sell a
variety of other semiconductor products, including competitors' products.
Semiconductor memory products sold through distributors approximated 11%, 7% and
8% of semiconductor net sales in 1998, 1997 and 1996, respectively.
Many of the Company's customers require a thorough review or "qualification"
of new semiconductor memory products and processes that may take several months.
As the Company diversifies its product lines and reduces the die sizes of
existing memory products, acceptance of these products and processes is subject
to this qualification procedure. There can be no assurance that new products or
processes will be qualified for purchase by existing or potential customers.
Sales to Dell Computer Corporation represented approximately 15% and 11% of
the Company's net sales of semiconductor memory products in 1998 and 1997,
respectively. Sales to Compaq Computer Corporation represented approximately
11% of the Company's net sales of semiconductor memory products in 1996. No
other customer individually accounted for 10% or more of the Company's net sales
of semiconductor memory products in 1998, 1997 or 1996.
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PERSONAL COMPUTER SYSTEMS
The Company's direct marketing approach is aimed toward PC users who evaluate
products based on performance, price, reliability, service and support. The
Company's customers are comprised primarily of consumers and commercial and
public entities. The Company markets its PC systems primarily by strategically
placing advertisements in personal computer trade publications, submitting its
products for review and evaluation by these publications and advertising its
products in certain newspapers and other publications and on its home page on
the Internet. The Company also markets its PC systems through direct-mail
campaigns and sells a limited number of PC systems through its factory outlet
stores located in Idaho and Utah. In addition, the Company sells its PC systems
through strategic relationships with third parties having large government
procurement contracts.
By focusing on the direct sales channel, the Company can avoid dealer markups
typically experienced in the retail sales channel, limit inventory carrying
costs and maintain closer contact with its target markets. Direct sales orders
are received primarily via telephone, facsimile, the Company's home page on the
Internet and through its direct sales force. The Company's sales
representatives assist customers in determining system configuration,
compatibility and current pricing. Customers generally order systems configured
with varying feature sets differentiated by microprocessor speed, hard drive
capacity, amount of memory, monitor size and resolution and bundled software, as
well as other features. The Company offers its customers a variety of payment
alternatives, including commercial trade terms, lease financing, cash on
delivery, its own private label credit card and other credit cards. The
Company's NetFRAME enterprise servers are sold primarily through the Company's
direct sales force and through value added resellers worldwide.
EXPORT SALES
Export sales totaled approximately $613 million for 1998, including
approximately $83 million in export sales of PC systems. Export sales included
approximately $275 million in sales to Europe, $179 million in sales to Asia
Pacific, $47 million in sales to Canada and $43 million in sales to Japan.
Export sales approximated $735 million and $938 million for 1997 and 1996,
respectively. The Company believes that export sales will increase as a result
of the Acquisition.
BACKLOG
SEMICONDUCTOR MEMORY PRODUCTS
Cyclical industry conditions make it difficult for many customers to enter
into long-term, fixed-price contracts and, accordingly, new order volumes for
the Company's semiconductor memory products fluctuate significantly. Orders
are typically accepted with acknowledgment that the terms may be adjusted to
reflect market conditions at the delivery date. For the foregoing reasons, and
because of the possibility of customer changes in delivery schedules or
cancellation of orders without significant penalty, the Company does not believe
that its backlog of semiconductor memory products as of any particular date is
firm or a reliable indicator of actual sales for any succeeding period.
PERSONAL COMPUTER SYSTEMS
Levels of unfilled orders for PC systems fluctuate depending upon component
availability, demand for certain products, the timing of large volume customer
orders and the Company's production schedules. Customers frequently change
delivery schedules and orders depending on market conditions and other reasons
and the Company allows the cancellation of unfilled orders without penalty any
time prior to shipment. As of September 3, 1998, the Company had unfilled
orders for PC systems of approximately $22 million compared to $42 million as of
August 28, 1997. The Company anticipates that substantially all of the unfilled
orders as of September 3, 1998, other than those subsequently canceled, will be
shipped within 30 days. The Company believes that backlog of unfilled orders of
PC systems is not indicative of actual sales for any succeeding period.
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PRODUCT WARRANTY
SEMICONDUCTOR MEMORY PRODUCTS
Consistent with semiconductor memory industry practice, the Company generally
provides a limited warranty that its semiconductor memory products are in
compliance with specifications existing at the time of delivery. Liability for
a stated warranty period is usually limited to replacement of defective items or
return of amounts paid.
PERSONAL COMPUTER SYSTEMS
Customers may generally return PC products within 30 days after shipment for a
full refund of the purchase price. The Company generally sells desktop and
notebook PC systems and servers with the Micron Power(SM) limited warranty,
including a five-year limited warranty on the microprocessor and main memory,
and a three-year limited warranty covering repair or replacement for defects in
workmanship or materials on the remaining hardware,.
COMPETITION
SEMICONDUCTOR MEMORY PRODUCTS
The Company's semiconductor memory operations experience intense competition
from a number of substantially larger foreign and domestic companies, including
Hitachi, Ltd., Hyundai Electronics, Co., Ltd., LG Semicon, NEC Corp., Samsung
Semiconductor, Inc., Siemens AG and Toshiba Corporation. Although the Company
has captured an increasing percentage of the semiconductor memory market in
recent periods and expects to gain additional market share as a result of the
Acquisition, it may be at a disadvantage in competing against manufacturers
having significantly greater capital resources, manufacturing capacity, engineer
and employee bases and portfolios of intellectual property and more diverse
product lines. As a result of greater product diversification and resources,
the Company's larger competitors may have long-term advantages in research and
new product development, and in their ability to withstand current or future
downturns in the semiconductor memory market. The Company's competitors are
also aggressively seeking improved yields, smaller die size and fewer mask
levels in their product designs. These improvements could result in a dramatic
increase in worldwide capacity leading to further downward pressure on product
prices.
Certain of the Company's competitors have announced merger plans. Any such
merger or consolidation could put the Company at a further disadvantage with
respect to such competitors.
PERSONAL COMPUTER SYSTEMS
The PC industry is highly competitive and has been characterized by intense
pricing pressure, generally low gross margin percentages, rapid technological
advances in hardware and software, frequent introduction of new products, and
rapidly declining component costs. Competition in the PC industry is based
primarily upon brand name recognition, performance, price, reliability and
service and support. The Company's sales of PC systems have historically
benefited from increased name recognition and market acceptance of the Company's
PC systems, primarily resulting from the receipt by the Company of awards from
trade publications recognizing the price and performance characteristics of
Micron brand PC systems and the Company's service and support functions. The
Company competes with a number of PC manufacturers, which sell their products
primarily through direct channels, including Dell Computer, Inc. and Gateway
2000, Inc. The Company also competes with PC manufacturers, such as Apple
Computer, Inc., Compaq Computer Corporation, Hewlett-Packard Company,
International Business Machines Corporation, NEC Corporation and Toshiba
Corporation among others, which have traditionally sold their products
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through national and regional distributors, dealers and value added resellers,
retail stores and direct sales forces. (See "Certain Factors--Personal Computer
Systems--Competition.")
RESEARCH AND DEVELOPMENT
Rapid technological change and intense price competition place a premium on
both new product and new process development efforts. The Company's continued
ability to compete in the semiconductor memory market will depend in part on its
ability to continue to develop technologically advanced products and processes,
of which there can be no assurance. Research and development is being performed
in strategic areas related to the Company's semiconductor expertise. Total
research and development expenditures for the Company were $272 million, $209
million and $192 million in 1998, 1997 and 1996, respectively.
Research and development expenses relating to the Company's semiconductor
memory operations, which constitute substantially all of the Company's research
and development expenses, vary primarily with the number of wafers processed,
personnel costs, and the cost of advanced equipment dedicated to new product and
process development. Research and development efforts are continually devoted
to developing leading process technology, which is the primary determinant in
the Company's ability to transition to next generation products. Application of
current developments in advanced process technology is currently concentrated on
shrink versions of the Company's 64 Meg SDRAM and development of the 128 Meg
SDRAM and RDRAM, Double Data Rate (DDR) and SyncLink memory products. Other
research and development efforts are devoted to the design and development of
remote intelligent communications technology ("RIC"), flat panel displays,
graphics accelerator products and PC systems.
In 1998, the Company transitioned a substantial portion of it's Boise, Idaho,
semiconductor manufacturing capacity, as measured by wafer starts, to .25 and
.21 micron (mu) line width processing from .30 (mu) line width processing. The
Company anticipates that it will utilize .21 (mu) line width processing for
approximately 85% of its Boise, Idaho, wafer starts by the end of calendar 1998.
The Company's transition to .18 (mu) line width processing is currently
anticipated in calendar 1999. The Company's process technology is expected to
progress to tighter geometries as needed for cost effective development of
future generation semiconductor products. The operations acquired in the
Acquisition currently utilize .30 (mu) line width process technology. The
Company anticipates transitioning the acquired operations to .21 (mu) line width
processing as the Company transfers its product and process technology to such
facilities. These facilities will be transitioned to .18 (mu) line width
processing in the future.
PATENTS AND LICENSES
As of September 3, 1998, the Company owned approximately 2,100 United States
patents and 170 foreign patents relating to the use of its products and
processes. In addition, the Company has numerous United States and foreign
patent applications pending.
The Company has entered into a number of cross-license agreements with third
parties. The agreements typically require one-time and/or periodic royalty
payments and expire at various times. One-time payments are typically
capitalized and amortized over the shorter of the estimated useful life of the
technology, the patent term or the term of the agreement. Royalty and other
product and process technology expenses were $170 million, $201 million and $153
million in 1998, 1997 and 1996, respectively. As a result of the expiration of
certain license agreements and the execution of the ten-year, royalty-free,
life-of-patents, patent cross license with TI, the Company expects product and
process technology expenses in 1999 to be significantly lower than in prior
years. In the future, it may be necessary or advantageous for the Company to
obtain additional patent licenses or to renew existing license agreements. The
Company is unable to predict whether these license agreements can be obtained or
renewed on terms acceptable to the Company. Adverse determinations that the
Company's manufacturing processes or products have infringed on the product or
process rights held by others could subject the Company to significant
liabilities to third parties or require material changes in production processes
or products, any of which could have a material
9
<PAGE>
adverse effect on the Company's business, results of operations and financial
condition. (See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Certain Factors.")
EMPLOYEES
As of September 3, 1998, the Company had approximately 11,400 full-time
employees, including approximately 8,800 in the semiconductor memory
manufacturing operations (including the component recovery operations) and 2,400
in the PC systems operations. Employment levels can vary depending on market
conditions and the level of the Company's production, research and product and
process development and administrative support activities. Many of the
Company's employees are highly skilled and the Company's continued success
depends in part upon its ability to attract and retain such employees.
As a result of the Acquisition, the Company's employee base grew by
approximately 3,900 employees, including 1,400 in Avezzano, Italy, 2,300 in
Singapore, and 200 in the United States. The Company's Italian employees are
represented by labor organizations that have entered into national and local
labor contracts with the Company. There can be no assurance the Company will be
able to assimilate, retain and attract key personnel in these foreign locations.
Because the Company has the right and obligation to purchase 100% of the output
of the KTI and TECH joint ventures, the Company is also dependent on the
performance of the approximate 770 employees at KTI and approximate 1,000
employees at TECH. There can be no assurance the joint ventures will be able to
retain and attract key personnel. The loss of key personnel from these
facilities could have an adverse effect on the Company's results of operations.
The Company gained approximately 100 employees located in California in its
merger with Rendition. These employees will focus on the Company's graphics
accelerator projects.
ENVIRONMENTAL COMPLIANCE
Government regulations impose various environmental controls on discharges,
emissions and solid wastes from the Company's manufacturing processes. The
Company believes that its activities conform to present environmental
regulations. In June 1998, the Idaho Association of Commerce and Industry gave
the Company's semiconductor memory operation its Environmental Excellence Award.
The award was created to formally recognize companies that have taken an extra
step in environmental protection in Idaho. In 1998, the Company continued to
conform to the requirements of ISO 14001 certification including a successful
independent surveillance audit. To continue certification, the Company met
requirements in environmental policy, planning, management, structure and
responsibility, training, communication, document control, operational control,
emergency preparedness and response, record keeping and management review.
While the Company has not experienced any materially adverse effects on its
operations from environmental or other government regulations, there can be no
assurance that changes in such regulations will not impose the need for
additional capital equipment or other compliance requirements. Additionally,
the extensive process required to obtain permits for expansion of the Company's
facilities may impact how quickly the Company can respond to increases in market
demand.
The Company is continuing to evaluate environmental compliance at the
facilities acquired in the Acquisition. The Company believes the activities at
the acquired facilities are in substantial compliance with present environmental
laws and regulations. There can be no assurance that further evaluation of the
facilities, or changes in applicable laws and regulations, will not require the
Company to incur substantial expenditures for additional equipment, improved
processes or other compliance requirements.
10
<PAGE>
OFFICERS AND DIRECTORS OF THE REGISTRANT
Officers of the Company are appointed annually by the Board of Directors.
Directors of the Company are elected annually by the shareholders of the
Company. Any directors appointed by the Board of Directors to fill vacancies on
the Board serve until the next election by the shareholders. All officers and
directors serve until their successors are duly chosen or elected and qualified,
except in the case of earlier death, resignation or removal.
As of October 23, 1998, the following executive officers and directors of the
Company were subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Steven R. Appleton................ 38 Chief Executive Officer, President and Chairman of the
Board of Directors
Donald D. Baldwin................. 38 Vice President of Sales and Marketing
Kipp A. Bedard.................... 39 Vice President of Corporate Affairs
Robert M. Donnelly................ 59 Vice President of Memory Products
D. Mark Durcan.................... 37 Chief Technical Officer and Vice President of Research
& Development
Jay L. Hawkins.................... 38 Vice President of Operations
Joel J. Kocher.................... 42 Chairman, Chief Executive Officer, President and Chief Operating Officer of Micron
Electronics, Inc.
Roderic W. Lewis.................. 43 Vice President of Legal Affairs, General Counsel and
Corporate Secretary
Wilbur G. Stover, Jr.............. 45 Chief Financial Officer and Vice President of Finance
James W. Bagley................... 59 Director
Robert A. Lothrop................. 72 Director
Thomas T. Nicholson............... 62 Director
Don J. Simplot.................... 63 Director
John R. Simplot................... 89 Director
Gordon C. Smith................... 69 Director
William P. Weber.................. 58 Director
</TABLE>
Steven R. Appleton joined MTI in February 1983 and has served in various
capacities with the Company and its subsidiaries. Mr. Appleton first became an
officer of MTI in August 1989 and has served in various officer positions,
including overseeing the Company's semiconductor operations as President, Chief
Executive Officer and Director of Micron Semiconductor, Inc. ("MSI"), then a
wholly-owned subsidiary of MTI, from July 1992 to November 1994. From April
1991 until July 1992 and since May 1994, Mr. Appleton has served on MTI's Board
of Directors. Since September 1994, Mr. Appleton has served as the Chief
Executive Officer, President and Chairman of the Board of Directors of MTI. Mr.
Appleton also serves as a Director of MEI. Mr. Appleton holds a BA in Business
Management from Boise State University.
Donald D. Baldwin joined MTI in April 1984 and has served in various
capacities with the Company and its subsidiaries. Mr. Baldwin first became an
officer of MTI in May 1991 and has served in various officer positions,
including Vice President, Sales of MSI from July 1992 to November 1994. Mr.
Baldwin served as Vice President, Sales for MTI from November 1994 through June
1997, at which time he became Vice President of Sales and Marketing. Mr.
Baldwin holds a BA in Marketing from Boise State University.
Kipp A. Bedard joined MTI in November 1983 and has served in various
capacities with the Company and its subsidiaries. Mr. Bedard first became an
officer of MTI in April 1990 and has served in various officer positions,
including Vice President, Corporate Affairs of MSI from July 1992 to January
1994. Since January 1994, Mr. Bedard has served as Vice President of Corporate
Affairs for MTI. Mr. Bedard holds a BBA in Accounting from Boise State
University.
11
<PAGE>
Robert M. Donnelly joined MTI in September 1988 and has served in various
technical positions with the Company and its subsidiaries. Mr. Donnelly first
became an officer of MTI in August 1989 and has served in various officer
positions, including Vice President, SRAM Products Group of MSI from July 1992
to November 1994. Mr. Donnelly was named Vice President, SRAM Products Group
for MTI in November 1994. Mr. Donnelly served as Vice President, SRAM Design
and Product Engineering for MTI from October 1995 through November 1996, at
which time he became Vice President of Memory Products. Mr. Donnelly holds a BS
in Electrical Engineering from the University of Louisville.
D. Mark Durcan joined MTI in 1984 and has served in various technical
positions with the Company and its subsidiaries, including Process Integration
Manager from December 1989 until May 1995 and Manager of Process Research and
Development from May 1995 until June 1996. Mr. Durcan served as Vice President,
Process Research and Development from June 1996 through June 1997, at which time
he became Chief Technical Officer and Vice President of Research & Development.
Mr. Durcan holds a BS and MS in Chemical Engineering from Rice University.
Jay L. Hawkins joined MTI in March 1984 and has served in various
manufacturing positions for the Company and its subsidiaries, including Director
of Manufacturing for MSI from July 1992 to November 1994 and Director of
Manufacturing for MTI from November 1994 to February 1996. Mr. Hawkins served
as Vice President, Manufacturing Administration from February 1996 through June
1997, at which time he became Vice President of Operations. Mr. Hawkins holds a
BBA in Marketing from Boise State University.
Joel J. Kocher joined MEI in January 1998. Prior to joining MEI, Mr. Kocher
was employed by Dell Computer Corporation from 1987 until September 1994, most
recently serving as President of Worldwide Marketing, Sales and Service. In
October 1994, Mr. Kocher joined Artistsoft, where he initially served as
Executive Vice President and Chief Operating Officer and subsequently served
from October 1995 until December 1996 as President, Chief Operating Officer, and
Director of Artistsoft. From December 1996 until August 1997, Mr. Kocher served
as President and Chief Operating Officer at Power Computing Corporation. Since
January 1998, Mr. Kocher has served as the President and Chief Operating Officer
of MEI and since June 1998 has also served as Chairman and Chief Executive
Officer of MEI. Mr. Kocher holds a BBA in Marketing from the University of
Florida.
Roderic W. Lewis joined MTI in 1991 and has served in various capacities with
the Company and its subsidiaries, including Assistant General Counsel for MTI
from August 1993 to April 1995. From April 1995 to July 1996, Mr. Lewis served
as Vice President, General Counsel and Corporate Secretary for MEI. Mr. Lewis
served as Vice President, General Counsel and Corporate Secretary for MTI from
July 1996 until November 1996, at which time he became Vice President of Legal
Affairs, General Counsel and Corporate Secretary. Mr. Lewis holds a BA in
Economics and Asian Studies from Brigham Young University and a JD from Columbia
University School of Law.
Wilbur G. Stover, Jr. joined MTI in June 1989 and has served in various
financial positions with the Company and its subsidiaries, including Vice
President, Finance and Chief Financial Officer of MSI from August 1992 to
September 1994. Since September 1994, Mr. Stover has served as MTI's Chief
Financial Officer and Vice President of Finance. From October 1994 through
September 1996, Mr. Stover served on MTI's Board of Directors. Mr. Stover holds
a BA in Business Administration from Washington State University.
James W. Bagley became the Chairman and Chief Executive Officer of Lam
Research, Inc. ("Lam") in August 1997, upon consummation of a merger of OnTrak
Systems, Inc. ("OnTrak") into Lam. From June 1996 to August 1997, Mr. Bagley
served as the Chairman and Chief Executive Officer of OnTrak. Prior to joining
OnTrak, Mr. Bagley was employed by Applied Materials, Inc. for 15 years in
various senior management positions, including Chief Operating Officer and Vice
Chairman of the Board. Mr. Bagley currently is a director of KLA-Tencor
Corporation, Teradyne, Inc. and Kulicke & Soffe Industries, Inc. He has served
on MTI's Board of Directors since June 1997. Mr. Bagley holds a BS in
Electrical Engineering and MS in Electrical Engineering from Mississippi State
University.
12
<PAGE>
Robert A. Lothrop served as Senior Vice President of the J.R. Simplot Company
from January 1986 until his retirement in January 1991. From August 1986 until
July 1992 and since May 1994, Mr. Lothrop has served on the Board of Directors
of MTI. From July 1992 until November 1994, he served as a Director of MSI.
Mr. Lothrop also serves as a Director of MEI. Mr. Lothrop holds a BS in
Engineering from the University of Idaho.
Thomas T. Nicholson has served as Vice President and a director of Honda of
Seattle since 1988. Mr. Nicholson has also served since 1982 as President of
Mountain View Equipment and since 1962 has been a partner of CCT Land & Cattle.
He has served on MTI's Board of Directors since May 1980. Mr. Nicholson holds a
BS in Agriculture from the University of Idaho.
Don J. Simplot served as the President of Simplot Financial Corporation, a
wholly-owned subsidiary of the J.R. Simplot Company, from February 1985 until
January 1992. Since 1955, Mr. Don J. Simplot has served in various capacities
with the J.R. Simplot Company and presently serves as a Corporate Vice
President. Since April 1994, he has also served as a member of the Office of
the Chairman of the J.R. Simplot Company. He has served on MTI's Board of
Directors since February 1982. Mr. Don Simplot is also a Director of
AirSensors, Inc.
John R. Simplot founded and served as the Chairman of the Board of Directors
of the J.R. Simplot Company prior to his retirement in April 1994, at which time
he was named Chairman Emeritus. He has served on MTI's Board of Directors since
May 1980. Mr. Simplot also serves as a Director of MEI.
Gordon C. Smith has served as President of Wesmar, Inc. since September 1996
and has served as Secretary and Treasurer of SSI Management Corp. since
September 1994. Mr. Smith served in various management positions from July 1980
until January 1992 for Simplot Financial Corporation, a wholly-owned subsidiary
of the J.R. Simplot Company. From May 1988 until his retirement in March 1994,
Mr. Smith served as the President and Chief Executive Officer of the J.R.
Simplot Company. From February 1982 until February 1984 and since September
1990, he has served on MTI's Board of Directors. Mr. Smith holds a bachelor's
degree in Accounting from Idaho State University.
William P. Weber served in various capacities with Texas Instruments
Incorporated and its subsidiaries from 1962 until April 1998. From December
1986 until December 1993 he served as the President of Texas Instrument's
worldwide semiconductor operations and from December 1993 until his retirement
in April 1998, he served as Vice Chairman of Texas Instruments Incorporated. He
is a member of the board of directors of Kmart Corporation and Unigraphics
Solutions, Inc. He has served on MTI's Board of Directors since July 1998. Mr.
Weber holds a BS in Engineering from Lamar University and a MS in Engineering
from Southern Methodist University.
There is no family relationship between any director or executive officer of
the Company, except between John R. Simplot and Don J. Simplot, who are father
and son, respectively.
13
<PAGE>
ITEM 2. PROPERTIES
The Company's principal semiconductor manufacturing, engineering,
administrative, and support facilities are located on an approximately 830 acre
site in Boise, Idaho. All facilities have been constructed since 1981 and are
owned by the Company. The Company has approximately 1.8 million square feet of
building space at this primary site. Of the total, approximately 489,000 square
feet is production space, 628,000 square feet is facility support space, and
678,000 square feet is office and other space.
With the acquisition of substantially all of TI's memory operations on
September 30, 1998, the Company obtained a number of additional properties
including a 587,000 square foot wafer fabrication facility located on 63 acres
in Avezzano, Italy, a 519,000 square foot assembly and test facility located on
7 acres in Singapore and a 418,000 square foot wafer fabrication facility
located on 36 acres in Richardson, Texas. The Avezzano facility includes
113,000 square feet for production space, 214,000 square feet for facility
support space and 260,000 for office and other space. The Singapore assembly
and test facility includes 181,000 square feet for production space, 98,000
square feet for facility support space and 241,000 square feet for office and
other space. Approximately 50,000 square feet at the Richardson facility is
being used for design engineering.
In 1995, the Company initiated construction of an approximate 2 million square
foot semiconductor memory manufacturing facility in Lehi, Utah. Completion of
this facility was suspended in February 1996 as a result of the decline in
average selling prices for semiconductor memory products. As of September 3,
1998, the Company had incurred construction costs of approximately $700 million
to build the existing structure. Market conditions for semiconductor memory
products will dictate when the Lehi complex is completed.
MEI's corporate headquarters, PC manufacturing operation and SpecTek operation
are based in a number of MEI-owned or leased facilities aggregating
approximately 300,000 square feet located in Nampa, Idaho. Approximately
100,000 square feet of the Nampa facilities are dedicated to PC manufacturing
and approximately 40,000 square feet are dedicated to the SpecTek operation.
The balance of the Nampa facilities is dedicated to sales, technical support,
customer service, administrative functions and warehouse space. In addition,
MEI is nearing completion of a new 325,000 square foot facility expected to be
in production in the fourth calendar quarter of 1998. The new facility is
expected to have approximately 135,000 square feet dedicated to PC
manufacturing. MEI leases a 77,000 square foot facility in Minneapolis,
Minnesota, dedicated primarily to PC sales, technical support and administrative
functions and a 75,000 square foot facility in Meridian, Idaho, dedicated to a
PC call center.
Equipment with a net book value of approximately $284 million was pledged as
collateral for outstanding debt and capital leases as of September 3, 1998.
Substantially all of the Company's facilities and equipment at the Boise and
Lehi sites not otherwise collateralized for outstanding debt and capital leases
is pledged as collateral for MTI's $400 million credit agreement.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party in various legal actions arising out of the normal
course of business, none of which is expected to have a material effect on the
Company's business and results of operations. (See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Certain Factors.")
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1998.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR COMMON STOCK
Micron Technology, Inc.'s common stock is listed on the New York Stock
Exchange and is traded under the symbol "MU." The following table represents
the high and low closing sales prices for the Company's common stock for each
quarter of 1998 and 1997, as reported by The Wall Street Journal.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
1998:
<S> <C> <C>
4th quarter........................................... $35.250 $20.125
3rd quarter........................................... 34.938 23.813
2nd quarter........................................... 38.000 22.000
1st quarter........................................... 45.312 23.125
1997:
4th quarter........................................... $60.063 $38.375
3rd quarter........................................... 45.250 33.250
2nd quarter........................................... 39.125 29.000
1st quarter........................................... 34.750 20.375
</TABLE>
HOLDERS OF RECORD
As of October 23, 1998, there were 6,523 shareholders of record of the
Company's common stock.
DIVIDENDS
The Company did not declare or pay any dividends during 1998 or 1997. The
Company declared and paid cash dividends of $0.15 per share during 1996.
Future dividends, if any, will vary depending on the Company's profitability and
anticipated capital requirements.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C>
(Amounts in millions, except for per share data)
Net sales................................... $3,011.9 $3,515.5 $3,653.8 $2,952.7 $1,628.6
Gross margin................................ 280.4 976.4 1,455.4 1,624.0 839.2
Operating income (loss)..................... (493.6) 402.4 940.5 1,307.8 625.7
Net income (loss)........................... (233.7) 332.2 593.5 844.1 400.5
Diluted earnings (loss) per share........... (1.10) 1.55 2.78 4.00 1.94
Cash dividend declared per share............ -- -- 0.15 0.15 0.06
Current assets.............................. 1,499.2 1,972.4 964.0 1,274.1 793.2
Property, plant and equipment, net.......... 3,030.8 2,761.2 2,708.1 1,385.6 663.5
Total assets................................ 4,688.3 4,851.3 3,751.5 2,774.9 1,529.7
Current liabilities......................... 740.3 749.9 664.5 604.8 274.2
Long-term debt.............................. 757.3 762.3 314.6 129.4 124.7
Shareholders' equity........................ 2,693.0 2,883.1 2,502.0 1,896.2 1,049.3
</TABLE>
Historical per share amounts have been restated in accordance with Statement
of Financial Accounting Standards No. 128. (See "Notes to Consolidated
Financial Statements." )
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of OperationsCertain Factors."
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion may contain trend information and other forward
looking statements (including statements regarding future operating results,
future capital expenditures and facility expansion, new product introductions,
the effect of the Acquisition, technological developments and industry trends)
that involve a number of risks and uncertainties. The Company's actual results
could differ materially from the Company's historical results of operations and
those discussed in the forward-looking statements. Factors that could cause
actual results to differ materially include, but are not limited to, those
identified in "Subsequent Events" and "Certain Factors." All period references
are to the Company's fiscal periods ended September 3, 1998, August 28, 1997 or
August 29, 1996, unless otherwise indicated. All per share amounts are
presented on a diluted basis unless otherwise stated.
Micron Technology, Inc. and its subsidiaries (hereinafter referred to
collectively as the "Company" or "MTI") principally design, develop, manufacture
and market semiconductor memory products and personal computer ("PC") systems.
The Company's PC systems business and semiconductor component recovery business
("SpecTek") are operated through Micron Electronics, Inc. ("MEI"), a 64% owned,
publicly-traded subsidiary of MTI.
RECENT EVENTS
The semiconductor industry in general, and the DRAM market in particular, is
experiencing a severe downturn. Per megabit prices declined approximately 60%
in 1998 following a 75% decline in 1997 and a 45% decline in 1996. These
extreme market conditions, while having an adverse effect on the Company's
results of operations, have also resulted in the Company being presented with
various strategic opportunities. On September 30, 1998, the Company completed
its acquisition (the "Acquisition") of substantially all of the semiconductor
memory operations of Texas Instruments, Inc. ("TI"). The Acquisition was
effected through the issuance of MTI debt and equity securities. Upon closing,
TI received approximately 28.9 million shares of MTI common stock, $740 million
principal amount, seven-year, 6.5% notes convertible into an additional
approximate 12.3 million shares of MTI common stock (the "Convertible Notes"),
and $210 million principal amount, seven year, 6.5% subordinated notes (the
"Subordinated Notes"). In addition to TI's memory assets, the Company received
approximately $550 million in cash. The Company and TI also entered into a ten-
year, royalty-free, life-of-patents, patent cross license that commences on
January 1, 1999. In addition, the parties have agreed to make cash adjustments
to ensure that current assets minus the sum of current and noncurrent assumed
liabilities of the acquired operations is $150 million as of September 30, 1998.
In light of the current market conditions in the semiconductor industry, the
Acquisition is expected to compound the effects of the downturn on the Company
and have a near term adverse effect on the Company's results of operations and
cash flows. (See "Subsequent Events - Acquisition" and "Certain Factors.")
On October 19, 1998, the Company issued to Intel Corporation ("Intel")
approximately 15.8 million stock rights (the "Rights") exchangeable into non-
voting Class A Common Stock (upon MTI shareholder approval of such class of
stock) or into common stock of the Company, for a purchase price of $500
million. The Rights at the time of issuance represented approximately 6% of the
Company's outstanding common stock. The Rights (or Class A Common Stock) will
automatically be exchanged for (or converted into) the Company's common stock
upon a transfer to a holder other than Intel or a 90% owned subsidiary of Intel.
The Company has agreed to seek shareholder approval to amend its Certificate of
Incorporation to create the non-voting Class A Common Stock at the Company's
next Annual Meeting of Shareholders. In the event the Company's shareholders
approve the amendment, the Rights will be automatically exchanged for Class A
Common Stock upon the filing in Delaware of the amended Certificate of
Incorporation. In the event the Company's shareholders do not approve the
amendment, the Rights will remain exchangeable into the Company's common stock.
In order to exchange the Rights for the Company's common stock, Intel would be
required to provide the Company with written evidence of compliance with the
Hart-Scott-Rodino Act ("HSR") filing requirements or that no HSR filings are
required. Intel also has the right to designate a nominee acceptable to the
Company to the Company's Board of Directors.
In consideration for Intel's investment, the Company has agreed to commit to
the development of direct Rambus DRAM ("RDRAM") products, to meet certain
production and capital expenditure milestones and to make available to Intel a
certain percentage of its semiconductor memory output over a five-year period,
subject to certain
16
<PAGE>
limitations. The exchange ratio of the Rights and conversion ratio of the Class
A Common Stock is subject to adjustment under certain formulae at the election
of Intel in the event MTI fails to meet the production or capital expenditure
milestones. No adjustment will occur to the exchange ratio or conversion ratio
under such formulae (i) if the Company achieves the production and capital
expenditure milestones, or (ii) unless the price of the Company's common stock
for a twenty day period ending two days prior to such milestone dates is lower
than $31.625 (the market price of the Company's common stock at the time of the
investment). In addition, in no event will the Company be obligated to issue
more than: (a) a number of additional shares of Class A Common Stock (or common
stock) having a value exceeding $150 million; or (b) a number of additional
shares exceeding the number of Rights originally issued.
RESULTS OF OPERATIONS
Net loss for 1998 was $234 million, or $1.10 per share, on net sales of $3,012
million. Net income for 1997 was $332 million, or $1.55 per share, on net sales
of $3,516 million. Net income for 1996 was $594 million, or $2.78 per share, on
net sales of $3,654 million.
For 1998, the Company's semiconductor memory operations incurred an operating
loss in excess of $350 million on net sales of $1,386 million, primarily due to
continued sharp declines in average sales prices for the Company's semiconductor
memory products.
Results of operation for 1998 included an aggregate pretax gain of $157
million (approximately $38 million or $0.18 per share after taxes and minority
interests) on MEI's sale of a 90% interest in its contract manufacturing
subsidiary, Micron Custom Manufacturing Services, Inc. ("MCMS"), in February
1998 for cash proceeds of $249 million. Results of operations for 1997 included
a pretax gain of $190 million (approximately $94 million or $0.44 per share
after taxes) on the sale of a portion of the Company's holdings in MEI common
stock, which decreased the Company's ownership in MEI from approximately 79% to
approximately 64%.
<TABLE>
<CAPTION>
NET SALES
1998 1997 1996
---------------------- ---------------------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Semiconductor memory products.......... $1,386.2 46% $1,738.1 49% $2,210.0 60%
PC Systems............................. 1,459.8 48% 1,463.5 42% 1,128.3 31%
Other.................................. 165.9 6% 313.9 9% 315.5 9%
-------- --- -------- --- -------- ---
Total net sales $3,011.9 100% $3,515.5 100% $3,653.8 100%
======== ======== ========
</TABLE>
Net sales reported under "Semiconductor memory products" include sales of MTI
semiconductor memory products incorporated in MEI PC systems and other products,
which amounted to $37 million, $87 million and $184 million in 1998, 1997 and
1996, respectively. "Other" net sales for 1998 include revenue of approximately
$124 million from MCMS, which was sold in February 1998. (See "Subsequent
Events Acquisition" for a discussion of the Acquisition as it relates to net
sales of the Company's semiconductor memory products.)
Total net sales in 1998 decreased by 14% compared to 1997, principally due to
an approximate 60% decline in average selling prices of semiconductor memory
products for the year, offset by increased volumes of semiconductor memory
products sold and increased unit sales of PC systems. Total megabits of
semiconductor memory shipped in 1998 increased by approximately 110% over 1997
levels. This increase was principally a result of shifts in the Company's mix
of semiconductor memory products to a higher average density, transitions to
successive reduced die size ("shrink") versions of existing products and
improved manufacturing yields on existing products.
The Company's 16 Meg DRAM comprised approximately 74% and 80%, respectively,
of net sales of semiconductor memory in 1998 and 1997. The Company's principal
semiconductor memory product in 1996 was the 4 Meg DRAM, which comprised
approximately 87% of net sales of semiconductor memory. The Company
transitioned from the 16 Meg to the 64 Meg DRAM as its primary memory product in
the fourth quarter of 1998.
17
<PAGE>
The Company also transitioned from EDO to Synchronous DRAM ("SDRAM") in the
third quarter of 1998. Approximately 46% of the Company's DRAM revenue was
attributable to SDRAM products for 1998.
Net sales of PC systems in 1998 were flat compared to 1997 primarily due to a
11% decrease in average selling prices for the Company's PC systems offset by an
increase in unit sales and a higher level of non-system revenue. The decline in
average selling prices was primarily attributable to a 12% decrease in the
selling prices for the Company's desktop PC systems and a 24% decline in selling
prices for notebook systems. Lower prices were largely the result of industry
price competitiveness, particularly for notebook products, and to the Company's
efforts to price its products more in line with its competition. Unit sales
were 5% higher in 1998 compared to 1997 due primarily to a 49% increase in unit
sales of the Company's notebook products.
Net sales in 1997 decreased by 4% compared to 1996, principally due to an
approximate 75% decline in average selling prices of semiconductor memory
products for the year, offset by increased volumes of semiconductor memory
products sold and increased unit sales of PC systems. Total megabits shipped in
1997 increased by more than 200% over 1996 levels. This increase was
principally a result of the transition to the 16 Meg DRAM as the Company's
principal memory product, ongoing transitions to shrink versions of existing
memory products, enhanced yields on existing memory products, the conversion of
all of the Company's fabs to 8-inch wafer processing at the end of 1996 and an
increase in total wafer outs. Unit sales of PC systems increased by 37% in 1997
compared to 1996, while average selling prices for PC systems declined. Higher
unit sales were largely attributed to significantly higher government and
corporate sales.
GROSS MARGIN
<TABLE>
<CAPTION>
1998 % Change 1997 % Change 1996
------------ -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Gross margin................................. $280.4 (71.3)% $976.3 (32.9)% $1,455.4
as a % of net sales.......................... 9.3% 27.8% 39.8%
</TABLE>
(See "Subsequent Events Acquisition" for a discussion of the Acquisition as
it relates to gross margin on the Company's semiconductor memory products.)
The Company's gross margin percentage was significantly lower for 1998
compared to 1997. This decline in gross margin percentage was principally the
result of lower gross margin percentages on sales of the Company's semiconductor
memory products resulting principally from a continued severe decline in average
sales prices.
The Company's gross margin percentage on sales of semiconductor memory
products for 1998 was 5% compared to 39% and 56% in 1997 and 1996, respectively.
The decrease in gross margin percentage on sales of semiconductor memory
products for the periods presented was primarily the result of the continuing
sharp decline in average selling prices of 60% in 1998 and 75% in 1997,
partially offset by a decline in per megabit manufacturing costs in each period.
Decreases in the Company's manufacturing costs per megabit in each period were
achieved principally through increases in production. These increases in
production resulted principally from shifts in the Company's mix of
semiconductor memory products to a higher average density, transitions to
successive shrink versions of existing products and improved manufacturing
yields on existing products.
The gross margin percentage for the Company's PC operations for 1998 was 12%,
compared to 17% and 15% in 1997 and 1996, respectively. The gross margin
percentage for sales of the Company's PC systems decreased in 1998 compared to
1997 primarily as a result of significantly lower margins realized on sales of
the Company's notebook systems as a result of intense price pressure on these
products during the year and due to losses realized from disposition of PC
component inventories. The Company's gross margin in 1998 was favorably
affected, however, by an adjustment made in the fourth quarter of $12 million
related to revisions of estimates for certain contingencies for product and
process technology costs.
18
<PAGE>
The decrease in gross margin percentage for 1997 compared to 1996 was
principally a result of lower average selling prices for semiconductor memory
products and higher net sales of PC systems as a percentage of total net sales.
The lower gross margin percentage on sales of semiconductor memory products in
1997 was principally due to sharp declines in average selling prices for such
products as compared to more gradual decreases in per megabit manufacturing
costs. Decreases in the Company's manufacturing costs per megabit were achieved
through the transition to the 16 Meg DRAM as the Company's principal memory
product, ongoing transitions to successive shrink versions of existing memory
products, enhanced yields on existing memory products, the conversion of all of
the Company's fabs to 8-inch wafer processing at the end of 1996 and an increase
in total wafer outs. The effect on the Company's gross margin from the decrease
in semiconductor gross margin was compounded by higher net sales of PC systems
as a percentage of net sales, as sales of PC systems generally had a lower gross
margin percentage than sales of the Company's semiconductor memory products in
1997 and 1996.
Cost of goods sold includes estimated costs of settlement or adjudication of
asserted and unasserted claims for patent infringement prior to the balance
sheet date and costs of product and process technology licensing arrangements.
The 1996 gross margin was increased by a net reduction of approximately $55
million in prior year accruals for product and process rights contingencies for
both semiconductor and personal computer operations.
SELLING, GENERAL AND ADMINISTRATIVE
<TABLE>
<CAPTION>
1998 % Change 1997 % Change 1996
-------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Selling, general and administrative.......... $467.9 26.2% $370.9 21.5% $305.3
as a % of net sales.......................... 15.5% 10.6% 8.4%
</TABLE>
(See "Subsequent Events Acquisition" for a discussion of the Acquisition as
it relates to selling, general and administrative expense.)
Selling, general and administrative expenses were higher in 1998 as compared
to 1997 and in 1997 as compared to 1996 primarily due to increased expenses
associated with the Company's PC operations. The higher level of selling,
general and administrative expenses for the Company's PC operations is
principally due to higher levels of personnel, advertising and technical and
professional fees associated with information technology consulting services.
The higher selling, general and administrative expenses for 1998 were partially
offset by a lower level of performance based compensation than in 1997. During
the fourth quarter of 1996, the Company charged operations with a $9 million
accrual relating to revisions of estimates for selling costs associated with
sales of PC systems.
RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
1998 % Change 1997 % Change 1996
-------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Research and development..................... $271.8 30.1% $208.9 8.9% $191.9
as a % of net sales.......................... 9.0% 5.9% 5.3%
</TABLE>
(See "Subsequent Events Acquisition" for a discussion of the Acquisition as
it relates to research and development.)
Research and development expenses relating to the Company's semiconductor
memory operations, which constitute substantially all of the Company's research
and development expenses, vary primarily with the number of wafers processed,
personnel costs, and the cost of advanced equipment dedicated to new product and
process development. Research and development efforts are focused on advanced
process technology, which is the primary determinant in transitioning to next
generation products. Application of advanced process technology currently is
concentrated on shrink versions of the Company's 64 Meg SDRAM and development of
the Company's 128 Meg SDRAM and RDRAM, Double Data Rate ("DDR"), SyncLink, Flash
and SRAM memory products. The Company transitioned from the 16 Meg to the 64 Meg
DRAM as its primary memory product in the fourth quarter of 1998 and
transitioned from EDO to SDRAM in the third quarter of 1998. Other research and
development efforts are devoted to the design and development of RIC, flat panel
displays, graphics accelerator products and PC systems.
19
<PAGE>
The Company substantially completed its transition from .30 (mu) to .25 (mu)
in the fourth quarter of 1998 and expects to transition from .25 (mu) to .21
(mu) in calendar 1998 and transition to .18 (mu) in calendar 1999. The Company's
process technology is expected to progress to tighter geometries in the next few
years as needed for the development of future generation semiconductor products.
OTHER OPERATING EXPENSE (INCOME)
Other operating expense for 1998 includes charges associated with PC
operations of $11 million resulting from employee termination benefits and
consolidation of domestic and international operations and $5 million from the
write-off of software development costs. Other operating expense reflects a net
pre-tax loss of $14 million and $3 million, and a net pre-tax gain of $15
million from the write-down and disposal of semiconductor manufacturing
operations equipment in 1998, 1997 and 1996, respectively.
GAIN ON SALE OF INVESTMENTS AND SUBSIDIARY STOCK
In a public offering in February 1997, MTI sold 12.4 million shares of MEI
common stock for net proceeds of $200 million and MEI sold 3 million newly
issued shares for net proceeds of $48 million, resulting in a consolidated pre-
tax gain of $190 million. The sales reduced the Company's ownership of the
outstanding MEI common stock from approximately 79% to approximately 64%. The
Company also recorded pre-tax gains totaling $22 million for 1997 relating to
sales of investments. Diluted earnings per share for 1997 benefited by $0.50
from these gain transactions.
RESTRUCTURING CHARGE
Results of operations for 1996 were adversely affected by a $30 million pre-
tax restructuring charge resulting from the decisions by its then approximately
79% owned subsidiary, MEI, to discontinue sales of ZEOS brand PC systems and to
close the related PC manufacturing operations in Minneapolis, Minnesota. The
restructuring charge reduced 1996 earnings per share by $0.09.
INCOME TAX PROVISION (BENEFIT)
<TABLE>
<CAPTION>
1998 % CHANGE 1997 % Change 1996
-------------- -------------- ------------- -------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Income tax provision......................... $(118.8) (144.4)% $267.3 (25.1)% $357.0
</TABLE>
The effective tax rate for 1998, 1997 and 1996 was 35%, 43% and 37%,
respectively. The effective tax rate primarily reflects (i) the statutory
corporate income tax rate and the net effect of state taxation; (ii) the effect
of taxes on the parent of the earnings or loss by domestic subsidiaries not
consolidated with the Company for federal income tax purposes; and (iii) in
1998, the impact of a $4 million valuation allowance recorded for a deferred tax
asset relating to MEI's consolidation of its NetFRAME enterprise server
operations. The relatively higher effective tax rate in 1997 was principally
due to the provision for income taxes by the Company on earnings of its domestic
subsidiaries, and the gain on the sale of MEI common stock by the Company and
the issuance of common stock by MEI in 1997. Taxes on earnings of domestic
subsidiaries not consolidated for tax purposes may cause the effective tax rate
to vary significantly from period to period.
20
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
Recently issued accounting standards include Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings Per Share", issued by the Financial
Accounting Standards Board ("FASB") in February 1997, SFAS No. 130 "Reporting
Comprehensive Income," SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information", issued by the FASB in June 1997, Statement of
Position ("SOP") 98-1 "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use," issued by the AICPA in March 1998 and SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities," issued by
the FASB in June 1998.
SFAS No. 128 was first effective for the Company for its interim period ended
February 26, 1998. Basic and diluted earnings per share pursuant to the
requirements of SFAS No. 128 are presented on the face of the income statement
and in the notes to the financial statements. Descriptions of SFAS No. 130,
SFAS No. 131, SOP 98-1, and SFAS No. 133 are included in the notes to the
financial statements. SFAS No. 130 will require the Company to provide
additional disclosures in the first quarter of 1999 and SFAS No. 131 will
require the Company to provide additional disclosures for its year end 1999.
The Company is currently evaluating the impact of SOP 98-1, required by year end
2000 and SFAS No. 133, which is required for the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 3, 1998, the Company had cash and liquid investments totaling
$649 million, representing a decrease of $338 million during 1998. As of
September 3, 1998, approximately $358 million of the Company's consolidated cash
and liquid investments were held by MEI. Cash generated by MEI is not readily
available or anticipated to be available to finance operations or other
expenditures of MTI's semiconductor memory operations.
Upon closing of the Acquisition on September 30, 1998, the Company received
$550 million. In addition, the Company and TI have agreed to make cash
adjustments to ensure that current assets minus the sum of current and
noncurrent assumed liabilities of the acquired operations is $150 million. As
part of the transaction, the Company also issued notes in an aggregate principal
amount of $950 million. The Company currently estimates it will spend
approximately $850 million over the next three years, primarily for equipment,
to upgrade the acquired facilities. In addition, it is expected that in the
near-term, per unit costs associated with products manufactured at the acquired
facilities will significantly exceed the per unit costs of products manufactured
at the Company's Boise, Idaho, facility. As a result, it is expected that the
Acquisition will have an adverse impact upon the Company's results of operations
and cash flows in the near term. (See "Subsequent Events Acquisition" and
"Certain Factors.")
On October 19, 1998, the Company issued to Intel approximately 15.8 million
stock rights ("the Rights") exchangeable into non-voting Class A Common Stock
(upon MTI shareholder approval of such class of stock) or common stock of the
Company for a purchase price of $500 million. The proceeds from this investment
are expected to be used for the development of next generation products,
including RDRAM, and certain capital expenditures related to this effort. (See
"Subsequent Events Equity Investment.")
The Company's principal sources of liquidity during 1998 were net cash
proceeds totaling $236 million from the sale of a 90% interest in MEI's contract
manufacturing subsidiary, MCMS, net cash flow from operations of $189 million
and proceeds of $103 million from the issuance of long-term debt. The principal
uses of funds in 1998 were $707 million for property, plant and equipment and
$189 million for repayments of equipment contracts and long-term debt.
The Company believes that in order to develop new product and process
technologies, support future growth, achieve operating efficiencies and maintain
product quality, it must continue to invest in manufacturing technology,
facilities and capital equipment, research and development and product and
process technology. As of September 3, 1998, the Company had entered into
contracts extending into the year 2000 for approximately $335 million for
equipment purchases and approximately $12 million for the construction of
facilities. The Company estimates it will spend approximately $900 million in
the next fiscal year for purchases of equipment and construction and improvement
of buildings at the Company's facilities, including the facilities obtained in
the Acquisition.
21
<PAGE>
Cash flows from operations for 1998 were significantly lower than cash flows
from operations for 1997. Cash flows from operations are significantly affected
by average selling prices and variable cost per unit for the Company's
semiconductor memory products. For 1998, average selling prices for
semiconductor memory products declined at a rate faster than that which the
Company was able to decrease costs per megabit, and as a result, the Company's
cash flows have been significantly and adversely affected. The Company has a $1
billion shelf registration statement under which $500 million in convertible
subordinated notes were issued in July 1997 and under which the Company may
issue from time to time up to an additional $500 million in debt or equity
securities.
The Company has an aggregate of $511 million in revolving credit agreements,
including a $400 million agreement expiring in May 2000 which contains certain
restrictive covenants pertaining to the Company's semiconductor memory
operations, including a maximum total debt to equity ratio. As of September 3,
1998, the Company was in compliance with all covenants under the facilities and
had borrowings totaling approximately $8 million outstanding under the
agreements. There can be no assurance that the Company will continue to be able
to meet the terms of the covenants and conditions in the agreements, borrow
under the agreements, renegotiate satisfactory new agreements or replace the
existing agreements with satisfactory replacements.
SUBSEQUENT EVENTS
ACQUISITION
On September 30, 1998, the Company completed its acquisition of substantially
all of TI's memory operations. The Acquisition was consummated through the
issuance of debt and equity securities. TI received approximately 28.9 million
shares of MTI common stock, $740 million principal amount of Convertible Notes
and $210 million principal amount of Subordinated Notes. In addition to TI's
memory assets, the Company received $550 million in cash. The Company and TI
also entered into a ten-year, royalty-free, life-of-patents, patent cross
license that commences on January 1, 1999. The parties have also agreed to make
cash adjustments to ensure that current assets minus the sum of current and
noncurrent assumed liabilities of the acquired operations is $150 million as of
September 30, 1998.
The MTI common stock and Convertible Notes issued in the transaction have not
been registered under the Securities Act of 1933, as amended, and are therefore
subject to certain restrictions on resale. The Company and TI entered into a
securities rights and restrictions agreement as part of the transaction which
provides TI with certain registration rights and places certain restrictions on
TI's voting rights and other activities with respect to shares of MTI common
stock. TI's registration rights begin on March 31, 1999. The Convertible Notes
and the Subordinated Notes issued in the transaction bear interest at the rate
of 6.5% and have a term of seven years. The Convertible Notes are convertible
into approximately 12.3 million shares of MTI common stock at a conversion price
of approximately $60 per share. The Subordinated Notes are subordinated to the
Convertible Notes, the Company's outstanding 7% Convertible Subordinated Notes
due July 1, 2004, and substantially all of the Company's other indebtedness.
The assets acquired by the Company in the Acquisition include a wafer
fabrication operation in Avezzano, Italy, an assembly/test operation in
Singapore, and a wafer fabrication facility in Richardson, Texas. TI closed the
Richardson memory manufacturing operation in June 1998. Also included in the
Acquisition was TI's interest in two joint ventures and TI's rights to 100% of
the output of the joint ventures: TECH Semiconductor Singapore ("TECH"), owned
by TI, Canon, Inc., Hewlett-Packard Singapore (Private) Limited, a subsidiary of
Hewlett Packard Company, and EDB Investments Pte. Ltd., which is controlled by
the Economic Development Board of the Singapore government; and KTI
Semiconductor ("KTI") in Japan owned by TI and Kobe Steel, Ltd. MTI acquired an
approximate 30% interest in TECH and a 25% interest in KTI. The Company filed
Form 8-K/A on October 16, 1998, which incorporates historical and pro forma
financial information with respect to the Acquisition.
Although the Company believes the Acquisition further leverages its
technology, the Company anticipates that the Acquisition will have a near term
adverse impact upon the Company's results of operations and cash flows. The
22
<PAGE>
Company expects to transfer its product and process technology into the acquired
facilities (primarily the wholly-owned fabrication facilities in Avezzano, Italy
and the joint-venture facilities, KTI and TECH) over the next 12 to 18 months.
Output of the Company's semiconductor memory products will increase directly as
a result of the manufacturing capacity obtained in the Acquisition and should
increase further as a result of the transfer of the Company's product and
process technology in the acquired facilities. Until the Company is able to
complete the transfer of its product and process technology into the acquired
facilities, the Company expects that the per unit costs associated with products
manufactured at the acquired facilities will significantly exceed the per unit
costs of products manufactured at the Company's Boise, Idaho facility, resulting
in a near-term adverse impact on the Company's gross margin percentage. The
ten-year, royalty-free, life-of-patents, patent cross license entered into with
TI will result in a significant reduction in the Company's royalty expenses
beginning January 1, 1999.
Annual selling, general and administrative expense is expected to increase by
approximately $30 million in future periods as a result of the Acquisition. The
increased selling, general and administrative expense associated with the
acquired operation is primarily for information technology services and systems.
Research and development efforts will continue to be coordinated from Boise,
Idaho. Annual research and development expense is expected to increase by
approximately $50 million as a result of the Acquisition. The increase in
research and development expense will be related primarily to the Company's
efforts to broaden its range of DRAM product offerings necessitated by the
expected increase in the Company's market share. Net interest expense is
expected to increase as a result of the Convertible Notes and Subordinated Notes
issued in the Acquisition. The Company currently estimates it will spend
approximately $850 million over the next three years, primarily for equipment,
to upgrade the wholly-owned facilities acquired in the Acquisition.
Pursuant to the Acquisition, the Company acquired the right and obligation to
purchase 100% of the production output of TECH and KTI. Under the terms of the
joint venture agreements, assembled and tested components are purchased at a
discount from the Company's worldwide average sales prices. These discounts are
currently higher than gross margins realized by the Company in recent periods on
similar products manufactured in the Company's wholly-owned facilities, but are
lower than gross margins historically realized in periods of relatively
constrained supply. At any future reporting period, gross margins for
semiconductor memory products resulting from the Company's right to purchase
joint venture products may positively or negatively impact gross margins
depending on the then existing relationship of average selling prices to the
Company's cost per unit sold for product manufactured in its wholly-owned
facilities.
EQUITY INVESTMENT
On October 19, 1998, the Company issued to Intel approximately 15.8 million
stock rights exchangeable into non-voting Class A Common Stock (upon MTI
shareholder approval of such class of stock) or into common stock of the Company
for a purchase price of $500 million. The Rights at the time of issuance
represented approximately 6% of the Company's outstanding common stock. The
Rights (or Class A Common Stock) will automatically be exchanged for (or
converted into) the Company's common stock upon a transfer to a holder other
than Intel or a 90% owned subsidiary of Intel. The Company has agreed to seek
shareholder approval to amend its Certificate of Incorporation to create the
non-voting Class A Common Stock at the Company's next Annual Meeting of
Shareholders. In the event the Company's shareholders approve the amendment,
the Rights will be automatically exchanged for Class A Common Stock upon the
filing in Delaware of the amended Certificate of Incorporation. In the event
the Company's shareholders do not approve the amendment, the Rights will remain
exchangeable into the Company's common stock. In order to exchange the Rights
for the Company's common stock, Intel would be required to provide the Company
with written evidence of compliance with the Hart-Scott-Rodino Act ("HSR")
filing requirements or that no HSR filings are required. The MTI common stock
issued to Intel has not been registered under the Securities Act of 1933, as
amended, and is therefore subject to certain restrictions on resale. The
Company and Intel entered into a securities rights and restrictions agreement
which provides Intel with certain registration rights and places certain
restrictions on Intel's voting rights and other activities with respect to the
shares of MTI Class A Common Stock or common stock. Intel's registration rights
begin on March 31, 1999. Intel also has the right to designate a nominee
acceptable to the Company to the Company's Board of Directors.
23
<PAGE>
In consideration for Intel's investment, the Company has agreed to commit to
the development of RDRAM and to certain production and capital expenditure
milestones and to make available to Intel a certain percentage of its
semiconductor memory output over a five-year period, subject to certain
limitations. The exchange ratio of the Rights and conversion ratio of the Class
A Common Stock is subject to adjustment under certain formulae at the election
of Intel in the event MTI fails to meet the production or capital expenditure
milestones. No adjustment will occur to the exchange ratio or conversion ratio
under such formulae (i) if the Company achieves the production and capital
expenditure milestones, or (ii) unless the price of the Company's common stock
for a twenty day period ending two days prior to such milestone dates is lower
than $31.625 (the market price of the Company's common stock at the time of
investment). In addition, in no event will the Company be obligated to issue
more than: (a) a number of additional shares of Class A Common Stock or common
stock having a value exceeding $150 million, or (b) a number of additional
Rights exceeding the number of shares originally issued.
MERGER
On September 11, 1998, the Company completed a stock-for-stock merger with
Rendition, Inc. ("Rendition"). Rendition designs, develops and markets high-
performance, low-cost, multi-functional graphics accelerators to the personal
computer market. The merger was accounted for as a business combination using
the pooling-of-interests method. Shareholders of Rendition received
approximately 3.7 million shares of the Company's common stock.
YEAR 2000
Like many other companies, the Year 2000 computer issue creates risks for the
Company. If internal systems do not correctly recognize and process date
information beyond the year 1999, the Company's operations could be adversely
impacted as the result of system failures and business process interruption.
The following Year 2000 discussion does not incorporate Year 2000 issues as they
relate to the Acquisition. (See "Subsequent Events - Acquisition" and "Certain
Factors.")
The Company has been addressing the Year 2000 computer issue with a plan that
began in early 1996. To manage its Year 2000 program, the Company has divided
its efforts into the primary program areas of: (i) information technology
("IT"), which includes computer and network hardware, operating systems,
purchased development tools, third-party and internally developed software,
files and databases, end-user extracts and electronic interfaces; (ii)
manufacturing equipment; and (iii) external dependencies, which include
relationships with suppliers and customers.
The Company is following four general steps for each of these program areas:
"Ownership," wherein each department manager is responsible for assigning
ownership for the various Year 2000 issues to be tested; "Identification" of
systems and equipment and the collection of Year 2000 data in a centralized
place to track results of compliance testing and subsequent remediation;
"Compliance Testing," which includes the determination of the specific test
routine to be performed on the software or equipment and determination of year
2000 compliance for the item being tested; and "Remediation," which involves
implementation of corrective action, verification of successful implementation,
finalization of, and, if need be, execution of, contingency plans.
As of September 3, 1998, the Ownership and Identification steps were
essentially complete for all three program areas: IT, manufacturing equipment
and external dependencies. The Compliance Testing and Remediation steps are
substantially complete for the IT area. At present, a large portion of the
Company's manufacturing equipment has yet to be subjected to Compliance Testing.
The majority of the equipment so tested has either tested Year 2000 compliant or
had minor failures, the nature of which was inconsequential to the continued
operation of the equipment. Compliance Testing on the balance of the Company's
equipment set in Boise, Idaho, will be completed by mid-1999. The Company is
currently in the process of assessing embedded technology associated with its PC
systems manufacturing equipment and expects the evaluation to be complete in the
fourth quarter of calendar 1998. The Company is currently working with
suppliers of products and services to determine and monitor their level of
compliance and Compliance Testing. Year 2000 readiness of significant customers
is also being assessed but is in
24
<PAGE>
very early stages. The Company's evaluation of Year 2000 compliance as it
relates to the Company's external dependencies is expected to be complete by
mid-1999.
The cost of addressing the Company's Year 2000 issues is expected to be
immaterial. The Company is executing its Year 2000 readiness plan solely
through its employees. Year 2000 Compliance Testing and reprogramming is being
done in conjunction with other ongoing maintenance and reprogramming efforts.
With respect to Remediation, the Company has commenced work on various types
of contingency plans to address potential problem areas with internal systems
and with suppliers and other third parties. Internally, each software and
hardware system has been assigned to on-call personnel who are responsible for
bringing the system back on line in the event of a failure. Externally, the
Company's Year 2000 plan includes identification of alternate sources for
providers of goods and services. The Company expects its contingency plans to
be complete by mid-1999.
CERTAIN FACTORS
In addition to the factors discussed elsewhere in this Annual Report on Form
10-K, the following are important factors which could cause actual results or
events to differ materially from those contained in any forward-looking
statement made by or on behalf of the Company.
The semiconductor memory industry is characterized by rapid technological
change, frequent product introductions and enhancements, difficult product
transitions, relatively short product life cycles, and volatile market
conditions. These characteristics historically have made the semiconductor
industry highly cyclical, particularly in the market for DRAMs, which are the
Company's primary products. The semiconductor industry has a history of
declining average sales prices as products mature. Long-term average decreases
in sales prices for semiconductor memory products approximate 30% on an
annualized basis; however, significant fluctuations from this rate have occurred
from time to time, including in recent periods.
The selling prices for the Company's semiconductor memory products fluctuate
significantly with real and perceived changes in the balance of supply and
demand for these commodity products. Growth in worldwide supply has outpaced
growth in worldwide demand in recent periods, resulting in a significant
decrease in average selling prices for the Company's semiconductor memory
products. The semiconductor industry in general, and the DRAM market in
particular, is experiencing a severe downturn. Per megabit prices declined
approximately 60% in 1998 following a 75% decline in 1997 and a 45% decline in
1996. In the event that average selling prices continue to decline at a faster
rate than that at which the Company is able to decrease per unit manufacturing
costs, the Company could be materially adversely affected in its operations,
cash flows and financial condition. Future consolidation by competitors in the
semiconductor memory industry may place the Company at a disadvantage in
competing with competitors that have greater capital resources. Competitors are
also aggressively seeking improved yields, smaller die size and fewer mask
levels in their product designs. These improvements could result in a dramatic
increase in worldwide capacity leading to further downward pressure on prices.
Approximately 70% of the Company's sales of semiconductor memory products
during 1998 were directly into the PC or peripheral markets. DRAMs are the most
widely used semiconductor memory component in most PC systems. Should the rate
of growth of sales of PC systems or the rate of growth in the amount of memory
per PC system decrease, the growth rate for sales of semiconductor memory could
also decrease, placing further downward pressure on selling prices for the
Company's semiconductor memory products. The Company is unable to predict
changes in industry supply, major customer inventory management strategies, or
end user demand, which are significant factors influencing pricing for the
Company's semiconductor memory products.
On September 30, 1998, the Company acquired substantially all of TI's memory
operations. The integration and successful operation of the acquired operations
is dependent upon a number of factors, including, but not limited to, the
Company's ability to transfer its product and process technology in a timely and
cost-effective manner into the wholly-owned acquired fabrication facilities in
Avezzano, Italy and joint venture facilities in Japan (KTI) and
25
<PAGE>
Singapore (TECH). The Company expects the transfer of its product and process
technology into these fabrication facilities to take approximately 12 to 18
months; however, there can be no assurance that the Company will be able to meet
this timeline. Until such time as the Company is able to complete the transfer
of its product and process technology into the acquired fabrication facilities,
it is expected that the per unit costs associated with the products manufactured
at the acquired fabrication facilities will exceed significantly the per unit
costs of products manufactured at the Company's Boise, Idaho, facility. As a
result, it is expected that the transaction with TI will have a near term
adverse effect on the Company's results of operations and cash flows.
The Acquisition is expected to have a significant effect on the Company's
future results of operations and cash flows, including, but not limited to: a
considerable negative impact on gross margin in the near term due in part to
significantly higher per unit manufacturing costs at the acquired facilities;
costs related to the assimilation of the acquired operations; increased research
and development expense associated with the Company's efforts to broaden its
range of DRAM product offerings; increased interest expense associated with the
Convertible Notes and Subordinated Notes to be issued in the transaction;
increased capital spending relating to the wholly-owned acquired facilities in
Avezzano, Italy and Singapore; and the potential for further downward pressure
on the average selling prices the Company receives on its semiconductor memory
products.
The Company has limited experience in integrating or operating geographically
dispersed manufacturing facilities. It is expected that the integration and
operation of the acquired facilities will place significant strains on the
Company's management and information systems resources. Failure by the Company
to effectively manage the integration of the acquired facilities could have a
material adverse effect on the Company's results of operations.
As a result of the Acquisition, the Company has substantially increased its
share of the worldwide DRAM market and its production capacity, and as a result,
the Company's results of operations are further subject to fluctuations in
pricing for semiconductor memory products. In addition, if the Company is
successful in the transfer of its product and process technology into the
acquired facilities, the amount of worldwide semiconductor memory capacity could
increase, resulting in further downward pricing pressure on the Company's
semiconductor memory products.
In connection with the Acquisition, the Company and TI entered into a
transition services agreement requiring TI to provide certain services and
support to the Company for specified periods following the Acquisition. TI is
to provide information technology, finance and accounting, human resources,
equipment maintenance, facilities and purchasing services under the services
agreement. The successful integration and operation of the acquired facilities
is partially dependent upon the successful provision of services by TI under the
services agreement. There can be no assurance that the services and support
called for under the services agreement will be provided in a manner sufficient
to meet anticipated requirements. The failure to obtain sufficient services and
support could impair the Company's ability to successfully integrate the
acquired facilities and could have a material adverse affect on the Company's
results of operations.
For a period of approximately 18 months, the Company will rely in part on TI
computer networks and information technology services with respect to certain of
its acquired facilities. During this period and beyond, the Company will also
be utilizing software obtained or licensed from TI to conduct specific portions
of business operations. Dependency upon TI systems will span calendar years
1999 and 2000, during which period Year 2000 issues may arise. The Company is
evaluating Year 2000 preparations associated with information technology
services provided by TI and with the operations acquired in the Acquisition.
The Company is in the process of developing Year 2000 contingency plans for the
acquired operations. If unforeseen difficulties are encountered in ending the
Company's reliance upon TI's software, hardware or services or in segregating
the companies' information technology operations or with Year 2000 issues, the
Company's results of operations could be materially adversely affected.
International sales comprised 20% of the Company's net sales in 1998, and the
Company expects international sales to increase in 1999 as a result of the
Acquisition. In addition, the Company will significantly expand its
international operations as a result of the Acquisition. International sales
and operations are subject to a variety of risks, including those arising from
currency fluctuations, export duties, changes to import and export regulations,
26
<PAGE>
possible restrictions on the transfer of funds, employee turnover, labor unrest,
longer payment cycles, greater difficulty in collecting accounts receivable, the
burdens and costs of compliance with a variety of foreign laws and, in certain
parts of the world, political instability. While to date these factors have not
had an adverse impact on the Company's results of operations, there can be no
assurance that there will not be such an impact in the future, particularly
arising from the Acquisition.
Pursuant to the Acquisition, the Company acquired the right and obligation to
purchase 100% of the production output of the TECH joint venture in Singapore
and the KTI joint venture in Japan. Under the terms of the joint venture
agreements, assembled and tested components are purchased at a discount from the
Company's worldwide average sales prices. These discounts are currently higher
than gross margins realized by the Company in recent periods on similar products
manufactured in the Company's wholly-owned facilities, but are lower than gross
margins historically realized in periods of relatively constrained supply. At
any future reporting period, gross margins for semiconductor memory products
resulting from the Company's right to purchase joint venture products may
positively or negatively impact gross margins depending on the then existing
relationship of average selling prices to the Company's cost per unit sold for
product manufactured in its wholly-owned facilities.
The Company's operating results are significantly impacted by the operating
results of its consolidated subsidiaries, particularly MEI. MEI's past
operating results have been, and its future operating results may be, subject to
seasonality and other fluctuations, on a quarterly and an annual basis, as a
result of a wide variety of factors, including, but not limited to, industry
competition, the Company's ability to accurately forecast demand and selling
prices for its PC products, fluctuating market pricing for PCs and semiconductor
memory products, seasonal government purchasing cycles, inventory obsolescence,
the Company's ability to effectively manage inventory levels, changes in product
mix, manufacturing and production constraints, fluctuating component costs, the
effects of product reviews and industry awards, critical component availability,
seasonal cycles common in the PC industry, the timing of new product
introductions by the Company and its competitors and global market and economic
conditions. Changing circumstances, including but not limited to, changes in
the Company's core operations, uses of capital, strategic objectives and market
conditions, could result in the Company changing its ownership interest in its
subsidiaries.
The Company is engaged in ongoing efforts to enhance its production processes
to reduce per unit costs by reducing the die size of existing products. The
result of such efforts has led to a significant increase in megabit production
over recent periods. There can be no assurance that the Company will be able to
maintain or approximate increases in megabit production at a level approaching
that experienced in 1998 at the Company's Boise, Idaho, facilities or that the
Company will not experience decreases in manufacturing yield or production as it
attempts to implement future technologies at its Boise, Idaho, facility and the
facilities acquired in the Acquisition. Further, from time to time, the Company
experiences volatility in its manufacturing yields, as it is not unusual to
encounter difficulties in ramping latest shrink versions of existing devices or
new generation devices to commercial volumes. The semiconductor memory industry
is characterized by frequent product introductions and enhancements. The
Company's ability to reduce per unit manufacturing costs of its semiconductor
memory products is largely dependent on its ability to design and develop new
generation products and shrink versions of existing products and its ability to
ramp such products at acceptable rates to acceptable yields, of which there can
be no assurance.
Historically, the Company has reinvested substantially all cash flow from
semiconductor memory operations in capacity expansion and enhancement programs.
The Company's cash flow from operations depends primarily on average selling
prices and per unit manufacturing costs of the Company's semiconductor memory
products. If for any extended period of time average selling prices decline
faster than the rate at which the Company is able to decrease per unit
manufacturing costs, the Company may not be able to generate sufficient cash
flows from operations to sustain operations. Cash generated by MEI is not
readily available or anticipated to be available to finance the Company's
semiconductor operations. The Company has an aggregate of $511 million in
revolving credit agreements, including a $400 million agreement expiring in May
2000, which contains certain restrictive covenants pertaining to the Company's
semiconductor memory operations, including a maximum total debt to equity ratio.
There can be no assurance that the Company will continue to be able to meet the
terms of the covenants or be able to borrow the full amount of the credit
facilities. There can be no assurance that, if needed, external sources of
liquidity will be available to fund the Company's operations or its capacity and
product and process technology
27
<PAGE>
enhancement programs. Failure to obtain financing would hinder the Company's
ability to make continued investments in such programs, which could materially
adversely affect the Company's business, results of operations and financial
condition.
Completion of the Company's semiconductor manufacturing facility in Lehi, Utah
was suspended in February 1996, as a result of the decline in average selling
prices for semiconductor memory products. As of September 3, 1998, the Company
had invested approximately $700 million in the Lehi facility. Timing of
completion of the remainder of the Lehi production facilities is dependent upon
market conditions. Market conditions which the Company expects to evaluate
include, but are not limited to, worldwide market supply and demand of
semiconductor products and the Company's operations, cash flows and alternative
uses of capital. There can be no assurance that the Company will be able to
fund the completion of the Lehi manufacturing facility. The failure by the
Company to complete the facility would likely result in the Company being
required to write off all or a portion of the facility's cost, which, if
required, could have a material adverse effect on the Company's business and
results of operations. In addition, in the event that market conditions
improve, there can be no assurance that the Company can commence manufacturing
at the Lehi facility in a timely, cost effective manner that enables it to take
advantage of the improved market conditions.
The semiconductor and PC industries have experienced a substantial amount of
litigation regarding patent and other intellectual property rights. In the
future, litigation may be necessary to enforce patents issued to the Company, to
protect trade secrets or know-how owned by the Company, or to defend the Company
against claimed infringement of the rights of others. The Company has from time
to time received, and may in the future receive, communications alleging that
its products or its processes may infringe product or process technology rights
held by others. The Company has entered into a number of patent and
intellectual property license agreements with third parties, some of which
require one-time or periodic royalty payments. It may be necessary or
advantageous in the future for the Company to obtain additional patent licenses
or to renew existing license agreements. The Company is unable to predict
whether these license agreements can be obtained or renewed on terms acceptable
to the Company. Adverse determinations that the Company's manufacturing
processes or products have infringed on the product or process rights held by
others could subject the Company to significant liabilities to third parties or
require material changes in production processes or products, any of which could
have a material adverse effect on the Company's business, results of operations
and financial condition.
The Company is dependent upon a limited number of key management and technical
personnel. In addition, the Company's future success will depend in part upon
its ability to attract and retain highly qualified personnel, particularly as
the Company engages in worldwide operations and adds different product types to
its product line, which will require parallel design efforts and significantly
increase the need for highly skilled technical personnel. The Company competes
for such personnel with other companies, academic institutions, government
entities and other organizations. The Company has experienced, and expects to
continue to experience, increased recruitment of its existing personnel by other
employers. The Company's ability to retain key personnel in the facilities
acquired will be a critical factor in the Company's ability to successfully
integrate the acquired operations. There can be no assurance that the Company
will be successful in hiring or retaining qualified personnel. Any loss of key
personnel or the inability to hire or retain qualified personnel could have a
material adverse effect on the Company's business and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Substantially all of the Company's liquid investments and long-term debt are
at fixed interest rates, and therefore the fair value of these instruments is
affected by changes in market interest rates. Substantially all of the
Company's liquid investments mature within one year. As a result, the Company
believes that the market risk arising from its holdings of financial instruments
is minimal.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Consolidated Financial Statements as of September 3, 1998 and August 28, 1997 and for fiscal years
ended September 3, 1998, August 28, 1997 and August 29, 1996:
Consolidated Statements of Operations................................................................ 30
Consolidated Balance Sheets.......................................................................... 31
Consolidated Statements of Shareholders' Equity...................................................... 32
Consolidated Statements of Cash Flows................................................................ 33
Notes to Consolidated Financial Statements........................................................... 34
Report of Independent Accountants.................................................................... 51
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the Fiscal Years Ended September 3, 1998, August
28, 1997 and August 26, 1996.......................................................................... 57
</TABLE>
29
<PAGE>
MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT FOR EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------
SEPTEMBER 3, AUGUST 28, AUGUST 29,
1998 1997 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
Net sales................................................ $3,011.9 $3,515.5 $3,653.8
Costs and expenses:
Cost of goods sold..................................... 2,731.5 2,539.2 2,198.4
Selling, general and administrative.................... 467.9 370.9 305.3
Research and development............................... 271.8 208.9 191.9
Restructuring charge................................... -- -- 29.6
Other operating expense (income), net.................. 34.3 (5.9) (11.9)
-------- -------- --------
Total costs and expenses............................ 3,505.5 3,113.1 2,713.3
-------- -------- --------
Operating income (loss).................................. (493.6) 402.4 940.5
Gain on sale of investments and subsidiary stock, net 157.0 186.7 4.7
Gain (loss) on issuance of subsidiary stock, net......... 1.3 29.1 (0.6)
Interest income, net..................................... 0.1 0.9 14.3
-------- -------- --------
Income (loss) before income taxes and minority interests. (335.2) 619.1 958.9
Income tax benefit (provision)........................... 118.8 (267.3) (357.0)
Minority interests in net income......................... (17.3) (19.6) (8.4)
-------- -------- --------
Net income (loss)........................................ $ (233.7) $ 332.2 $ 593.5
======== ======== ========
Earnings (loss) per share:
Basic.................................................. $ (1.10) $ 1.58 $ 2.86
Diluted................................................ (1.10) 1.55 2.78
Number of shares used in per share calculation:
Basic.................................................. 212.2 210.0 207.7
Diluted................................................ 212.2 214.3 213.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
31
<PAGE>
MICRON TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT FOR PAR VALUE DATA)
<TABLE>
<CAPTION>
AS OF
----------------------------
SEPTEMBER 3, AUGUST 28,
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Cash and equivalents............................................................ $ 558.6 $ 619.5
Liquid investments.............................................................. 90.8 368.2
Receivables..................................................................... 489.5 458.9
Inventories..................................................................... 291.1 454.2
Prepaid expenses................................................................ 7.5 9.4
Deferred income taxes........................................................... 61.7 62.2
-------- --------
Total current assets.......................................................... 1,499.2 1,972.4
Product and process technology, net............................................. 84.9 51.1
Property, plant and equipment, net.............................................. 3,030.8 2,761.2
Other assets.................................................................... 73.4 66.6
-------- --------
Total assets............................................................... $4,688.3 $4,851.3
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses........................................... $ 456.6 $ 546.1
Short-term debt................................................................. 10.1 10.6
Deferred income................................................................. 7.5 14.5
Equipment purchase contracts.................................................... 168.8 62.7
Current portion of long-term debt............................................... 97.3 116.0
-------- --------
Total current liabilities..................................................... 740.3 749.9
Long-term debt.................................................................. 757.3 762.3
Deferred income taxes........................................................... 284.2 239.8
Non-current product and process technology...................................... 11.3 44.1
Other liabilities............................................................... 50.1 35.6
-------- --------
Total liabilities.......................................................... 1,843.2 1,831.7
-------- --------
Minority interests.............................................................. 152.1 136.5
Commitments and contingencies
Common stock, $0.10 par value, authorized 1.0 billion shares, issued and
outstanding 213.5 million and 211.3 million shares, respectively............... 21.4 21.1
Additional capital.............................................................. 526.8 483.8
Retained earnings............................................................... 2,144.8 2,378.2
-------- --------
Total shareholders' equity.................................................... 2,693.0 2,883.1
-------- --------
Total liabilities and shareholders' equity................................. $4,688.3 $4,851.3
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS AND SHARES IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------------
SEPTEMBER 3, 1998 AUGUST 28, 1997 AUGUST 29, 1996
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Balance at beginning of year........... 211.3 $ 21.1 208.8 $ 20.9 206.4 $ 20.6
Stock sold............................. 0.4 0.1 0.3 -- 0.4 0.1
Stock option plan...................... 1.2 0.1 2.2 0.2 2.0 0.2
Conversion of minority interest........ 0.6 0.1 -- -- -- --
----- -------- ----------- -------- ----------- --------
Balance at end of year................. 213.5 $ 21.4 211.3 $ 21.1 208.8 $ 20.9
===== ======== =========== ======== =========== ========
ADDITIONAL CAPITAL
Balance at beginning of year........... 483.8 $ 434.7 $ 391.5
Stock sold............................. 8.1 7.7 11.1
Stock option plan...................... 12.4 26.9 11.5
Tax effect of stock purchase plans..... 5.2 14.5 20.6
Conversion of minority interest........ 17.3 -- --
-------- -------- --------
Balance at end of year................. $ 526.8 $ 483.8 $ 434.7
======== ======== ========
RETAINED EARNINGS
Balance at beginning of year........... $2,378.2 $2,046.4 $1,484.1
Net income............................. (233.7) 332.2 593.5
Cumulative translation adjustment...... 0.3 (0.4) --
Dividends paid......................... -- -- (31.2)
-------- -------- --------
Balance at end of year................. $2,144.8 $2,378.2 $2,046.4
======== ======== ========
Dividends declared per share............ $ -- $ -- $ 0.15
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
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34
<PAGE>
MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
SEPTEMBER 3, AUGUST 28, AUGUST 29,
1998 1997 1996
--------------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................................... $(233.7) $ 332.2 $ 593.5
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization............................................. 606.6 476.3 383.0
Gain on sale and issuance of investments and subsidiary stock, net........ (157.0) (186.7) (4.7)
Change in assets and liabilities, net of effects of sale of MCMS
Decrease (increase) in receivables...................................... (73.8) (97.7) 107.5
Decrease (increase) in inventories...................................... 140.0 (194.2) (61.1)
Increase (decrease) in accounts payable and accrued expenses,
net of plant and equipment purchases................................... (86.1) 143.7 (57.8)
Increase (decrease) in non-current product and process liability........ (32.8) 0.6 40.0
Restructuring charge...................................................... -- -- 29.6
Gain from equipment sales................................................. (0.9) (2.9) (20.7)
Increase in deferred income taxes......................................... 30.1 93.9 48.1
Other..................................................................... (3.2) 38.4 3.1
------- ------- ---------
Net cash provided by operating activities................................... 189.2 603.6 1,060.5
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment.............................. (707.1) (516.9) (1,524.9)
Purchase of held-to-maturity securities..................................... (52.5) (10.1) --
Purchase of available-for-sale securities................................... (601.1) (436.7) (194.6)
Proceeds from sale of subsidiary stock, net of MCMS cash.................... 235.9 199.9 --
Proceeds from sales and maturities of available-for-sale securities......... 916.1 113.8 617.7
Proceeds from maturities of held-to-maturity securities..................... 34.0 -- --
Proceeds from sale of equipment............................................. 33.4 15.5 33.8
Other....................................................................... (44.7) (44.4) (11.5)
------- ------- ---------
Net cash used for investing activities...................................... (186.0) (678.9) (1,079.5)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt.............................................. 102.9 587.8 264.7
Net proceeds from (repayments of) borrowings on lines of credit............. -- (90.0) 90.0
Payments on equipment purchase contracts.................................... (63.5) (53.9) (127.0)
Repayments of debt.......................................................... (125.7) (101.1) (54.9)
Proceeds from issuance of common stock...................................... 20.6 34.8 25.1
Proceeds from issuance of stock by subsidiaries............................. 3.4 55.4 2.3
Debt issuance costs......................................................... (1.8) (14.3) (2.0)
Payment of dividends........................................................ -- -- (31.2)
------- ------- ---------
Net cash provided by (used for) financing activities........................ (64.1) 418.7 167.0
------- ------- ---------
Net increase (decrease) in cash and equivalents............................. (60.9) 343.4 148.0
Cash and equivalents at beginning of year................................... 619.5 276.1 128.1
------- ------- ---------
Cash and equivalents at end of year......................................... $ 558.6 $ 619.5 $ 276.1
======= ======= =========
Supplemental disclosures
Income taxes paid, net...................................................... $ (21.7) $(122.9) $ (403.4)
Interest paid, net of amounts capitalized................................... (59.9) (27.9) (12.3)
Noncash investing and financing activities:
Equipment acquisitions on contracts payable and capital leases........... 212.6 41.5 180.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
MICRON TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABULAR DOLLAR AND SHARE AMOUNTS ARE STATED IN MILLIONS)
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Micron Technology, Inc. and its domestic and foreign subsidiaries
(the "Company" or "MTI"). The Company designs, develops, manufactures, and
markets semiconductor memory products, primarily DRAM, principally for use in
personal computers ("PCs"). Through its majority-owned subsidiary, Micron
Electronics, Inc. ("MEI"), the Company also designs, develops, manufactures,
markets, and supports PC systems and network servers. All significant
intercompany accounts and transactions have been eliminated. The Company's
fiscal year is the 52 or 53 week period ending on the Thursday closest to August
31. The fiscal year ended September 3, 1998 contained 53 weeks compared to 52
weeks in fiscal years 1997 and 1996.
CERTAIN CONCENTRATIONS AND ESTIMATES: Approximately 70% of the Company's
sales of semiconductor memory products are to the PC or peripheral markets.
Certain components used by the Company in manufacturing of PC systems are
purchased from a limited number of suppliers.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION: Revenue from product sales to direct customers is
recognized when title transfers to the customer, primarily upon shipment. The
Company defers recognition of sales to distributors, which allow certain rights
of return and price protection, until distributors have sold the products. Net
sales include revenues under cross-license agreements with third parties and
under government research contracts.
EARNINGS PER SHARE: The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings per
share is calculated using the average number of shares of common stock
outstanding during the year. Diluted earnings per share is computed on the
basis of the average number of common shares outstanding plus the effect of
outstanding stock options using the "treasury stock method" and convertible
debentures using the "if-converted" method. Common stock equivalents consist of
stock options. Diluted earnings per share further assumes the conversion of the
Company's convertible subordinated notes for the period they were outstanding,
unless such assumed conversion would result in anti-dilution.
FINANCIAL INSTRUMENTS: Cash equivalents include highly liquid short-term
investments with original maturities of three months or less, readily
convertible to known amounts of cash. The amounts reported as cash and
equivalents, liquid investments, receivables, other assets, accounts payable and
accrued expenses and equipment purchase contracts are considered to be
reasonable approximations of their fair values. The fair value of the Company's
long-term debt as of September 3, 1998 and August 28, 1997 approximated $787.5
million and $850.6 million, respectively. The fair value estimates presented
herein were based on market interest rates and other market information
available to management as of each balance sheet date presented. The use of
different market assumptions and/or estimation methodologies could have a
material effect on the estimated fair value amounts. The reported fair values
do not take into consideration potential expenses that would be incurred in an
actual settlement.
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash, liquid investments and trade
accounts receivable. The Company invests cash through high-credit-quality
financial institutions and performs periodic evaluations of the relative credit
standing of these financial institutions. The Company, by policy, limits the
concentration of credit exposure by restricting investments with any single
obligor. A concentration of credit risk may exist with respect to trade
receivables, as a substantial portion of the
36
<PAGE>
MICRON TECHNOLOGY, INC.
Company's customers are affiliated with the computer, telecommunications and
office automation industries. The Company performs ongoing credit evaluations of
customers worldwide and generally does not require collateral from its
customers. Historically, the Company has not experienced significant losses on
receivables.
INVENTORIES: Inventories are stated at the lower of average cost or market.
Cost includes labor, material and overhead costs, including product and process
technology costs.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of 5 to 30 years for buildings and 2 to 20 years for
equipment. When property or equipment is retired or otherwise disposed of, the
net book value of the asset is removed from the Company's books and the net gain
or loss is included in the determination of income.
The Company capitalizes interest on borrowings during the active construction
period of major capital projects. Capitalized interest is added to the cost of
the underlying assets and is amortized over the useful lives of the assets. For
1998, 1997 and 1996, the Company capitalized $15.5 million, $6.0 million and
$7.8 million of interest, respectively, in connection with various capital
expansion projects.
The Company reviews the carrying value of property, plant and equipment for
impairment whenever events and circumstances indicate that the carrying value of
an asset may not be recoverable from the estimated future cash flows expected to
result from its use and eventual disposition. In cases where undiscounted
expected future cash flows are less than the carrying value, an impairment loss
is recognized equal to an amount by which the carrying value exceeds the fair
value of assets.
PRODUCT AND PROCESS TECHNOLOGY: Costs related to the conceptual formulation
and design of products and processes are expensed as research and development.
Costs incurred to establish patents and acquire product and process technology
are capitalized. Capitalized costs are amortized on the straight-line method
over the shorter of the estimated useful life of the technology, the patent term
or the agreement, ranging up to 10 years. The Company has royalty-bearing
license agreements that allow it to manufacture and sell semiconductor memory
devices, PC hardware and software.
SUBSIDIARY STOCK SALES: Gains and losses on issuance of stock by a subsidiary
are recognized in income.
ADVERTISING: Advertising costs are charged to operations as incurred.
Advertising costs expensed in 1998, 1997 and 1996 were $70.8 million, $35.7
million and $25.4 million, respectively.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1997, the FASB issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for the reporting of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from non-
owner sources. The adoption of SFAS No. 130 is effective for the Company in
1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 requires publicly-held
companies to report financial and other information about key revenue-producing
segments of the entity for which such information is available and is utilized
by the chief operation decision maker. Specific information to be reported for
individual segments includes profit or loss, certain revenue and expense items
and total assets. A reconciliation of segment financial information to amounts
reported in the financial statements is also to be provided. SFAS No. 131 is
effective for the Company in 1999.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair
37
<PAGE>
MICRON TECHNOLOGY, INC.
value. SFAS No. 133 is effective for the Company in 1999. The Company is
currently evaluating the effect SFAS No. 133 will have on future results of
operations and financial position as the acquired TI memory operations are
integrated into the Company. Implementation of SFAS No. 133 is required for the
Company by the first quarter of 2000.
In March 1998, the AICPA issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires companies to capitalize certain costs of
computer software developed or obtained for internal use. The Company is
currently evaluating the effect on the Company's results of operations and
financial position. Implementation of SOP 98-1 is required for the Company by
the end of 2000.
FOREIGN CURRENCY: The U.S. dollar is the Company's functional currency for
substantially all of its operations. For international operations where the
local currency is the functional currency, assets and liabilities are translated
into U.S. dollars at exchange rates in effect at the balance sheet date and
income and expense items are translated at the average exchange rates prevailing
during the period.
RESTATEMENTS AND RECLASSIFICATIONS: Certain reclassifications have been made,
none of which affected the results of operations, to present the financial
statement on a consistent basis.
SUPPLEMENTAL BALANCE SHEET INFORMATION 9/3/98 8/28/97
- --------------------------------------------------------------------------
LIQUID INVESTMENTS
- --------------------------------------------------------------------------
Available-for-sale securities:
Commercial paper........................... $ 228.4 $ 377.4
U.S. Government agency..................... 25.9 248.7
Bankers' acceptances....................... -- 96.1
State and local governments................ -- 5.8
------- -------
254.3 728.0
Held-to-maturity securities:
Commercial paper........................... 70.4 72.7
State and local governments................ 37.4 45.2
U.S. Government agency..................... 205.0 39.3
Bankers' acceptances....................... -- 3.8
------- -------
312.8 161.0
------- -------
Total investments............................. 567.1 889.0
Less cash equivalents......................... (476.3) (520.8)
------- -------
$ 90.8 $ 368.2
======= =======
Securities classified as available-for-sale are stated at amortized cost which
approximates fair value. Securities classified as held-to-maturity are stated
at amortized cost. As of September 3, 1998, the total amount of securities
classified as available-for-sale mature within 90 days and the total amount of
securities classified as held-to-maturity mature within one year.
38
<PAGE>
MICRON TECHNOLOGY, INC.
<TABLE>
<CAPTION>
SUPPLEMENTAL BALANCE SHEET INFORMATION (CONTINUED) 9/3/98 8/28/97
- ---------------------------------------------------------------------------------------------------------------------
RECEIVABLES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade receivables.................................................................... $293.0 $ 447.2
Income taxes receivable.............................................................. 191.9 17.9
Allowance for returns and discounts.................................................. (11.4) (29.3)
Allowance for doubtful accounts...................................................... (5.4) (9.0)
Other receivables.................................................................... 21.4 32.1
------ -------
$489.5 $ 458.9
====== ========
<CAPTION>
INVENTORIES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods......................................................... $ 92.8 $ 128.6
Work in progress....................................................... 139.6 195.7
Raw materials and supplies............................................. 58.7 129.9
------- --------
$ 291.1 $ 454.2
======= ========
<CAPTION>
PRODUCT AND PROCESS TECHNOLOGY
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Product and process technology, at cost.............................................. $ 161.7 $ 108.1
Less accumulated amortization........................................................ (76.8) (57.0)
------- --------
$ 84.9 $ 51.1
======= ========
</TABLE>
Amortization of capitalized product and process technology costs was $23.1
million in 1998; $11.4 million in 1997; and $13.6 million in 1996.
<TABLE>
<CAPTION>
PROPERTY, PLANT AND EQUIPMENT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land................................................................................. $ 34.8 $ 35.4
Buildings............................................................................ 915.5 817.9
Equipment............................................................................ 3,017.4 2,416.2
Construction in progress............................................................. 704.6 681.9
--------- ---------
4,672.3 3,951.4
Less accumulated depreciation and amortization....................................... (1,641.5) (1,190.2)
--------- ---------
$3,030.8 $2,761.2
========= =========
</TABLE>
As of September 3, 1998, property, plant and equipment included unamortized
costs of $701.2 million for the Company's semiconductor memory manufacturing
facility in Lehi, Utah, of which $640.4 million has not been placed in service
and is not being depreciated. Timing of the completion of the remainder of the
Lehi production facilities is dependent upon market conditions. Market
conditions which the Company expects to evaluate include, but are not limited
to, worldwide market supply and demand of semiconductor products and the
Company's operations, cash flows and alternative uses of capital. The Company
continues to evaluate the carrying value of the facility and as of September 3,
1998, it was determined to have no impairment.
Depreciation expense was $567.6 million, $461.7 million and $363.7 million for
1998, 1997 and 1996, respectively.
39
<PAGE>
MICRON TECHNOLOGY, INC.
<TABLE>
<CAPTION>
SUPPLEMENTAL BALANCE SHEET INFORMATION (CONTINUED) 9/3/98 8/28/97
- ---------------------------------------------------------------------------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- -------------------------------------
<S> <C> <C>
Accounts payable.................................................. $232.8 $277.0
Salaries, wages and benefits...................................... 84.9 93.7
Product and process technology payable............................ 46.4 99.9
Taxes payable other than income................................... 44.5 37.3
Interest payable.................................................. 7.3 6.9
Other............................................................. 40.7 31.3
------ ------
$ 456.6 $546.1
====== ======
</TABLE>
<TABLE>
<CAPTION>
DEBT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible Subordinated Notes payable, due July 2004, interest rate of 7%................. $500.0 $ 500.0
Notes payable in periodic installments through July 2015, weighted average
interest rate 7.38% and 7.33%, respectively............................................. 315.2 331.3
Capitalized lease obligations payable in monthly installments through August
2004, weighted average interest rate of 7.38% and 7.68%, respectively................... 39.4 40.7
Other...................................................................................... -- 6.3
------ -------
854.6 878.3
Less current portion....................................................................... (97.3) (116.0)
------ -------
$757.3 $ 762.3
====== =======
</TABLE>
The Company has $500 million in 7% convertible subordinated notes due July 1,
2004 which are convertible into shares of the Company's common stock at $67.44
per share. The notes were offered under a $1 billion shelf registration
statement pursuant to which the Company may issue from time to time up to $500
million of additional debt or equity securities.
During the fourth quarter of 1998 the Company renegotiated its revolving
credit agreement which expires May 2000. The total amount the Company is
eligible to borrow was reduced to $400 million. The interest rate on borrowed
funds is based on various pricing options at the time of borrowing. The
agreement contains certain restrictive covenants pertaining to the Company's
semiconductor operations, including a maximum debt to equity covenant. As of
September 3, 1998, MTI had no borrowings outstanding under the agreement.
MEI has an unsecured $100 million credit facility expiring in June 2001 and an
additional unsecured revolving credit facility expiring in June 1999 providing
for borrowings of up to 1.5 billion Japanese yen (US $11.1 million at September
3, 1998). MEI is subject to certain financial and other covenants including
certain financial ratios and limitations on the amount of dividends paid by MEI.
As of September 3, 1998, MEI was eligible to borrow the full amount under the
agreements and had aggregate borrowings of approximately $8.2 million
outstanding under its credit agreements.
Certain notes payable are collateralized by plant and equipment with a total
cost of approximately $496.2 million and accumulated depreciation of
approximately $242.0 million as of September 3, 1998. Equipment under capital
leases, and the accumulated depreciation thereon, were approximately $45.0
million and $15.4 million, respectively, as of September 3, 1998, and $59.8
million and $21.6 million, respectively, as of August 28, 1997.
The Company leases certain facilities and equipment under operating leases.
Total rental expense on all operating leases was $16.3 million, $8.0 million and
$5.7 million for 1998, 1997 and 1996, respectively. Minimum future rental
commitments under operating leases aggregate $34.4 million as of September 3,
1998 and are payable as follows (in millions): 1999, $9.3; 2000, $7.9; 2001,
$6.6; 2002, $5.4; 2003 and thereafter, $5.2.
40
<PAGE>
MICRON TECHNOLOGY, INC.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
NOTES CAPITAL
FISCAL YEAR PAYABLE LEASES
----------- ------- -------
<S> <C> <C>
1999................................................................. $ 91.9 $10.9
2000................................................................. 96.1 10.5
2001................................................................. 81.1 16.5
2002................................................................. 27.5 4.6
2003................................................................. 17.2 1.3
2004 and thereafter.................................................. 502.2 2.3
Less discount and interest........................................... (0.8) (6.7)
------ -----
$815.2 $39.4
====== =====
</TABLE>
Interest income in 1998, 1997, and 1996 is net of interest expense of $49.4
million, $31.3 million and $8.6 million, respectively.
STOCK PURCHASE PLANS
As of September 3, 1998, the Company had in place the 1994 Stock Option Plan,
the 1996 Stock Option Plan, the NSO Plan and the 1997 NSO Plan, collectively
the "Active Stock Plans." As of September 3, 1998, there was an aggregate of
42.9 million shares of the Company's common stock authorized for issuance under
the Active Stock Plans. No options were available for grant under the Company's
1985 Incentive Stock Option Plan, which expired in 1995, however, options remain
outstanding under that plan. Options are subject to terms and conditions
determined by the Board of Directors, and generally are exercisable in
increments of 20% during each year of employment beginning one year from the
date of grant. All stock options issued prior to January 19, 1998 expire six
years from the date of grant and all subsequent options granted expire 10 years
from the date of grant.
Option activity under MTI's Stock Plans is summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------------
9/3/98 8/28/97 8/29/96
--------------------- --------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........... 21.7 $28.85 14.5 $29.38 13.7 $15.54
Assumption of subsidiary options........... 0.3 1.74
Granted.................................... 2.0 30.37 14.3 36.57 3.3 71.61
Terminated or cancelled.................... (0.6) 32.58 (4.9) 49.28 (0.5) 23.11
Exercised.................................. (1.3) 9.96 (2.2) 11.94 (2.0) 6.94
---- ---- ----
Outstanding at end of year................. 22.1 29.59 21.7 28.85 14.5 29.38
==== ==== ====
Exercisable at end of year................. 8.9 22.80 5.3 17.63 2.9 14.54
Shares available for future grants......... 26.4 -- 2.9 -- 5.1 --
</TABLE>
Options outstanding under the Active Stock Plans as of September 3, 1998, were
at per share prices ranging from $1.50 to $45.78. Options exercised were at per
share prices ranging from $1.50 to $31.65 in 1998, $1.72 to $37.87 in 1997 and
$1.53 to $28.87 in 1996.
41
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
42
<PAGE>
MICRON TECHNOLOGY, INC.
The following table summarizes information about MTI options outstanding under
the Active Stock Plans as of September 3, 1998:
<TABLE>
<CAPTION>
MTI OUTSTANDING OPTIONS MTI EXERCISABLE OPTIONS
- -----------------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OF SHARES LIFE (IN PRICE of shares PRICE
YEARS)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.50 - $9.60 1.8 1.7 $ 4.74 1.7 $ 4.67
$10.19 -$19.98 2.8 1.5 13.85 2.0 13.75
$20.09 -$29.94 6.8 3.3 26.69 2.3 25.84
$30.39 -$45.78 10.7 4.7 39.56 2.9 37.49
---- ---
22.1 8.9
==== ===
</TABLE>
The Company's 1989 Employee Stock Purchase Plan ("ESPP") and MEI's 1995
Employee Stock Purchase Plan ("MEI ESPP") allow eligible employees to purchase
shares of the Company's common stock and MEI's common stock through payroll
deductions. The shares can be purchased for 85% of the lower of the beginning
or ending fair market value of each offering period and are restricted from
resale for a period of one year from the date of purchase. Purchases are
limited to 20% of an employee's eligible compensation. A total of 6.8 million
shares of Company common stock are reserved for issuance under the ESPP, of
which 6.5 million shares have been issued as of September 3, 1998. A total of
2.5 million shares of MEI common stock are reserved for issuance under the MEI
ESPP, of which approximately 508,000 shares had been issued as of September 3,
1998.
MEI's 1995 Stock Option Plan provides for the granting of incentive and
nonstatutory stock options. As of September 3, 1998, there were 10 million
shares of common stock reserved for issuance under the option plan. Exercise
prices of the incentive and nonstatutory stock options have generally been 100%
and 85%, respectively, of the fair market value of the Company's common stock on
the date of grant. Options are granted subject to terms and conditions
determined by the MEI Board of Directors, and generally are exercisable in
increments of 20% for each year of employment beginning one year from date of
grant and generally expire six years from date of grant.
On March 19, 1998, the MEI Board of Directors approved an option repricing
program pursuant to which essentially all MEI employees could exchange
outstanding options under the option plan for new options having an exercise
price equal to the average closing price of the Company's common stock for the
five business days preceding April 3, 1998 and having generally the same terms
and conditions, including vesting and expiration terms, as the options
exchanged. Options to purchase 2,345,000 shares were exchanged under the
program.
During 1998, Mr. Joel J. Kocher, MEI's Chief Executive Officer, President and
Chairman of the Board of Directors, was granted options to purchase a total of
650,000 shares of the Company's common stock. Of these 650,000 options, 500,000
were granted under the option plan and 150,000 were granted as non-plan grants
outside of the option plan. A total of 250,000 options vest after completion by
Mr. Kocher of seven (7) years of employment with the Company, subject to
immediate early vesting if the Company achieves certain financial criteria
relating to profitability, net revenue, net margin and cash balance increases.
43
<PAGE>
MICRON TECHNOLOGY, INC.
Option activity under MEI's 1995 Stock Option Plan is summarized as follows
(amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------
9/3/98 8/28/97 8/29/96
----------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........... 3,559 $16.98 1,908 $13.70 1,795 $ 8.22
Granted.................................... 5,842 13.20 1,926 19.90 1,294 12.11
Terminated or cancelled.................... (4,041) 17.40 (200) 16.52 (189) 17.35
Exercised.................................. (68) 11.37 (75) 9.49 (992) 1.02
------- ------- -------
Outstanding at end of year................. 5,292 12.56 3,559 16.98 1,908 13.70
======= ======= =======
Exercisable at end of year................. 747 13.24 473 14.45 172 13.84
Shares available for future grants......... 4,764 -- 1,416 -- 3,141 --
</TABLE>
The following table summarizes information about MEI options outstanding under
the MEI 1995 Stock Option Plan as of September 3, 1998 (amounts in thousands,
except per share amounts):
<TABLE>
<CAPTION>
MEI OUTSTANDING OPTIONS MEI EXERCISABLE OPTIONS
- ---------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE AVERAGE
OF REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL PRICE OF SHARES PRICE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
below $5.00 17 .23 $ 3.00 17 $ 3.00
$5.00 - $10.00 742 5.43 9.14 8 9.31
$10.01 - $15.00 3,836 5.23 12.47 564 12.36
$15.01 - $20.00 600 4.26 17.17 150 17.44
above $20.00 97 4.40 21.96 8 21.96
----- ---
5,292 747
===== ===
</TABLE>
In December 1994, ZEOS International, Ltd. ("ZEOS"), subsequently merged with
MEI, awarded shares of its common stock to certain of its employees subject to
their continued employment as of January 1, 1996. Compensation expense was
recognized over the vesting period based upon the fair market value of the stock
at the date of award. To satisfy this award, MEI issued approximately 151,000
shares of its common stock in January 1996.
Pro forma Disclosure
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," issued in October 1995. Accordingly, compensation cost has been
recorded based on the intrinsic value of the option only. The Company
recognized $3.4 million and $8.4 million of compensation cost in 1998 and 1997,
respectively, for stock-based employee compensation awards. The pro forma
compensation cost for stock-based employee compensation awards was $67.6 million
and $38.9 million in 1998 and 1997, respectively. If the Company had elected to
recognize compensation cost based on the fair value of
44
<PAGE>
MICRON TECHNOLOGY, INC.
the options granted at grant date as prescribed by SFAS No. 123, net income
(loss) and earnings (loss) per share would have been changed to the pro forma
amounts indicated in the table below:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS 1998 1997 1996
EXCEPT PER SHARE AMOUNTS) AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $(233.7) $(301.3) $332.2 $293.3 $593.5 $559.8
Diluted earnings (loss) per share $ (1.10) $ (1.42) $ 1.55 $ 1.35 $ 2.76 $ 2.60
</TABLE>
The above pro forma amounts, for purposes of SFAS No. 123, reflect the portion
of the estimated fair value of awards earned in 1998 and 1997. For purposes of
pro forma disclosures, the estimated fair value of the options is amortized over
the options' vesting period (for stock options) and over the offering period for
stock purchases under the Employee Stock Purchase Plans. The effects on pro
forma disclosures of applying SFAS 123 are not likely to be representative of
the effects on pro forma disclosures of future years. Because SFAS 123 is
applicable only to options granted subsequent to August 31, 1995, the effect
will not be fully reflected until 2000.
The Company used the Black-Scholes model to value stock options for pro forma
presentation. The assumptions used to estimate the value of the MTI options
included in the pro forma amounts and the weighted average estimated fair value
of MTI options granted are as follows:
<TABLE>
<CAPTION>
STOCK OPTION EMPLOYEE STOCK
PLAN SHARES PURCHASE PLAN SHARES
----------------------------- --------------------------
1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average expected life (years) 3.5 3.5 3.5 0.25 0.25 0.25
Expected volatility 60% 58% 57% 60% 58% 57%
Risk-free interest rate (zero coupon U.S. Treasury 5.6% 6.2% 5.9% 5.1% 5.0% 5.1%
note)
Weighted average fair value at grant
Exercise price equal to market price $14.70 $15.17 $34.13 -- -- --
Exercise price less than market price $27.77 $21.26 $37.14 $9.68 $6.61 $20.67
</TABLE>
The assumptions used to estimate the value of the MEI options included in the
pro forma amounts and the weighted average estimated fair value of MEI options
granted are as follows:
<TABLE>
<CAPTION>
STOCK OPTION EMPLOYEE STOCK
PLAN SHARES PURCHASE PLAN SHARES
----------------------------- ----------------------------
1998 1997 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average expected life (years) 3.3 3.5 3.5 0.5 0.5 0.5
Expected volatility 70% 70% 70% 70% 70% 70%
Risk-free interest rate (zero coupon U.S. Treasury 5.6% 6.2% 5.9% 5.1% 5.0% 5.1%
note)
Weighted average fair value at grant
Exercise price equal to market price $6.57 $10.68 $6.50 -- -- --
Exercise price less than market price $9.25 $11.41 $6.61 $3.78 $5.39 $3.68
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, the Black-Scholes model requires the input of
highly subjective assumptions, including the expected stock price volatility and
option life. Because the Company's stock options granted to employees have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, existing models do not necessarily
provide a reliable measure of the fair value of its stock options granted to
employees. For purposes of this model no dividends have been assumed.
45
<PAGE>
MICRON TECHNOLOGY, INC.
EMPLOYEE SAVINGS PLAN
The Company has 401(k) profit-sharing plans ("RAM Plans") in which
substantially all employees are participants. Employees may contribute from 2%
to 16% of their eligible pay to various savings alternatives in the RAM Plans.
The Company's contribution provides for an annual match of the first $1,500 of
eligible employee contributions, in addition to contributions based on the
Company's financial performance. The Company's RAM Plans expenses were $11.3
million in 1998, $18.9 million in 1997 and $16.9 million in 1996.
RESTRUCTURING
In 1996, MEI adopted and completed a plan to discontinue the manufacture and
sale of ZEOS brand PC systems. The Company recorded a restructuring charge of
$29.6 million in 1996, comprised principally of $14.5 million relating to the
disposition of ZEOS components and systems and $13 million to write off
unamortized goodwill.
OTHER OPERATING EXPENSE (INCOME)
Other operating expense for 1998 includes charges of $11.1 million associated
with PC operations resulting from employee termination benefits and
consolidation of domestic and international operations and $5.2 million from the
write-off of software development costs. Other operating expense (income)
reflects net pre-tax losses of $13.9 million and $2.6 million from the write-
down and disposal of semiconductor memory operations equipment in 1998 and 1997,
respectively, and a net pre-tax gain of $15.4 million in 1996. Fiscal year 1998
activity also includes a one-time benefit recognized by MEI resulting from a net
rebate of $4.4 million associated with a change of providers of on-site service
contracts.
GAINS ON INVESTMENTS AND SUBSIDIARY STOCK TRANSACTIONS
On February 26, 1998, MEI completed the sale of 90% of its interest in MCMS,
Inc. ("MCMS"), formerly Micron Custom Manufacturing Services, Inc. and a wholly-
owned subsidiary of MEI, resulting in a consolidated pre-tax gain of $157.0
million (approximately $37.8 million or $0.18 per share after taxes and minority
interests). In exchange for the 90% interest in MCMS, MEI received $249.2
million in cash. The sale was structured as a recapitalization of MCMS, whereby
Cornerstone Equity Investors IV, L.P., other investors and certain members of
MCMS management, including Robert F. Subia, then a director of MEI, acquired the
90% interest in MCMS.
In a public offering in February 1997, MTI sold 12.4 million shares of MEI
common stock for net proceeds of $200.0 million and MEI sold 3 million newly
issued shares for net proceeds of $48.2 million, resulting in consolidated pre-
tax gains of $164.6 million and $25.3 million, respectively (for a total of
approximately $93.7 million or $0.44 per share after taxes). The sales reduced
the Company's ownership of the outstanding MEI common stock from approximately
79% to approximately 64%. The Company also recorded pre-tax gains totaling
$22.1 million for 1997 relating to sales of investments. The Company recognized
a deferred tax liability on the resultant gain from the sale of MEI common stock
in the second quarter of 1997.
46
<PAGE>
MICRON TECHNOLOGY, INC.
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
9/3/98 8/28/97 8/29/96
------- -------- --------
<S> <C> <C> <C>
Current:
U.S. federal...................................................... $(156.1) $ 152.1 $ 274.5
State............................................................. 0.1 21.1 25.1
Foreign........................................................... 1.7 1.5 9.3
------- -------- --------
(154.3) 174.7 308.9
------- -------- --------
Deferred:
U.S. federal...................................................... 77.6 89.5 45.5
State............................................................. (42.1) 3.1 2.6
------- -------- --------
35.5 92.6 48.1
------- -------- --------
Income tax provision (benefit)...................................... $(118.8) $ 267.3 $ 357.0
======= ======== ========
</TABLE>
The tax benefit associated with the exercise of nonstatutory stock options and
disqualifying dispositions by employees of shares issued in the Company's stock
option and purchase plans reduced taxes payable by $5.2 million, $14.5 million
and $20.6 million for 1998, 1997 and 1996, respectively. Such benefits are
reflected as additional capital.
A reconciliation between income tax computed using the federal statutory rate
and the income tax provision (benefit) follows:
<TABLE>
<CAPTION>
9/3/98 8/28/97 8/29/96
------- -------- --------
<S> <C> <C> <C>
U.S. federal income tax at statutory rate........................... $(117.3) $ 216.7 $ 332.7
State taxes, net of federal benefit................................. (25.9) 14.1 17.5
Basis difference in domestic subsidiaries........................... 11.6 24.8 --
Other............................................................... 12.8 11.7 6.8
------- -------- --------
Income tax provision (benefit)...................................... $(118.8) $ 267.3 $ 357.0
======= ======== ========
</TABLE>
State taxes reflect utilization of investment tax credits of $21.1 million,
$15.3 million and $31.2 million for 1998, 1997 and 1996, respectively. As of
September 3, 1998, the Company had unused state net operating loss carryforwards
of approximately $288.8 million for tax purposes which expire through 2113 and
unused state credits of approximately $44.3 million for tax and financial
reporting purposes which expire through 2005.
Deferred income taxes reflect the net tax effects of temporary differences
between the basis of assets and liabilities for financial reporting and income
tax purposes. Deferred income tax assets totaled $182.7 million and $160.4
million and liabilities totaled $405.2 million and $338.0 million as of
September 3, 1998 and August 28,
47
<PAGE>
MICRON TECHNOLOGY, INC.
1997, respectively. The approximate tax effects of temporary differences which
give rise to the net deferred tax liability (benefit) are as follows:
<TABLE>
<CAPTION>
9/3/98 8/28/97
------- --------
<S> <C> <C>
Current deferred tax asset:
Accrued product and process technology...................................... $ 10.4 $ 16.3
Inventory................................................................... 11.3 14.4
Accrued compensation........................................................ 14.8 8.3
Deferred income............................................................. 3.1 6.3
Net operating loss acquired in merger....................................... -- 0.6
Other....................................................................... 22.1 16.3
------- --------
Net deferred tax asset................................................... 61.7 62.2
------- --------
Noncurrent deferred tax asset (liability):
Excess tax over book depreciation........................................... (217.5) (191.6)
Accrued product and process technology...................................... (3.4) 21.7
Investment in subsidiary.................................................... (56.7) (44.7)
Other....................................................................... (6.6) (25.2)
------- --------
Net deferred tax liability............................................... (284.2) (239.8)
------- --------
Total net deferred tax liability.............................................. $(222.5) $ (177.6)
======= ========
</TABLE>
PURCHASE OF MINORITY INTERESTS
In the second quarter of 1998 the Company purchased the 11% minority interest
in its subsidiary, Micron Quantum Devices, Inc., for $26.2 million in stock and
stock options. The cost of the acquired interest was allocated primarily to
intangible assets related to flash semiconductor technology, which is being
amortized over a three-year period.
In the first quarter of 1998 the Company purchased the 12% minority interest
in its subsidiary, Micron Display Technology, Inc., for $20.6 million in cash.
The cost of the acquired interest was allocated primarily to intangible assets
related to field emission flat panel display technology, which is being
amortized over a three-year period.
EARNINGS (LOSS) PER SHARE
During 1998, the Company adopted SFAS No. 128, "Earnings Per Share," which
changed the standard for computing and presenting earnings per share. Earnings
per share for periods prior to 1998 have been restated as required by SFAS No.
128.
48
<PAGE>
MICRON TECHNOLOGY, INC.
Basic earnings per share is calculated using the average number of common
shares outstanding. Diluted earnings per share is computed on the basis of the
average number of common shares outstanding plus the effect of outstanding stock
options using the "treasury stock method" and convertible debentures using the
"if-converted" method.
<TABLE>
<CAPTION>
9/3/98 8/28/97 8/29/96
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) available for common shareholders,
(233.7) $ 332.2 $ 593.5
Basic and Diluted ======= ======== ========
Weighted average common stock outstanding - Basic 212.2 210.0 207.7
Net effect of dilutive stock options --- 4.3 5.4
------- -------- --------
Weighted average common stock and common
stock equivalents Diluted 212.2 214.3 213.1
======= ======== ========
Basic earnings (loss) per share (1.10) $ 1.58 $ 2.86
======= ======== ========
Diluted earnings (loss) per share (1.10) $ 1.55 $ 2.78
======= ======== ========
</TABLE>
Earnings per share computations exclude stock options and potential shares
for convertible debentures to the extent that their effect would have been
antidilutive.
EXPORT SALES AND MAJOR CUSTOMERS
Export sales were $612.7 million for 1998, including $275.3 million in sales
to Europe and $179.0 million in sales to Asia Pacific, $47.4 million in sales to
Canada and $42.9 million in sales to Japan. Export sales were $735.4 million
and $938.4 million in 1997 and 1996, respectively. No customer individually
accounted for 10% or more of the Company's total net sales.
COMMITMENTS AND CONTINGENCIES
As of September 3, 1998, the Company had commitments of $335.1 million for
equipment purchases and $12.3 million for the construction of buildings.
The Company has from time to time received, and may in the future receive,
communications alleging that its products or its processes may infringe on
product or process technology rights held by others. The Company has accrued a
liability and charged operations for the estimated costs of settlement or
adjudication of asserted and unasserted claims for alleged infringement prior to
the balance sheet date. Determination that the Company's manufacture of
products has infringed on valid rights held by others could have a material
adverse effect on the Company's financial position, results of operations or
cash flows and could require changes in production processes and products.
The Company is currently a party to various other legal actions arising out of
the normal course of business, none of which are expected to have a material
effect on the Company's financial position or results of operations.
49
<PAGE>
MICRON TECHNOLOGY, INC.
SUBSEQUENT EVENTS
ACQUISITION
On September 30, 1998, the Company completed its acquisition of substantially
all of TI's memory operations. The Acquisition was consummated through the
issuance of debt and equity securities. TI received approximately 28.9 million
shares of MTI common stock, $740 million principal amount of Convertible Notes
and $210 million principal amount of Subordinated Notes. In addition to TI's
memory assets, the Company received $550 million in cash. The Company and TI
also entered into a ten-year, royalty-free, life-of-patents, patent cross
license that commences on January 1, 1999. The parties have also agreed to make
cash adjustments to ensure that current assets minus the sum of current and
noncurrent assumed liabilities of the acquired operations is $150 million as of
September 30, 1998.
The MTI common stock and Convertible Notes issued in the transaction have not
been registered under the Securities Act of 1933, as amended, and are therefore
subject to certain restrictions on resale. The Company and TI entered into a
securities rights and restrictions agreement as part of the transaction which
provides TI with certain registration rights and places certain restrictions on
TI's voting rights and other activities with respect to shares of MTI common
stock. TI's registration rights begin on March 31, 1999. The Convertible Notes
and the Subordinated Notes issued in the transaction bear interest at the rate
of 6.5% and have a term of seven years. The Convertible Notes are convertible
into approximately 12.3 million shares of MTI common stock at a conversion price
of approximately $60 per share. The Subordinated Notes are subordinated to the
Convertible Notes, the Company's outstanding 7% Convertible Subordinated Notes
due July 1, 2004, and substantially all of the Company's other indebtedness.
The assets acquired by the Company in the Acquisition include a wafer
fabrication operation in Avezzano, Italy, an assembly/test operation in
Singapore, and a wafer fabrication facility in Richardson, Texas. TI closed the
Richardson memory manufacturing operation in June 1998. Also included in the
Acquisition was TI's interest in two joint ventures and TI's rights to 100% of
the output of the joint ventures, TECH and KTI. MTI acquired an approximate 30%
interest in TECH and a 25% interest in KTI. In the Acquisition, the Company
acquired the obligation to purchase and the rights to 100% of the production
output of TECH and KTI. Under the provisions of the joint venture agreements,
the Company purchases assembled and tested components from the joint ventures at
prices discounted from end customer sales price(s). Pursuant to the
Acquisition, the Company acquired the right and obligation to purchase 100% of
the production output of the TECH Semiconductor joint venture in Singapore and
the KTI Semiconductor joint venture in Japan. Under the terms of the joint
venture agreements, assembled and tested components are purchased at a discount
from worldwide average sales prices.
EQUITY INVESTMENT
On October 19, 1998, the Company issued to Intel approximately 15.8 million
stock rights exchangeable into non-voting Class A Common Stock (upon MTI
shareholder approval of such class of stock) or into common stock of the Company
for a purchase price of $500 million. The Rights at the time of issuance
represented approximately 6% of the Company's outstanding common stock. The
Rights (or Class A Common Stock) will automatically be exchanged for (or
converted into) the Company's common stock upon a transfer to a holder other
than Intel or a 90% owned subsidiary of Intel. The Company has agreed to seek
shareholder approval to amend its Certificate of Incorporation to create the
non-voting Class A Common Stock at the Company's next Annual Meeting of
Shareholders. In the event the Company's shareholders approve the amendment,
the Rights will be automatically exchanged for Class A Common Stock upon the
filing in Delaware of the amended Certificate of Incorporation. In the event
the Company's shareholders do not approve the amendment, the Rights will remain
exchangeable into the Company's common stock. In order to exchange the Rights
for the Company's common stock, Intel would be required to provide the Company
with written evidence of compliance with the Hart-Scott-Rodino Act ("HSR")
filing requirements or that no HSR filings are required. The MTI common stock
issued to Intel has not been registered under the Securities Act of 1933, as
amended, and is therefore subject to certain restrictions on resale. The
Company and Intel entered into a securities rights and restrictions agreement
which provides Intel with certain
50
<PAGE>
MICRON TECHNOLOGY, INC.
registration rights and places certain restrictions on Intel's voting rights and
other activities with respect to the shares of MTI Class A Common Stock or
common stock. Intel's registration rights begin on March 31, 1999. Intel also
has the right to designate a nominee acceptable to the Company to the Company's
Board of Directors.
In consideration for Intel's investment, the Company has agreed to commit to
the development of RDRAM and to certain production and capital expenditure
milestones and to make available to Intel a certain percentage of its
semiconductor memory output over a five-year period, subject to certain
limitations. The exchange ratio of the Rights and conversion ratio of the Class
A Common Stock is subject to adjustment under certain formulae at the election
of Intel in the event MTI fails to meet the production or capital expenditure
milestones. No adjustment will occur to the exchange ratio or conversion ratio
under such formulae unless the price of the Company's common stock for a twenty
day period ending two days prior to such milestone dates is lower than $31.625
(Intel's purchase price per Right at the time of the investment). In addition,
in no event will the Company be obligated to issue more than: (a) a number of
additional shares of Class A Common Stock or common stock having a value
exceeding $150 million, or (b) a number of additional shares exceeding the
number of shares originally issued.
MERGER
On September 11, 1998, the Company completed a stock-for-stock merger with
Rendition. Rendition designs, develops and markets high-performance, low-cost,
multi-functional graphics accelerators to the personal computer market. The
merger was accounted for as a business combination using the pooling-of-
interests method. Shareholders of Rendition received approximately 3.7 million
shares of the Company's common stock.
51
<PAGE>
QUARTERLY FINANCIAL AND MARKET INFORMATION (UNAUDITED)
(Dollars in millions, except for per share data)
<TABLE>
<CAPTION>
1998 QUARTER 1ST 2nd 3rd 4th
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales............................................... $ 954.6 $ 755.4 $ 609.9 $ 692.0
Costs and expenses:
Cost of goods sold.................................... 744.1 733.1 603.6 650.7
Selling, general and administrative................... 124.5 135.7 109.0 98.7
Research and development.............................. 63.9 69.9 66.2 71.8
Other operating expense (income)...................... 4.6 24.2 3.4 2.1
------- ------- ------- -------
Total costs and expenses........................... 937.1 962.9 782.2 823.3
------- ------- ------- -------
Operating income (loss)................................. 17.5 (207.5) (172.3) (131.3)
Gain (loss) on sale of investments and subsidiary
stock, net............................................. -- 157.1 -- (0.1)
Gain on issuance of subsidiary stock, net............... 0.1 0.5 0.2 0.5
Interest income (expense), net.......................... (1.3) 1.9 0.8 (1.3)
------- ------- ------- -------
Income (loss) before income taxes....................... 16.3 (48.0) (171.3) (132.2)
Income tax benefit (provision).......................... (6.5) 8.9 67.3 49.1
Minority interests...................................... (0.2) (9.0) (2.1) (6.0)
------- ------- ------- -------
Net income (loss)....................................... $ 9.6 $ (48.1) $(106.1) $ (89.1)
======= ======= ======= =======
Diluted earnings (loss) per share....................... $ 0.04 $ (0.23) $ (0.50) $ (0.42)
Quarterly stock price:
High.................................................. $45.312 $38.000 $34.938 $35.250
Low................................................... 23.125 22.000 23.813 20.125
</TABLE>
<TABLE>
<CAPTION>
1997 QUARTER 1ST 2nd 3rd 4th
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales............................................... $ 728.1 $ 876.2 $ 965.0 $ 946.2
Costs and expenses:
Cost of goods sold.................................... 572.9 657.5 650.0 658.8
Selling, general and administrative................... 76.4 97.4 92.3 104.8
Research and development.............................. 47.2 46.8 52.6 62.3
Other operating expense (income) (0.6) (2.5) 1.1 (3.9)
------- ------- ------- -------
Total costs and expenses........................... 695.9 799.2 796.0 822.0
------- ------- ------- -------
Operating income........................................ 32.2 77.0 169.0 124.2
Gain on sale of investments and subsidiary stock, net... 10.1 176.5 0.1 --
Gain (loss) on issuance of subsidiary stock, net........ (0.9) 28.6 (0.1) 1.5
Interest (expense) income, net.......................... (2.1) (1.8) 1.5 3.3
------- ------- ------- -------
Income before income taxes.............................. 39.3 280.3 170.5 129.0
Income tax provision.................................... (15.6) (131.2) (67.8) (52.7)
Minority interests...................................... (3.1) (6.4) (5.9) (4.2)
------- ------- ------- -------
Net income.............................................. $ 20.6 $ 142.7 $ 96.8 $ 72.1
======= ======= ======= =======
Diluted earnings per share.............................. $ 0.10 $ 0.67 $ 0.45 $ 0.33
Quarterly stock price:
High.................................................. $34.750 $39.125 $45.250 $60.063
Low................................................... 20.375 29.000 33.250 38.375
</TABLE>
As of October 23, 1998, the Company had 6,523 shareholders of record. The
Company did not declare or pay any dividends during 1998 or 1997.
Net gains on sale of investments and subsidiary stock for the third quarter of
1998 includes a pretax gain of $157.0 million on the sale of 90% of the
Company's contract manufacturing subsidiary. Net gain on sales of
52
<PAGE>
investments and subsidiary stock in the second quarter of 1997 includes a pretax
gain of $189.9 million for the sale of 15.4 million shares of common stock of
MEI.
Other operating expense for the second quarter of 1998 includes charges of
$13.0 million associated with the Company's PC operations resulting from a
reduction in workforce and consolidation of domestic and international
operations.
53
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and
Shareholders of Micron Technology, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Micron
Technology, Inc., and its subsidiaries at September 3, 1998 and August 28, 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended September 3, 1998, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial schedule based on our audits. We conducted our audits
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Boise, Idaho
September 28, 1998, except the
Subsequent Event Note, which
is as of October 19, 1998
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain information concerning the registrant's executive officers is included
under the caption "Officers and Directors of the Registrant" following Part I,
Item 1 of this report. Other information required by Items 10, 11, 12 and 13
will be contained in the registrant's Proxy Statement which will be filed with
the Securities and Exchange Commission within 120 days after September 3, 1998,
and is incorporated herein by reference.
55
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Consolidated financial statements and financial statement schedules--(see
"Item 8. Financial Statements and Supplementary Data--Notes to Consolidated
Financial Statements--Contingencies.")
<TABLE>
<CAPTION>
EXHIBIT Description
- ----------- ---------------------------------------------------------------------------------------------
<S> <C>
2.1 Acquisition Agreement between the Registrant and Texas Instruments Incorporated dated June
18, 1998 (1)
2.2 Second Amendment to Acquisition Agreement dated as of September 30, 1998 between the
Registrant and Texas Instruments Incorporated (2)
2.3 Agreement and Plan of Reorganization dated as of June 22, 1998 between the Registrant and
Rendition, Inc. (3)
3.1 Certificate of Incorporation of the Registrant, as amended (4)
3.7 Bylaws of the Registrant, as amended (5)
4.1 Indenture dated as of June 15, 1997 between the Registrant and Norwest Bank Minnesota,
National Association (the "Trustee"), relating to the issuance of 7% Convertible
Subordinated Notes due July 1, 2004 (the "Notes") (6)
4.2 Supplemental Trust Indenture dated as of June 15, 1997 between the Registrant and the
Trustee, relating to the Notes (including the form of Note) (6)
4.3 Rendition Affiliate Agreement dated as of June 22, 1998 among the Registrant, Rendition,
Inc. and each of the affiliates of Rendition (3)
10.6 Form of Micron Affiliate Agreement among the Registrant, Rendition, Inc. and each of the
affiliates of the Registrant (3)
10.82 Form of Indemnification Agreement between the Registrant and its officers and directors (7)
10.91 Board Resolution regarding stock and bonus plan vesting schedules in the event of change
in control of the Registrant (8)
10.92 Additional provisions related to Management Bonus Arrangements for Certain Executive
Officers (8)
10.100 Amended and Restated 1985 Incentive Stock Option Plan (9)
10.109 Form of Management bonus arrangements for Executive Officers of Micron Technology,
Inc., and Micron Semiconductor, Inc., for 1994 (10)
10.110 1994 Stock Option Plan (11)
10.111 Executive Bonus Plan (4)
10.112 Forms of Severance Agreement (12)
10.116 Registration Rights Agreement dated as of June 28, 1996 between the Registrant and
Canadian Imperial Bank of Commerce (13)
10.117 Registration Rights Agreement dated as of July 29, 1996 between the Registrant and
Canadian Imperial Bank of Commerce (13)
10.118(a) Irrevocable Proxy dated June 28, 1996 by Canadian Imperial Bank of Commerce in favor of the
Registrant (13)
10.118(b) Irrevocable Proxy dated July 24, 1998 by the Registrant in favor of the Canadian Imperial
Bank of Commerce
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.119(a) Reformed Irrevocable Proxy dated July 23, 1998 by J.R. Simplot Company in favor of the
Registrant
10.119(b) Irrevocable Proxy dated July 24, 1998 by the Registrant in favor of the Canadian Imperial
Bank of Commerce
10.120 Form of Agreement and Amendment to Severance Agreement between the Company and its executive
officers (14)
10.125 Second Supplemental Trust Indenture dated as of September 30, 1998 between the Registrant
and the Trustee, relating to the issuance of 6 1/2% Convertible Subordinated Notes due
October 2, 2003 (the "TI Notes") (including the form of TI Note) (2)
10.126 Subordinated Promissory Note dated September 30, 1998, issued by the Registrant in the name
of Texas Instruments Incorporated in the amount of $210,000,000 (2)
10.127 Registration Rights Agreement dated as of July 20, 1998, between the Registrant, Canadian
Imperial Bank of Commerce and J.R. Simplot Company (5)
10.128 Nonstatutory Stock Option Plan (15)
10.129 1997 Nonstatutory Stock Option Plan (16)
10.130 Micron Quantum Devices, Inc. 1996 Stock Option Plan (16)
10.131 Sample Stock Option Assumption Letter for Micron Quantum Devices, Inc. 1996 Stock Option
Plan (16)
10.132 1998 Nonstatutory Stock Option Plan (17)
10.133 Rendition, Inc. 1994 Equity Incentive Plan (17)
10.134 Sample Stock Option Assumption Letter for Rendition, Inc. 1994 Equity Incentive Plan (17)
10.135 Second Amended and Restated Revolving Credit Agreement dated as of September 1, 1998 among
the Registrant and several financial institutions
10.136 Securities Purchase Agreement dated as of October 15, 1998 between the Registrant and Intel
Corporation (Confidential Treatment has been requested for a portion of this document)
10.137 Securities Rights and Restrictions Agreement dated as of October 19, 1998 between the
Registrant and Intel Corporation
10.138 Stock Rights Agreement dated as of October 19, 1998 between the Registrant and Intel
Corporation (Confidential Treatment has been requested for a portion of this document)
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
</TABLE>
- ---------
(1) Incorporated by Reference to Quarterly Report on Form 10-Q for the
fiscal quarter ended May 28, 1998
(2) Incorporated by Reference to Current Report on Form 8-K filed on
October 14, 1998, as amended on October 16, 1998
(3) Incorporated by Reference to Registration Statement on Form S-4 as
amended (Reg. No. 333-60129)
(4) Incorporated by Reference to Annual Report on Form 10-K as amended for
the fiscal year ended August 31, 1995
(5) Incorporated by Reference to Registration Statement on Form S-3 as
amended (Reg. No. 333-57973)
(6) Incorporated by Reference to Current Report on Form 8-K filed on July
3, 1997
(7) Incorporated by Reference to Proxy Statement for the 1986 Annual
Meeting of Shareholders
57
<PAGE>
(8) Incorporated by Reference to Annual Report on Form 10-K for the fiscal
year ended August 31, 1989
(9) Incorporated by Reference to Registration Statements on Forms S-8
(Reg. Nos. 33-38665, 33-38926, and 33-52653)
(10) Incorporated by Reference to Annual Report on Form 10-K for the fiscal
year ended September 2, 1993
(11) Incorporated by Reference to Registration Statement on Form S-8 (Reg.
Nos. 33-57887, 333-07283 and 333-50353)
(12) Incorporated by Reference to Quarterly Report on Form 10-Q for the
fiscal quarter ended February 29, 1996
(13) Incorporated by Reference to Annual Report on Form 10-K for the fiscal
year ended August 29, 1996
(14) Incorporated by Reference to Quarterly Report on Form 10-Q for the
fiscal quarter ended February 27, 1997
(15) Incorporated by Reference to Registration Statement on Form S-8 (Reg.
Nos. 333-17073 and 333-50353)
(16) Incorporated by Reference to Registration Statement on Form S-8 (Reg.
No. 333-50353)
(17) Incorporated by Reference to Registration Statement on Form S-8 (Reg.
No. 333-65449)
(b) Reports on Form 8-K:
The Registrant did not file any Reports on Form 8-K during the quarter ended
September 3, 1998.
Micron is a trademark of the Company. GoBook, mPower and Transport Trek are
trademarks of MEI. ClientPro, Millennia and NetFRAME are registered trademarks
of MEI. Micron Power is a service mark of MEI. All other product names
appearing herein are for identification purposes only and may be trademarks of
their respective companies.
58
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOISE,
STATE OF IDAHO, ON THE 2ND DAY OF NOVEMBER, 1998.
MICRON TECHNOLOGY, INC.
By: /S/ WILBUR G. STOVER, JR.
--------------------------------
WILBUR G. STOVER, JR.,
VICE PRESIDENT OF FINANCE, CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
ANNUAL REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature TITLE DATE
--------- ----- ----
/S/ STEVEN R. APPLETON Chairman of the Board, November 2, 1998
- ----------------------
(STEVEN R. APPLETON) Chief Executive Officer
and President
/S/ JAMES W. BAGLEY Director November 2, 1998
- -------------------
(JAMES W. BAGLEY)
/S/ ROBERT A. LOTHROP Director November 2, 1998
- ---------------------
(ROBERT A. LOTHROP)
/S/ THOMAS T. NICHOLSON Director November 2, 1998
- -----------------------
(THOMAS T. NICHOLSON)
/S/ DON J. SIMPLOT Director November 2, 1998
- -----------------------
(DON J. SIMPLOT)
/S/ JOHN R. SIMPLOT Director November 2, 1998
- -----------------------
(JOHN R. SIMPLOT)
/S/ GORDON C. SMITH Director November 2, 1998
- -----------------------
(GORDON C. SMITH)
/S/ WILLIAM P. WEBER Director November 2, 1998
- -----------------------
(WILLIAM P. WEBER)
59
<PAGE>
Schedule II
MICRON TECHNOLOGY, INC.
Valuation and Qualification Accounts
(dollars in millions)
<TABLE>
<CAPTION>
Balance at Charged Deduction/ Balance at End
Beginning of (Credited) to Write-Off of Period
Period Costs and Expenses
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
- --------------------------------------
Year ended September 3, 1998 $ 9.0 $(3.3) $ (0.3) $ 5.4
Year ended August 28, 1997 9.0 0.2 (0.2) 9.0
Year ended August 29, 1996 7.4 1.9 (0.3) 9.0
Allowance for Obsolete Inventory
- --------------------------------------
Year ended September 3, 1998 $23.7 $12.4 $(16.3) $19.8
Year ended August 28, 1997 14.5 15.9 (6.7) 23.7
Year ended August 29, 1996 11.1 8.1 (4.7) 14.5
Deferred Tax Asset Valuation Allowance
- --------------------------------------
Year ended September 3, 1998 $ - $ 4.1 $ - $ 4.1
Year ended August 28, 1997 - - - -
Year ended August 29, 1996 - - - -
</TABLE>
60
<PAGE>
EXHIBIT 10.118(b)
IRREVOCABLE PROXY
(2,600,000 shares)
The undersigned Steven R. Appleton ("Appleton") and Wilbur G. Stover, Jr.
("Stover"), and each of them alone, hereby irrevocably appoint Canadian Imperial
Bank of Commerce, a Canadian bank ("CIBC"), as their true and lawful proxy and
attorney-in-fact, with full power of substitution and resubstitution (a) to
represent J.R. Simplot Company, a Nevada corporation (the "Company"), at the
annual meetings of the stockholders of Micron Technology, Inc., a Delaware
corporation ("Micron"), to be held in 1998, 1999, 2000, 2001 and 2002, and at
any adjournment thereof, and to vote, in CIBC's discretion (including
cumulatively, if required) 2,600,000 shares (the "Shares") of common stock, $.10
par value ("Common Stock"), of Micron held by the Company and consisting of (i)
all of the shares of Common Stock certificate numbers MC38055 and MC38060 and
(ii) 1,098,750 shares of the common stock evidenced by certificate number
MC38067, or any certificates issued to the Company as a replacement therefor;
(b) to represent the Company at any special meeting of stockholders of Micron,
and at any adjournment thereof, and to vote (including cumulatively, if
required) all the Shares in his or her discretion; and (c) to vote all the
Shares in CIBC's discretion upon such other matter or matters which may properly
come before the stockholders of Micron by written consent or otherwise. This
proxy does not affect the voting rights with regard to the remaining 882,500
shares of Common Stock evidenced by certificate number MC38067.
This irrevocable proxy may be exercised at any time after the date hereof
and prior to June 27, 2003, except that such proxy shall expire immediately upon
the first to occur of (1) the termination for any reason of the dividend swap
transaction contemplated by the letter agreement by and between the Company and
CIBC dated June 28, 1996 or (2) the first date as of which CIBC is required to
return the Shares pursuant to that certain Pledge Agreement dated or to be dated
as of July 1998, by and between the Company and CIBC.
This irrevocable proxy is given by the undersigned, in their respective
capacities as Chairman of the Board of Micron (in the case of Appleton) and
Chief Financial Officer of Micron (in the case of Stover), pursuant to the power
of substitution accorded by that certain proxy dated June 28, 1996 executed by
CIBC in favor of the undersigned, which proxy was in turn given pursuant to the
power of substitution awarded by that certain proxy dated June 28, 1996 by the
Company to CIBC.
Dated: July 24, 1998
/s/ WILBUR G. STOVER, JR.
-----------------------------------
Wilbur G. Stover, Jr.
/s/ STEVEN R. APPLETON
-----------------------------------
Steven R. Appleton
<PAGE>
EXHIBIT 10.119(a)
REFORMED IRREVOCABLE PROXY
(J.R. Simplot Company)
This Reformed Irrevocable Proxy reforms and restates that certain
Irrevocable Proxy dated as of July 29, 1996 executed by J.R. Simplot Company, a
Nevada corporation (the "Company"), in favor of such persons as may be serving
from time to time as the Chairman of the Board of Micron Technology, Inc., a
Delaware corporation ("Micron"), and the Chief Financial Officer of Micron.
This Reformed Irrevocable Proxy is effective as of July 29, 1996.
The Company hereby irrevocably appoints such persons as may be serving from
time to time as the Chairman of the Board of Micron, the Chief Financial Officer
of Micron, and each of them alone, as its true and lawful proxy and
attorney-in-fact, with full power of substitution and resubstitution (a) to
represent the Company at the annual meetings of the stockholders of Micron to be
held in 1996, 1997, 1998, 1999, 2000, 2001 and 2002, and at any adjournment
thereof, and to vote, in its discretion (including cumulatively, if required)
5,000,000 shares ( the "Shares") of common stock, $.10 par value, of Micron
("Common Stock") held by the Company and consisting of (i) all of the shares of
Common Stock evidenced by certificate numbers MC83051, MC38054, MC38057,
MC38061, MC38063 and MC38066, (ii) 882,500 shares of Common Stock evidenced by
certificate number MC38067 and (iii) 1,244,750 shares of Common Stock evidenced
by certificate number MC51861, or any certificates issued to the Company as a
replacement therefor; (b) to represent the Company at any special meeting of
stockholders of Micron, and at any adjournment thereof, and to vote (including
cumulatively, if required) all the Shares in its discretion; and (c) to vote all
the Shares in its discretion upon such other matter or matters which may
properly come before the stockholders of Micron by written consent or otherwise.
This proxy does not affect the voting rights with regard to the remaining
1,098,750 shares of Common Stock evidenced by certificate number MC38067 and the
remaining 1,099,000 shares of Common Stock evidenced by certificate number
MC51861.
This irrevocable proxy may be exercised at any time after the date hereof
and prior to July 29, 2003, except that such proxy shall expire immediately upon
the termination for any reason of the dividend swap transaction contemplated by
the letter agreement between the Company and Canadian Imperial Bank of Commerce
dated July 29, 1996.
Dated: July 23, 1998 J.R. SIMPLOT COMPANY
By: /s/ RONALD GRAVES
------------------------------
Name: Ronald N. Graves
Title: Secretary
<PAGE>
EXHIBIT 10.119(b)
IRREVOCABLE PROXY
(5,000,000 shares)
The undersigned Steven R. Appleton ("Appleton") and Wilbur G. Stover, Jr.
("Stover"), and each of them alone, hereby irrevocably appoint Canadian Imperial
Bank of Commerce, a Canadian bank ("CIBC"), as their true and lawful proxy and
attorney-in-fact, with full power of substitution and resubstitution (a) to
represent J.R. Simplot Company, a Nevada corporation ("Company"), at the annual
meetings of the stockholders of Micron Technology, Inc., a Delaware corporation
("Micron"), to be held in 1998, 1999, 2000, 2001 and 2002, and at any
adjournment thereof, and to vote, in CIBC's discretion (including cumulatively,
if required) 5,000,000 shares (the "Shares") of common stock, $.10 par value, of
Micron ("Common Stock") held by the Company and consisting of (i) all of the
shares of Common Stock evidenced by certificate numbers MC83051, MC38054,
MC38057, MC38061, MC38063 and MC38066, (ii) 882,500 shares of Common Stock
evidenced by certificate number MC38067 and (iii) 1,244,750 shares of Common
Stock evidenced by certificate number MC51861, or any certificates issued to the
Company as a replacement therefor; (b) to represent the Company at any special
meeting of stockholders of Micron, and at any adjournment thereof, and to vote
(including cumulatively, if required) all the Shares in its discretion; and (c)
to vote all the Shares in CIBC's discretion upon such other matter or matters
which may properly come before the stockholders of Micron by written consent or
otherwise. This proxy does not affect the voting rights with regard to the
remaining 1,098,750 shares of Common Stock evidenced by certificate number
MC38067 and the remaining 1,099,000 shares of Common Stock evidenced by
certificate number MC51861.
This irrevocable proxy may be exercised at any time after the date hereof
and prior to July 29, 2003, except that such proxy shall expire immediately upon
the first to occur of (1) the termination for any reason of the dividend swap
transaction contemplated by the letter agreement between the Company and CIBC
dated July 29, 1996 or (2) the first date as of which CIBC is required to return
the Shares pursuant to that certain Pledge Agreement dated or to be dated as of
July 1998, by and between the Company and CIBC.
This irrevocable proxy is given by the undersigned, in their respective
capacities as Chairman of the Board of Micron (in the case of Appleton) and
Chief Financial Officer of Micron (in the case of Stover), pursuant to the power
of substitution accorded to the undersigned by that certain proxy dated July 29,
1996 executed by the Company in favor of the undersigned.
Dated: July 24, 1998
/s/ WILBUR G. STOVER, JR.
---------------------------------
Wilber G. Stover, Jr.
/s/ STEVEN R. APPLETON
---------------------------------
Steven R. Appleton
<PAGE>
EXHIBIT 10.135
================================================================================
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of September 1, 1998
among
MICRON TECHNOLOGY, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BANCAMERICA SECURITIES, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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<S> <C>
ARTICLE I - DEFINITIONS; OTHER INTERPRETIVE PROVISIONS; ACCOUNTING PRINCIPLES... 1
1.01 Certain Defined Terms............................................... 1
1.02 Other Interpretive Provisions....................................... 17
1.03 Accounting Principles............................................... 17
ARTICLE II - THE REVOLVING CREDIT................................................ 18
2.01 Amounts and Terms of Commitments.................................... 18
2.02 Loan Accounts....................................................... 18
2.03 Procedure for Borrowing............................................. 18
2.04 Conversion and Continuation Elections............................... 19
2.05 Termination or Reduction of Commitments............................. 20
2.06 Prepayments......................................................... 20
2.07 Repayment........................................................... 21
2.08 Interest............................................................ 21
2.09 Fees................................................................ 22
2.10 Computation of Fees and Interest.................................... 22
2.11 Payments by the Company............................................. 22
2.12 Payments by the Banks to the Agent.................................. 23
2.13 Sharing of Payments, Etc. .......................................... 23
2.14 Optional Extension of Commitments................................... 24
2.15 Certain Closing Date Transitional Matters........................... 24
ARTICLE III - TAXES, YIELD PROTECTION AND ILLEGALITY............................. 24
3.01 Taxes............................................................... 24
3.02 Illegality.......................................................... 26
3.03 Increased Costs and Reduction of Return............................. 27
3.04 Funding Losses...................................................... 27
3.05 Inability to Determine Rates........................................ 28
3.06 Certificates of Banks............................................... 28
3.07 Replacement of Bank................................................. 28
3.08 Survival............................................................ 29
ARTICLE IV - CONDITIONS PRECEDENT................................................ 29
4.01 Conditions to Effectiveness......................................... 29
(a) Credit Agreement, Guaranty and Notes........................... 29
(b) Resolutions; Incumbency; Organization Documents................ 29
(c) Good Standing.................................................. 30
(d) Legal Opinions................................................. 30
(e) Payment of Fees................................................ 30
(f) Certificate.................................................... 30
(g) Collateral Documents and Actions Relating to Collateral........ 30
(h) Other Documents................................................ 31
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4.02 Conditions to All Borrowings........................................ 31
(a) Notice of Borrowing or Conversion/Continuation................. 31
(b) Continuation of Representations and Warranties................. 31
(c) No Existing Default............................................ 31
ARTICLE V - REPRESENTATIONS AND WARRANTIES....................................... 32
5.01 Corporate Existence and Power....................................... 32
5.02 Corporate Authorization; No Contravention........................... 32
5.03 Governmental Authorization.......................................... 32
5.04 Binding Effect...................................................... 32
5.05 Litigation.......................................................... 32
5.06 No Default.......................................................... 33
5.07 ERISA Compliance.................................................... 33
5.08 Use of Proceeds; Margin Regulations................................. 33
5.09 Title to Properties; Liens.......................................... 33
5.10 Taxes............................................................... 34
5.11 Financial Condition................................................. 34
5.12 Environmental Matters............................................... 34
5.13 Regulated Entities.................................................. 34
5.14 Intellectual Property............................................... 35
5.15 Subsidiaries; Minority Interests.................................... 35
5.16 Insurance........................................................... 35
5.17 Swap Obligations.................................................... 35
5.18 Full Disclosure..................................................... 36
5.19 Projections......................................................... 36
5.20 Year 2000........................................................... 36
5.21 Collateral Documents................................................ 36
ARTICLE VI - AFFIRMATIVE COVENANTS............................................... 37
6.01 Financial Statements................................................ 37
6.02 Certificates; Other Information..................................... 38
6.03 Notices............................................................. 38
6.04 Preservation of Corporate Existence, Etc. .......................... 40
6.05 Maintenance of Property............................................. 40
6.06 Insurance........................................................... 40
6.07 Payment of Obligations.............................................. 40
6.08 Compliance with Laws................................................ 41
6.09 Compliance with ERISA............................................... 41
6.10 Inspection of Property and Books and Records........................ 41
6.11 Environmental Laws.................................................. 42
6.12 Use of Proceeds..................................................... 42
6.13 Ranking; Designated Senior Indebtedness............................. 42
6.14 New Semiconductor Operations Subsidiaries........................... 42
6.15 Further Assurances.................................................. 42
ARTICLE VII - NEGATIVE COVENANTS................................................. 42
7.01 Limitation on Liens................................................. 42
</TABLE>
ii.
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(continued)
<TABLE>
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<S> <C>
7.02 Exclusive Negative Pledge........................................... 45
7.03 Disposition of Assets............................................... 46
7.04 Consolidations and Mergers.......................................... 47
7.05 Loans and Investments............................................... 47
7.06 Limitation on Indebtedness and Contingent Obligations............... 49
7.07 Transactions with Affiliates........................................ 50
7.08 Use of Proceeds..................................................... 51
7.09 Restricted Payments................................................. 51
7.10 Permitted Subordinated Debt......................................... 51
7.11 ERISA............................................................... 52
7.12 Business or Accounting Changes...................................... 52
7.13 Minimum Cash and Equivalents........................................ 52
7.14 Combined Tangible Net Worth......................................... 53
7.15 Leverage Ratio...................................................... 53
7.16 Maximum Indebtedness to Capitalization.............................. 53
7.17 [Reserved].......................................................... 53
7.18 Material Semiconductor Operations................................... 53
ARTICLE VIII - EVENTS OF DEFAULT................................................. 53
8.01 Event of Default.................................................... 53
(a) Non-Payment.................................................... 53
(b) Representation or Warranty..................................... 53
(c) Specific Defaults.............................................. 53
(d) Other Defaults................................................. 54
(e) Cross-Acceleration -- Indebtedness............................. 54
(f) Cross-Acceleration - Swap Obligations.......................... 54
(g) Insolvency; Voluntary Proceedings.............................. 54
(h) Involuntary Proceedings........................................ 55
(i) ERISA.......................................................... 55
(j) Monetary Judgments............................................. 55
(k) Non-Monetary Judgments......................................... 55
(l) Change of Control.............................................. 55
(m) Loss of Governmental Licenses.................................. 56
(n) Permitted Subordinated Debt; Loss of Subordination............. 56
(o) Guarantor Defaults............................................. 56
(p) Collateral..................................................... 56
8.02 Remedies............................................................ 56
8.03 Rights Not Exclusive................................................ 57
8.04 Certain Financial Covenant Defaults................................. 57
ARTICLE IX - THE AGENT........................................................... 57
9.01 Appointment and Authorization; "Agent".............................. 57
9.02 Delegation of Duties................................................ 57
9.03 Liability of Agent.................................................. 58
9.04 Reliance by Agent................................................... 58
9.05 Notice of Default................................................... 58
9.06 Credit Decision..................................................... 59
</TABLE>
iii.
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(continued)
<TABLE>
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<S> <C>
9.07 Indemnification of Agent............................................ 59
9.08 Agent in Individual Capacity........................................ 59
9.09 Successor Agent..................................................... 60
9.10 Withholding Tax..................................................... 60
9.11 Co-Agents........................................................... 61
9.12 Collateral Matters.................................................. 62
ARTICLE X - MISCELLANEOUS........................................................ 62
10.01 Amendments and Waivers.............................................. 62
10.02 Notices............................................................. 63
10.03 No Waiver; Cumulative Remedies...................................... 63
10.04 Costs and Expenses.................................................. 63
10.05 Company Indemnification............................................. 64
10.06 Payments Set Aside.................................................. 64
10.07 Successors and Assigns.............................................. 65
10.08 Assignments, Participations, etc. .................................. 65
10.09 Confidentiality..................................................... 66
10.10 Set-off............................................................. 67
10.11 Notification of Addresses, Lending Offices, Etc. ................... 67
10.12 Counterparts........................................................ 67
10.13 Severability........................................................ 68
10.14 No Third Parties Benefited.......................................... 68
10.15 Governing Law and Jurisdiction...................................... 68
10.16 Waiver of Jury Trial................................................ 68
10.17 Entire Agreement.................................................... 69
10.18 Amendment and Restatement of Existing Facility...................... 69
</TABLE>
iv.
<PAGE>
ANNEXES, SCHEDULES AND EXHIBITS
-------------------------------
ANNEXES:
I Pricing Grid
SCHEDULES:
2.01 Commitments and Pro Rata Shares
4.01 Filing Offices
10.02 Lending and Payment Offices; Addresses for Notices
EXHIBITS:
A Form of Notice of Borrowing
B Form of Notice of Conversion/Continuation
C Form of Note
D Form of Compliance Certificate
E Form of Guaranty
F Form of Company Security Agreement
G Form of Guarantor Security Agreement
H Form of Idaho Deed of Trust
I Form of Utah Deed of Trust
J Form of Legal Opinion of Company's Assistant General Counsel
K Form of Legal Opinion of Wilson Sonsini Goodrich & Rosati PC
L Form of Opinion of Hawley, Troxell, Ennis & Hawley LLP
M Form of Opinion of Parsons Behle & Latimer
N Form of Assignment and Acceptance
v.
<PAGE>
SECOND AMENDED AND RESTATED
---------------------------
REVOLVING CREDIT AGREEMENT
--------------------------
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is entered
into as of September 1, 1998, among Micron Technology, Inc., a Delaware
corporation (the "Company"), the several financial institutions from time to
-------
time to this Agreement (individually, a "Bank" and, collectively, the "Banks"),
---- -----
and Bank of America National Trust and Savings Association, as administrative
agent for the Banks (in such capacity, the "Agent").
-----
RECITALS
--------
A. The Company, the Banks and the Agent entered into that certain First
Amended and Restated Revolving Credit Agreement, dated as of May 28,
1997, as amended (as amended, the "Existing Facility").
-----------------
B. The Company, the Banks and the Agent desire to amend and restate the
Existing Facility on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I - DEFINITIONS; OTHER INTERPRETIVE PROVISIONS;
----------------------------------------------------------
ACCOUNTING PRINCIPLES
---------------------
1.01 Certain Defined Terms. The following terms have the following meanings:
---------------------
"Acquisition" means any transaction or series of related transactions
-----------
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
1.
<PAGE>
"Agent" means BofA in its capacity as agent for the Banks hereunder,
-----
and any successor agent arising under Section 9.09.
"Agent-Related Persons" means BofA and any successor agent arising
---------------------
under Section 9.09, together with their respective Affiliates (including, in the
case of BofA, the Lead Arranger), and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
Schedule 10.02 or such other address as the Agent may from time to time specify.
"Agreement" means this Second Amended and Restated Revolving Credit
---------
Agreement.
"Applicable Fee Percentage" means with respect to the commitment fee
-------------------------
payable hereunder, the amount set forth opposite the indicated Level below the
heading "Commitment Fee" in the pricing grid set forth on Annex I in accordance
-------
with the parameters for calculations of such amount also set forth on Annex I.
-------
"Applicable Margin" means, with respect to the interest payable on
-----------------
Base Rate Loans and Offshore Rate Loans outstanding hereunder, the amount set
forth opposite the indicated Level below the heading "LIBOR Margin" or "Base
Rate Margin," as applicable, in the pricing grid set forth on Annex I in
-------
accordance with the parameters for calculations of such amounts also set forth
on Annex I.
-------
"Assignee" has the meaning specified in subsection 10.08(a).
--------
"Attorney Costs" means and includes all reasonable fees and
--------------
disbursements of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory paragraph hereof.
----
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
---------------
U.S.C. (S)101, et seq.).
-------
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
---------
above the latest Federal Funds Rate; and (b) the rate of interest in effect for
such day as publicly announced from time to time by BofA in San Francisco,
California, as its "Reference Rate." (The "reference rate" is a rate set by
BofA based upon various factors including BofA's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate.) Any change in the reference rate announced by BofA shall take effect at
the opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Loan that bears interest based on the Base
--------------
Rate.
2.
<PAGE>
"BofA" means Bank of America National Trust and Savings Association, a
----
national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans of the
---------
same Type made to the Company on the same day by the Banks under Article II,
and, other than in the case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
--------------
Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York, New York, Portland, Oregon, Boise,
Idaho, or San Francisco, California are authorized or required by law to close
and, if the applicable Business Day relates to any Offshore Rate Loan, means
such a day on which dealings are carried on in the applicable offshore Dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
---------------------------
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Capitalization", on any date, means the sum of (i) all Indebtedness
--------------
of the Company and the Semiconductor Operations Subsidiaries on a combined basis
on such date, plus (ii) Combined Tangible Net Worth on such date.
----
"Charge" has the meaning specified in Section 8.04.
------
"Closing Date" means the date on which all conditions precedent set
------------
forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of
subsection 4.01(e), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations
----
promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
----------
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien now or hereafter exists in favor of the Banks, or the Agent on behalf of
the Banks, whether under this Agreement or under any other documents executed by
any such Person, and delivered to the Agent or the Banks.
"Collateral Documents" means, collectively, (i) the Security
--------------------
Agreements, the Deeds of Trusts and all other security agreements, mortgages,
deeds of trust, lease assignments, guarantees and other similar agreements
between any Loan Party and the Banks or the Agent for the benefit of the Banks
now or hereafter delivered to the Banks or the Agent pursuant to or in
connection with the transactions contemplated hereby, and all financing
statements (or comparable documents now or hereafter filed in accordance with
the Uniform Commercial Code or comparable law) against any Loan Party as debtor
in favor of the Banks or the Agent for the
3.
<PAGE>
benefit of the Banks as secured party, and (ii) any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and
extensions of any of the foregoing.
"Combined Adjusted Total Liabilities" means, as of any date of
-----------------------------------
determination, without duplication, the total liabilities of the Company and the
Semiconductor Operations Subsidiaries on a combined basis, as shown in the
Semiconductor Operations Supplemental Schedules, plus all Guaranty Obligations
of the Company and the Semiconductor Operations Subsidiaries on a combined basis
with respect to indebtedness or obligations of Persons other than the Company
and the Semiconductor Operations Subsidiaries of the kinds referred to in
clauses (a) through (g) of the definitions of the term "Indebtedness", plus all
obligations of the Company and the Semiconductor Operations Subsidiaries on a
combined basis under synthetic leases in excess of $500,000, individually, which
obligations shall be discounted to present value at the interest rate implicit
in each such lease in effect at any date of determination, less Permitted
Subordinated Debt.
"Combined Net Income" and "Combined Net Loss" mean, respectively, for
------------------- -----------------
any period, the aggregate net income or loss for such period of the Company and
the Semiconductor Operations Subsidiaries on a combined basis, as shown in the
Semiconductor Operations Supplemental Schedules.
"Combined Tangible Assets" means, as of any date of determination, (a)
------------------------
the total assets of the Company and the Semiconductor Operations Subsidiaries on
a combined basis, as shown in the Semiconductor Operations Supplemental
Schedules, minus (b) the net book value of all assets of the Company and the
-----
Semiconductor Operations Subsidiaries on a combined basis, as shown in the
Semiconductor Operations Supplemental Schedules which would be treated as
intangible assets under GAAP, including (without duplication or limitation)
intangible deferred charges, franchise rights, non-compete agreements,
capitalized research and development costs, capitalized costs associated with
software development expenses, goodwill, patents, patent applications,
trademarks, trade names, copyrights and licenses.
"Combined Tangible Net Worth" means, as of any date of determination,
---------------------------
(a) the total net assets of the Company and the Semiconductor Operations
Subsidiaries on a combined basis, as shown in the Semiconductor Operations
Supplemental Schedules minus (b) the net book value of all assets of the Company
-----
and the Semiconductor Operations Subsidiaries on a combined basis as shown in
the Semiconductor Operations Supplemental Schedules which would be treated as
intangibles under GAAP, including (without duplication or limitation) intangible
deferred charges, franchise rights, non-compete agreements, capitalized research
and development costs, capitalized costs associated with software development
expenses, goodwill, patents, patent applications, trademarks, trade names,
copyrights and licenses.
"Commitment", as to each Bank, has the meaning specified in Section
----------
2.01.
"Company" means Micron Technology, Inc., a Delaware corporation.
-------
"Company Security Agreement" means the Security Agreement between the
--------------------------
Company and the Agent in substantially the form of Exhibit F.
---------
4.
<PAGE>
"Compliance Certificate" means a certificate, duly executed by a
----------------------
Responsible Office of the Company, substantially in the form of Exhibit D.
---------
"Contingent Obligation" means, as to any Person, any direct or
---------------------
indirect liability of that Person, whether or not contingent, with or without
recourse: (a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another Person (the
-------------------
"primary obligor"), including any obligation of that Person (i) to purchase,
- ----------------
repurchase or otherwise acquire such primary obligations or any security
therefor, (ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
-------------------
respect to any Surety Instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to obtain the
services of, another Person if the relevant contract or other related document
or obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered, or (d) in respect of any Swap Contract.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section
----------------------------
2.04, the Company (a) converts Loans of one Type to another Type, or (b)
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
"Deeds of Trust" means the Idaho Deed of Trust and the Utah Deed of
--------------
Trust.
"Default" means any event or circumstance which, with the giving of
-------
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Disclosure Letter" means the disclosure letter dated the Original
-----------------
Closing Date delivered to the Agent pursuant to Section 4.01(g) of the Existing
Facility.
"Dispositions" has the meaning specified in Section 7.03.
------------
"Distributions" has the meaning specified in Section 7.09.
-------------
"Dollars", "dollars" and "$" each mean lawful money of the United
------- ------- -
States.
5.
<PAGE>
"EBITDA" means, for any period, Combined Net Income or Combined Net
------
Loss, as the case may be, for such period, plus the sum of (a) interest expense,
----
(b) income tax expense, (c) depreciation expense, and (d) amortization expense,
which were deductible in determining Combined Net Income or Combined Net Loss.
"Eligible Assignee" means (a) a commercial bank organized under the
-----------------
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
----
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of
a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a
Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Indemnity" means the Environmental and Hazardous
-----------------------
Substance Indemnity Agreement, dated as of September 1, 1998, made by the
Company in favor of the Banks and the Agent.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974.
-----
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
-----------
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer
6.
<PAGE>
Plan; or (f) the imposition of any material liability under Title IV of ERISA,
other than PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon the Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the
-----------------------------
definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances specified
----------------
in Section 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
------------
regulations promulgated thereunder.
"Existing Facility" has the meaning set forth in Recital A to this
-----------------
Agreement.
"FDIC" means the Federal Deposit Insurance Corporation, and any
----
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York opposite the
caption "Federal Funds (Effective)"; or, if for any relevant day such rate is
not so published with respect to any day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"FRB" means the Board of Governors of the Federal Reserve System, and
---
any Governmental Authority succeeding to any of its principal functions.
"Filing Offices" has the meaning set forth in Section 4.01.
--------------
"Further Taxes" means any and all present or future taxes, levies,
-------------
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including net income taxes and franchise taxes), and all liabilities with
respect thereto, imposed by any jurisdiction on account of amounts payable or
paid pursuant to Section 3.01.
"GAAP" means generally accepted accounting principles set forth from
----
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the Closing Date.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
7.
<PAGE>
"Guarantor" means Micron Semiconductor Products, Inc., an Idaho
---------
corporation and a Semiconductor Operations Subsidiary for purposes hereof.
"Guarantor Security Agreement" means the Security Agreement between
----------------------------
the Guarantor and the Agent in substantially the form of Exhibit G.
---------
"Guaranty" means the Guaranty executed by the Guarantor in
--------
substantially the form of Exhibit E.
----------
"Guaranty Obligation" has the meaning specified in the definition of
-------------------
"Contingent Obligation."
"Idaho Deed of Trust" means the Deed of Trust with Assignment of
-------------------
Rents, Security Agreement and Fixture Filing, from the Company, as trustor, to
the trustee named therein and for the Agent, as beneficiary, in substantially
the form of Exhibit H.
---------
"Idaho Facility" means the Company's facility in Boise, Idaho, located
--------------
on the "Land" described in the Idaho Deed of Trust.
"Indebtedness" of any Person means, without duplication: (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
royalty payables and trade payables entered into in the ordinary course of
business on ordinary terms); (c) all non-contingent reimbursement or payment
obligations with respect to Surety Instruments; (d) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses; (e) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property); (f) all obligations with
respect to capital leases; (g) all indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (g) above.
For all purposes of this Agreement, (i) the Indebtedness of any Person shall
include all recourse Indebtedness of any partnership or joint venture or limited
liability company in which such Person is a general partner or a joint venturer
or a member, and (ii) indebtedness secured by a Lien permitted under Section
7.01(m) shall not constitute Indebtedness hereunder.
"Indemnified Liabilities" has the meaning specified in Section 10.05.
-----------------------
"Indemnified Person" has the meaning specified in Section 10.05.
------------------
"Independent Auditor" has the meaning specified in subsection 6.01(a).
-------------------
"Insolvency Proceeding" means, with respect to any Person, (a) any
---------------------
case, action or proceeding with respect to such Person before any court or other
Governmental Authority
8.
<PAGE>
relating to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each case undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Intellectual Property Licenses" has the meaning specified in Section
------------------------------
6.03(b).
"Interest Payment Date" means, as to any Loan other than a Base Rate
---------------------
Loan, the last day of each Interest Period applicable to such Loan and, as to
any Base Rate Loan, the last Business Day of each calendar quarter and each date
such Loan is converted into another Type of Loan; provided, however, that if any
-------- -------
Interest Period for an Offshore Rate Loan exceeds three months, the date that
falls three months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
---------------
commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as an Offshore Rate Loan,
and ending on the date one, two, three or six months thereafter as selected by
the Company in its Notice of Borrowing or Notice of Conversion/Continuation;
provided, that:
- -------- ----
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following Business
Day unless, in the case of an Offshore Rate Loan, the result of such extension
would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to an Offshore Rate Loan that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and
(c) no Interest Period for any Loan shall extend beyond the Revolving
Termination Date as in effect on the date such Loan is made, converted or
continued, as the case may be.
"Investments" has the meaning specified in Section 7.05.
-----------
"IRS" means the Internal Revenue Service, and any Governmental
---
Authority succeeding to any of its principal functions under the Code
"Lead Arranger" means BancAmerica Securities, Inc.
-------------
"Lending Office" means, as to any Bank, the office or offices of such
--------------
Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on Schedule 10.02, or such other office or
--------------
offices as such Bank may from time to time notify the Company and the Agent.
9.
<PAGE>
"Leverage Ratio" means, as of any date of determination, the ratio of
--------------
(a) Combined Adjusted Total Liabilities, after giving effect to any payments or
prepayments hereunder made on such date, to (b) Combined Tangible Net Worth.
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing, but not including
the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to the Company under
----
Article II, and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type"
----
of Loan).
"Loan Documents" means this Agreement, the Notes, the Guaranty, the
--------------
Collateral Documents, the Environmental Indemnity, the Disclosure Letter, all
fee letters and all other certificates, documents or financial or other
statements delivered at any time to the Agent or any Bank in connection herewith
or with any other Loan Document.
"Loan Party" means each of the Company and the Guarantor.
----------
"Majority Banks" means at any time Banks then holding at least 66-2/3%
--------------
of the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having at least 66-2/3% of the
Commitments.
"Margin Stock" means "margin stock" as such term is defined in
------------
Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the operations, business, properties or condition
(financial or otherwise) of the Company or the Company and its Semiconductor
Operations Subsidiaries taken as a whole; (b) a material impairment of the
ability of any Loan Party to perform its payment obligations under the Loan
Documents; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against any Loan Party of any Loan Document.
"Material Semiconductor Operations" means, at any time, semiconductor
---------------------------------
operations (excluding any existing Subsidiary that is not a Wholly-Owned
Subsidiary, and its Subsidiaries, if any) which both (a) comprise assets having
a net book value equal to or greater than ten percent (10%) of the combined
total assets of the Company and its Semiconductor Operations Subsidiaries as
shown in the Semiconductor Operations Supplemental Schedules, and (b) for the
most recent fiscal quarter or the most recent fiscal year, generated operating
income equal to or greater than ten percent (10%) of the combined income from
operations for the Company and its Semiconductor Operations Subsidiaries as
shown in the Semiconductor Operations Supplemental Schedules.
10.
<PAGE>
"Material Semiconductor Operations Subsidiary" means, at any time, (a)
--------------------------------------------
any Semiconductor Operations Subsidiary conducting Material Semiconductor
Operations, and (b) any Semiconductor Operations Subsidiary owning 50% or more
of the voting stock or other equity interest of any Material Semiconductor
Operations Subsidiary.
"Multiemployer Plan" means a "multiemployer plan", within the meaning
------------------
of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make, contributions.
"Negative Pledge" has the meaning specified in Section 7.02.
---------------
"Net Proceeds" means, as to any Disposition by a Person, the gross
------------
proceeds received by such Person from such Disposition less all direct costs and
expenses incurred or to be incurred, and all federal, state, local and foreign
taxes assessed or to be assessed, in connection therewith.
"Note" means a promissory note executed by the Company in favor of a
----
Bank pursuant to Section 2.02(b), in substantially the form of Exhibit C.
---------
"Notice of Borrowing" means a notice in substantially the form of
-------------------
Exhibit A.
- ---------
"Notice of Conversion/Continuation" means a notice in substantially
---------------------------------
the form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document owing by the Company to any
Bank, the Agent, or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to
-------------
Offshore Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the next 1/16th of 1%) determined by the Agent as
follows:
LIBOR
Offshore Rate = ------------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day in any Interest
-----------------------------
Period the maximum reserve percentage (expressed as a decimal, rounded
upward to the next 1/100th of 1%) in effect on such day (whether or not
applicable to any Bank) under regulations issued from time to time by the
FRB for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"); and
11.
<PAGE>
"LIBOR" means, for any Interest Period, the rate of interest per
-----
annum determined by the Agent to be the arithmetic mean (rounded upward
to the next 1/16 of 1%) equal to the rates of interest per annum notified
to the Agent by BofA as the rate of interest at which Dollar deposits in
the approximate amount of the amount of the Loan to be made or continued
as, or converted into, an Offshore Rate Loan by BofA and having a
maturity comparable to such Interest Period would be offered to major
banks in the London interbank market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the commencement of
such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on the
------------------
Offshore Rate.
"Organization Documents" means, for any corporation, the certificate
----------------------
or articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Original Closing Date" means the "Closing Date" of the Existing
---------------------
Facility.
"Other Taxes" means any present or future stamp, court or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies imposed
by any Governmental Authority which arise from any payment made hereunder by the
Company or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Agreement or any other Loan
Documents.
"Participant" has the meaning specified in Section 10.08(d).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
Governmental Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------
ERISA) subject to Title IV of ERISA which the Company sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in the case
of a multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.01.
---------------
"Permitted Sale-Leaseback Transaction" means a transaction pursuant to
------------------------------------
which the Company or any of the Semiconductor Operations Subsidiaries purchases
equipment and, within 12 months thereafter, sells such equipment to, and leases
back such equipment from, a third-party pursuant to an operating or capital
lease.
12.
<PAGE>
"Permitted Subordinated Debt" means (a) Indebtedness issued under the
---------------------------
Subordinated Note Indenture in an aggregate principal amount not to exceed the
amount outstanding as of the Closing Date; (b) any TI Subordinated Debt; and (c)
any other Indebtedness of the Company (issued in compliance with the limitations
set forth in Section 7.06(j)) under a written instrument which, unless otherwise
consented to by the Majority Banks prior to the issuance thereof:
(i) without giving effect to the first clause of Section 1501 of the
Subordinated Note Indenture providing for modifications in a supplemental
indenture or pursuant to Section 301, contains subordination provisions at
least as favorable to the Banks as those contained in Article Fifteen of
the Subordinated Note Indenture;
(ii) provides that the stated maturity date of such subordinated
Indebtedness shall be at least one year after the Revolving Termination
Date in effect on the date of its issuance;
(iii) requires no mandatory or scheduled amortization, prepayments,
redemptions, repurchases, defeasances or sinking fund payments prior to one
year after the Revolving Termination Date in effect on the date of its
issuance, except for mandatory redemptions and purchases upon the
------
occurrence of certain changes in control or fundamental changes with
respect to the Company which are approved by the Majority Banks prior to
the issuance of such subordinated Indebtedness, which mandatory redemptions
and purchases shall be subject to the subordination provisions set forth in
this definition;
(iv) contains no representations, warranties or covenants other than
those set forth in Articles Eight and Ten of the Subordinated Note
Indenture other than those which are not otherwise inconsistent with the
other clauses of this definition or are not more restrictive on the Company
than, or are in addition to, the representations, warranties or covenants
concerning the operation or condition of the Company contained in the
Agreement;
(v) contains no events of default other than those set forth in
Section 501(1)-(6) of the Subordinated Note Indenture other than a cross-
acceleration clause substantially in the form set forth in the Disclosure
Letter;
(vi) contains no modifications, additions or deletions to the
Subordinated Note Indenture (made pursuant to a supplemental indenture,
pursuant to Section 301 or 901 of the Subordinated Note Indenture or
otherwise) unless the Majority Banks have determined that such
modifications, additions or deletions are not otherwise inconsistent with
the other clauses of this definition or adverse to the interests of the
Banks from the standpoint of senior lenders;
(vii) is unsecured except for Liens granted in favor of the trustee for
such Permitted Subordinated Debt as described in the Disclosure Letter to
secure fees and other amounts owing to such trustee;
13.
<PAGE>
(viii) contains conversion features, including the type of security or
property into which such subordinated Indebtedness may be converted,
consented to by the Majority Banks prior to the issuance of such
subordinated Indebtedness; and
(ix) the Agent and the Majority Banks have determined is in form and
substance not otherwise inconsistent with the requirements of this
definition.
"Permitted Swap Obligations" means all obligations (contingent or
--------------------------
otherwise) of the Company or any Semiconductor Operations Subsidiary existing or
arising under Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such Person in
the ordinary course of business for the purpose of directly mitigating risks
associated with liabilities, commitments or assets held or reasonably
anticipated by such Person, or changes in the value of securities issued by such
Person in conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or taking a "market
view;" and (b) such Swap Contracts do not contain (i) any provision ("walk-away"
provision) exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party, or (ii) any
provision creating or permitting the declaration of an event of default,
termination event or similar event upon the occurrence of an Event of Default
hereunder (other than an Event of Default under Section 8.01(a)).
"Person" means an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the percentage
--------------
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks.
"Reportable Event" means, any of the events set forth in Section
----------------
4043(c) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, president,
-------------------
chief financial officer or treasurer of the Company, or any other officer having
substantially the same authority and responsibility.
14.
<PAGE>
"Revolving Termination Date" means the earlier to occur of (a) May 28,
--------------------------
2000, and (b) the date on which the Commitments terminate in accordance with the
provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal functions.
"Security Agreements" means the Company Security Agreement and the
-------------------
Guarantor Security Agreement.
"Semiconductor Operations Subsidiaries" means all Wholly-Owned
-------------------------------------
Subsidiaries of the Company conducting from time to time semiconductor
operations and as specified and described in the notes to the most recent
Semiconductor Operations Supplemental Schedules (individually, a "Semiconductor
-------------
Operations Subsidiary").
- ---------------------
"Semiconductor Operations Supplemental Schedules" means the
-----------------------------------------------
Supplemental Schedules of Net Assets of Semiconductor Operations and Other
Operations, the Supplemental Schedules of Semiconductor Operations, the
Supplemental Schedules of Cash Flows of Semiconductor Operations and the notes
thereto, which are to present fairly, in all material respects, the net assets
and operations and cash flows of the Company and its Semiconductor Operations
Subsidiaries (on a combined basis) for the periods covered thereby, on the basis
specified and described in the notes to such schedules. The items "Investments
in other affiliated operations" and "Net assets - other operations, at cost"
shall be excluded for all purposes in computing covenant compliance in this
Agreement, and all references to the Semiconductor Operations Supplemental
Schedules shall be deemed to exclude such items for computing covenant
compliance.
"Subordinated Note Indenture" means that certain Indenture between the
---------------------------
Company and Norwest Bank Minnesota, National Association, dated as of June 15,
1997, as amended, supplemented or otherwise modified from time to time (with the
prior written consent of the Majority Banks if such amendment, supplement or
other modification would allow for the issuance of Indebtedness not satisfying
all the conditions set forth in the definition of "Permitted Subordinated
Debt").
"Subsidiary" of a Person means any corporation, association,
----------
partnership, limited liability company, joint venture or other business entity
of which 50% or more of the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company.
"Surety Instruments" means all letters of credit (including standby
------------------
and commercial), banker's acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate
15.
<PAGE>
option, forward foreign exchange transaction, cap, collar or floor transaction,
currency swap, cross-currency rate swap, swaption, currency option or any other,
similar transaction (including any option to enter into any of the foregoing) or
any combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
----------------------
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Company
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Bank).
"Taxes" means any and all present or future taxes, levies,
-----
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of each Bank
and the Agent, respectively, taxes imposed on or measured by its net income by
the jurisdiction (or any political subdivision thereof) under the laws of which
such Bank or the Agent, as the case may be, is organized or maintains a lending
office.
"TI" means Texas Instruments Incorporated.
--
"TI Acquisition" means the transactions contemplated under the
--------------
Acquisition Agreement dated as of June 18, 1998, as amended, between the Company
and TI.
"TI Subordinated Debt" means any subordinated Indebtedness issued by
--------------------
the Company to TI, in an aggregate principal amount not exceeding $950,000,000,
pursuant to the instruments contemplated by the TI Acquisition, as amended,
supplemented or otherwise modified from time to time (with the prior written
consent of the Majority Banks if such amendment, supplement or other
modification would allow for the issuance of Indebtedness not satisfying all the
conditions set forth in the definition of "Permitted Subordinated Debt").
"Type" has the meaning specified in the definition of "Loan."
----
"Unfunded Pension Liability" means the excess of a Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
------------- ----
"Utah Deed of Trust" means the Deed of Trust, Assignment of Rents,
------------------
Security Agreement and Financing Statement, from the Company, as trustor, to the
trustee named therein and for the Agent, as beneficiary, in substantially the
form of Exhibit I.
---------
"Utah Facility" means the Company's facility in Lehi, Utah, located on
-------------
the "Real Property" described in the Utah Deed of Trust.
16.
<PAGE>
"Wholly-Owned Subsidiary" means any corporation or limited liability
-----------------------
company in which (other than directors' qualifying shares or local ownership
shares required by law) 100% of the capital stock of each class having ordinary
voting power, and 100% of the capital stock of every other class, in each case,
at the time as of which any determination is being made, is owned, beneficially
and of record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
1.02 Other Interpretive Provisions. (a) The meanings of defined
-----------------------------
terms are equally applicable to the singular and plural forms of the defined
terms. The words "hereof", "herein", "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified. The term "documents" includes any
and all instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced. The term "including" is not limiting
and means "including without limitation." In the computation of periods of
time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding",
and the word "through" means "to and including." The captions and headings of
this Agreement are for convenience of reference only and shall not affect the
interpretation of this Agreement.
(b) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(c) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks by way of
consent, approval or waiver shall be deemed modified by the phrase "in its/their
sole discretion."
(d) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Loan
Parties and the Banks, and are the products of all the parties. Accordingly,
they shall not be construed against the Agent or the Banks merely because of
the Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles. Unless the context otherwise clearly
---------------------
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. References herein to "fiscal year"
and "fiscal quarter" refer to such fiscal periods of the Company.
17.
<PAGE>
ARTICLE II - THE REVOLVING CREDIT
-------------------------------------
2.01 Amounts and Terms of Commitments. Each Bank severally agrees,
--------------------------------
on the terms and conditions set forth herein, to make loans to the Company
from time to time on any Business Day during the period from the Closing Date
to the Revolving Termination Date, in an aggregate amount not to exceed at any
time outstanding the amount set forth on Schedule 2.01 (such amount, as the
-------------
same may be reduced under Section 2.05 or as a result of one or more
assignments under Section 10.08, the Bank's "Commitment"); provided, however,
---------- -------- -------
that, after giving effect to any Borrowing, the aggregate principal amount of
all outstanding Loans shall not at any time exceed the combined Commitments.
Within the limits of each Bank's Commitment, and subject to the other terms
and conditions hereof, the Company may borrow under this Section 2.01, prepay
under Section 2.06 and reborrow under this Section 2.01.
2.02 Loan Accounts. (a) The Loans made by the Banks shall be
-------------
evidenced by one or more accounts or records maintained by the Banks in the
ordinary course of business. The accounts or records maintained by the Agent
and each Bank shall be conclusive absent manifest error of the amount of the
Loans made by the Banks to the Company, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount
owing with respect to the Loans.
(b) Upon the request of any Bank made through the Agent, the Loans
made by each Bank shall be evidenced by a Note executed by the Company in
favor of such Bank, instead of loan accounts. Each Bank may endorse on
schedules annexed to its Note the date, amount and maturity of each Loan made
by it and the amount of each payment of principal made by the Company with
respect thereto. Each Bank is irrevocably authorized by the Company to endorse
its Note and each Bank's record shall be conclusive absent manifest error;
provided, however, that the failure of a Bank to make, or an error in making,
- -------- -------
a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Company hereunder or under any such Note to such
Bank.
2.03 Procedure for Borrowing. (a) Each Borrowing shall be made upon
-----------------------
the Company's irrevocable written notice delivered to the Agent in the form of a
Notice of Borrowing, which notice must be received by the Agent prior to (i) in
the case of Offshore Rate Loans, 9:00 a.m. (San Francisco time) three Business
Days prior to the requested Borrowing Date and (ii) in the case of Base Rate
Loans, 9:00 a.m. (San Francisco time) on the requested Borrowing Date,
specifying: (A) the amount of the Borrowing, which shall be in an aggregate
minimum amount of $10,000,000 or any multiple of $5,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of
Loans comprising the Borrowing; and (D) the duration of the Interest Period
applicable to such Loans included in such notice (if the Notice of Borrowing
fails to specify the duration of the Interest Period for any Borrowing comprised
of Offshore Rate Loans, such Interest Period shall be one month). After giving
effect to any Borrowing, unless the Agent shall otherwise consent, there may not
be more than six different Interest Periods in effect.
18.
<PAGE>
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing. Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of
BofA (or any successor Agent pursuant to Section 9.09) with the aggregate of
the amounts made available to the Agent by the Banks and in like funds as
received by the Agent or, if requested by the Company, by wire transfer in
accordance with written instructions provided to the Agent by the Company of
like funds as received by the Agent.
2.04 Conversion and Continuation Elections. (a) The Company may,
-------------------------------------
upon irrevocable written notice to the Agent in accordance with Section
2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Loans, or
as of the last day of the applicable Interest Period, in the case of any other
Type of Loans, to convert any such Loans (or any part thereof in an amount not
less than $10,000,000, or that is in an integral multiple of $5,000,000 in
excess thereof) into Loans of any other Type; or (ii) elect, as of the last
day of the applicable Interest Period, to continue any Loans having Interest
Periods expiring on such day (or any part thereof in an amount not less than
$10,000,000, or that is in an integral multiple of $5,000,000 in excess
thereof); provided, that if at any time the aggregate amount of Offshore Rate
--------
Loans in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of part thereof to be less than $10,000,000, such Offshore Rate
Loans shall automatically convert into Base Rate Loans, and on and after such
date the right of the Company to continue such Loans as, and convert such
Loans into, Offshore Rate Loans shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than (i) 9:00 a.m. (San Francisco time) at
least three Business Days in advance of the Conversion/Continuation Date, if
the Loans are to be converted into or continued as Offshore Rate Loans, and
(ii) 9:00 a.m. (San Francisco time) on the Conversion/Continuation Date, if
the Loans are to be converted into Base Rate Loans, specifying: (A) the
proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be
converted or continued; (C) the Type of Loans resulting from the proposed
conversion or continuation; and (D) other than in the case of conversions into
Base Rate Loans, the duration of the requested Interest Period. After giving
effect to any conversion or continuation of Loans, unless the Agent shall
otherwise consent, there may not be more than six different Interest Periods
in effect.
(c) During the existence of an Event of Default, the Company may not
elect to have a Loan converted into or continued as an Offshore Rate Loan. If
upon the expiration of any Interest Period applicable to Offshore Rate Loans,
the Company has failed to select timely a new Interest Period to be applicable
to such Offshore Rate Loans, as the case may be, or if any Event of Default then
exists, the Company shall be deemed to have elected to convert such Offshore
Rate Loans into Base Rate Loans effective as of the expiration date of such
Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a Notice
of Conversion/Continuation, or, if no timely notice is provided by the Company,
or if the Agent has received a notice of an Event of Default pursuant to Section
9.05, the Agent will promptly notify
19.
<PAGE>
each Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans held by each Bank with respect to which the
notice was given.
2.05 Termination or Reduction of Commitments. (a) Subject to Section
---------------------------------------
3.04, the Company may, upon not less than three Business Days' prior notice to
the Agent by 9:00 a.m. (San Francisco time), terminate the Commitments, or
permanently reduce the Commitments by an aggregate minimum amount of
$10,000,000, or any multiple of $5,000,000 in excess thereof; unless, after
------
giving effect thereto and to any prepayments of Loans made on the effective date
thereof, the then-outstanding principal amount of the Loans would exceed the
amount of the combined Commitments then in effect.
(b) Upon the making of any Disposition under subsections 7.03(e) or
(f) in excess of the aggregate amount then permitted to be made thereunder,
the Commitments of the Banks shall automatically reduce by an amount equal to
the excess of the cumulative amount of Net Proceeds received over the amount
of Net Proceeds permitted to be received under such subsections, effective as
of the date of such Disposition. If after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, the then-outstanding
principal amount of the Loans would exceed the amount of the combined
Commitments then in effect, the Company shall make the mandatory prepayment of
Loans required by Section 2.06(b). The Company shall give prior notice to the
Banks of any Disposition resulting in a Commitment reduction hereunder
(including in such notice the amount of the estimated Net Proceeds to be
received by the Company or a Subsidiary in respect thereof).
(c) Once reduced or terminated in accordance with this Section, the
Commitments may not be increased or reinstated. Any reduction or termination of
the Commitments shall be applied to each Bank according to its Pro Rata Share.
The Agent will promptly notify each Bank of its receipt of any notice under this
Section 2.05, and of the amount of reduction or termination of such Bank's
Commitment. All accrued commitment fees to, but not including, the effective
date of any reduction or termination of Commitments shall be paid on the
effective date of such reduction or termination.
2.06 Prepayments. (a) Subject to Section 3.04, the Company may, at
-----------
any time or from time to time, upon (a) in the case of Offshore Rate Loans,
irrevocable notice to the Agent given prior to 9:00 a.m. (San Francisco time)
not less than three Business Days and (b) in the case of Base Rate Loans,
irrevocable notice to the Agent given prior to 9:00 a.m. (San Francisco time) on
the date of prepayment, ratably prepay Loans in whole or in part, in minimum
amounts of $10,000,000, or any multiple of $5,000,000 in excess thereof.
(b) If as a result of any required Commitment reduction under Section
2.05 the then-outstanding principal amount of the Loans would exceed the
amount of the combined Commitments (after giving effect to the Revolving
Commitment reduction), then (i) the Company shall promptly notify the Agent of
the Company's intent to make a mandatory prepayment of Loans hereunder, and
(ii) promptly upon, and in no event later than one Business Day after, receipt
by the Company or the Subsidiary of the Net Proceeds of the Disposition, the
Company shall prepay Loans in an aggregate amount equal to the amount of such
excess;
20.
<PAGE>
provided, however, that any such prepayment shall not be required if such amount
- -------- -------
is less than $1,000,000.
(c) Each such notice of prepayment under this Section 2.06 shall
specify the date and amount of such prepayment and the Type(s) of Loans to be
prepaid. The Agent will promptly notify each Bank of its receipt of any such
notice, and of such Bank's Pro Rata Share of such prepayment. If such notice
is given by the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 3.04.
2.07 Repayment. The Company shall repay to the Banks on the
---------
Revolving Termination Date the aggregate principal amount of Loans outstanding
on such date.
2.08 Interest. (a) Each Loan shall bear interest on the outstanding
--------
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate, as the case may be (and subject to
the Company's right to convert to other Types of Loans under Section 2.04), plus
----
the Applicable Margin; provided, however, that (i) if at any time the
-------- -------
aggregate outstanding principal amount of Loans equals or exceeds 50% of the
combined Commitments, the Applicable Margin in respect of any Offshore Rate
Loans and Base Rate Loans then outstanding shall be increased by an additional
0.25% per annum, and/or (ii) if the TI Acquisition has not closed by December
31, 1998, the interest rate in effect for the Loans as provided above shall be
increased by an additional 0.25% per annum, effective January 1, 1999 (such
increase to terminate effective upon any closing of the TI Acquisition
occurring after December 31, 1998).
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Loans under Section 2.06 for the portion of the Loans so prepaid and upon
payment (including prepayment) in full thereof and, during the existence of
any Event of Default, interest shall be paid on demand of the Agent at the
request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, if any amount of
principal of or interest on any Loan, or any other amount payable hereunder or
under any other Loan Document is not paid in full when due (whether at stated
maturity, by acceleration, demand or otherwise), the Company agrees to pay
interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon to the extent permitted by law, payable
on demand, at a fluctuating rate per annum equal to the Base Rate plus 2%.
----
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest
is computed hereunder, to the extent (but only to the extent) that contracting
for or receiving such payment by such Bank would be contrary to the provisions
of any law applicable to such Bank limiting the highest rate of interest that
may be lawfully contracted for, charged or received by such Bank, and in such
event the Company shall pay such Bank interest at the highest rate permitted
by applicable law.
21.
<PAGE>
2.09 Fees. (a) Arrangement, Agency Fee. The Company shall pay
---- -----------------------
arrangement fee to the Lead Arranger for the Lead Arranger's own account, and
shall pay an agency fee to the Agent for the Agent's own account, as required
by the letter agreement between the Company and the Agent dated August 28,
1998.
(b) Upfront Fee. The Company shall pay to the Agent for the
-----------
account of each Bank consenting hereto (as evidenced by its signature hereto)
(a "Consenting Bank") an upfront fee equal to 0.25% of such Bank's Commitment,
payable on the Closing Date. If the TI Acquisition has not closed by December
31, 1998, the Company shall pay to the Agent for the account of each
Consenting Bank additional upfront fee equal to 0.125% of such Bank's
Commitment, payable on January 1, 1999.
(c) Commitment Fee. The Company shall pay to the Agent for the
--------------
account of each Bank a commitment fee on the actual daily unused portion of
such Bank's Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for
that quarter as calculated by the Agent, at a rate per annum equal to the
Applicable Fee Percentage; provided, however, that if the TI Acquisition has
-------- -------
not closed by December 31, 1998, the commitment fee in effect as provided
above shall be increased by an additional .125% per annum, effective January
1, 1999 (such increase to terminate effective upon any closing of the TI
Acquisition occurring after December 31, 1998). Such commitment fee shall
accrue from the Closing Date to the Revolving Termination Date and shall be
due and payable quarterly in arrears on the last Business Day of each calendar
quarter commencing on September 30, 1998 through the Revolving Termination
Date, with the final payment to be made on the Revolving Termination Date;
provided that, in connection with any reduction or termination of Commitments
- --------
under Section 2.05, the accrued commitment fee calculated for the period
ending on such date shall also be paid on the date of such reduction or
termination. The commitment fee provided in this subsection shall accrue at
all times after the above-mentioned commencement date, including at any time
during which one or more conditions in Section 4.02 are not met.
2.10 Computation of Fees and Interest. All computations of
--------------------------------
interest for Base Rate Loans when the Base Rate is determined by BofA's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof. Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error.
2.11 Payments by the Company. (a) All payments to be made by the
-----------------------
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Agent for the account of the Banks at the Agent's Payment Office, and
shall be made in Dollars and in immediately available funds, no later than
10:00 a.m. (San Francisco time) on the date specified herein. The Agent will
promptly distribute to each Bank its Pro Rata Share (or other applicable share
as expressly provided herein) of such payment in like funds as received. Any
payment received by the Agent
22.
<PAGE>
later than 10:00 a.m. (San Francisco time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee
shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the Company has not
made such payment in full to the Agent, each Bank shall repay to the Agent on
demand such amount distributed to such Bank, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed
to such Bank until the date repaid.
2.12 Payments by the Banks to the Agent. Unless the Agent receives
----------------------------------
notice from a Bank on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the date
of such Borrowing, that such Bank will not make available as and when required
hereunder to the Agent for the account of the Company the amount of that
Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank
has made such amount available to the Agent in immediately available funds on
the Borrowing Date and the Agent may (but shall not be so required), in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Bank shall not have made its
full amount available to the Agent in immediately available funds and the
Agent in such circumstances has made available to the Company such amount,
that Bank shall on the Business Day following such Borrowing Date make such
amount available to the Agent, together with interest at the Federal Funds
Rate for each day during such period. A notice of the Agent submitted to any
Bank with respect to amounts owing under this Section shall be conclusive,
absent manifest error. If such amount is so made available, such payment to
the Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the Agent
on the Business Day following the Borrowing Date, the Agent will notify the
Company of such failure to fund and, upon demand by the Agent, the Company
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing. The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing Date, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on
any Borrowing Date.
2.13 Sharing of Payments, Etc. If, other than as expressly
------------------------
provided elsewhere herein, any Bank shall obtain on account of the Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise), other than pursuant to Article III, in excess
of its ratable share (or other share contemplated hereunder),
23.
<PAGE>
such Bank shall immediately (a) notify the Agent of such fact, and (b)
purchase from the other Banks such participations in the Loans made by them as
shall be necessary to cause such purchasing Bank to share the excess payment
pro rata with each of them; provided, however, that if all or any portion of
-------- -------
such excess payment is thereafter recovered from the purchasing Bank, such
purchase shall to that extent be rescinded and each other Bank shall repay to
the purchasing Bank the purchase price paid therefor, together with an amount
equal to such paying Bank's ratable share (according to the proportion of (i)
the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
The Company agrees that any Bank so purchasing a participation from another
Bank may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to Section 10.10) with
respect to such participation as fully as if such Bank were the direct
creditor of the Company in the amount of such participation. The Agent will
keep records (which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in each case
notify the Banks following any such purchases or repayments.
2.14 Optional Extension of Commitments. The Company may request
---------------------------------
the Banks to extend the Revolving Termination Date for a period of one year by
delivering a written request for such extension to the Agent (who shall
promptly notify the Banks) at any time on or before the 45th day prior to the
Revolving Termination Date. Each Bank shall respond in writing to such
extension request by providing written notice of its acceptance or rejection
of such request to the Agent within 30 Business Days after it receives such
request from the Agent. Any Bank not responding within such period shall be
deemed to have rejected such request for extension. Such extension shall
require the unanimous consent of the Banks, and if such unanimous consent is
obtained, the Revolving Termination Date shall thereupon be so extended by one
year after the then current Revolving Termination Date.
2.15 Certain Closing Date Transitional Matters. On and after the
-----------------------------------------
Closing Date, each Bank shall be entitled to receive commitment fees and
interest on the Loans and on any other amount due under any Loan Document, in
each case (i) accrued and unpaid up to the Closing Date in accordance with the
applicable rates in effect under the Existing Facility and (ii) accrued on and
after the Closing Date in accordance with the applicable rates under this
Agreement. All such accrued and unpaid amounts due under the Existing Facility
shall be paid together with any amounts due hereunder on the next occurring
payment dates therefor set forth herein.
ARTICLE III - TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------------------------
3.01 Taxes. (a) Any and all payments by the Company to each Bank or
-----
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
24.
<PAGE>
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then, subject to Section 3.01(e): (i) the
sum payable shall be increased as necessary so that, after making all required
deductions and withholdings (including deductions and withholdings applicable
to additional sums payable under this Section), such Bank or the Agent, as the
case may be, receives and retains an amount equal to the sum it would have
received and retained had no such deductions or withholdings been made; (ii)
the Company shall make such deductions and withholdings; (iii) the Company
shall pay the full amount deducted or withheld to the relevant taxing
authority or other authority in accordance with applicable law; and (iv) the
Company shall also pay to such Bank or the Agent for the account of such Bank,
at the time interest is paid, Further Taxes in the amount that such Bank
specifies as necessary to preserve the after-tax yield such Bank would have
received if such Taxes, Other Taxes or Further Taxes had not been imposed (but
only if such Taxes, Other Taxes or Further Taxes are imposed because the
Company has made any payment to the Agent or any Bank hereunder or under any
other Loan Document from a Person or entity outside of the United States to a
Person or entity inside of the United States or from a Person or entity inside
of the United States to a Person or entity outside of the United States).
(c) Subject to Section 3.01(e), the Company agrees to indemnify and
hold harmless each Bank and the Agent for the full amount of (i) Taxes, (ii)
Other Taxes, and (iii) Further Taxes referred to in Section 3.01(b) in the
yield such Bank would have received if such Taxes, Other Taxes or Further
Taxes had not been imposed (but only if such Taxes, Other Taxes or Further
Taxes are imposed because the Company has made any payment to the Agent or any
Bank hereunder or under any other Loan Document from a Person or entity
outside of the United States to a Person or entity inside of the United States
or from a Person or entity inside of the United States to a Person or entity
outside of the United States), and any liability (including penalties,
interest, additions to tax and expenses; provided, however, that the Company
-------- -------
shall not be responsible for any such penalty, interest or expense resulting
from the gross negligence or willful misconduct of the Agent or any Bank)
arising therefrom or with respect thereto, whether or not such Taxes, Other
Taxes or Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Bank or the
Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) The Company will not be required to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 3.01(b) or (c)
to any Bank for the account of any Lending Office of such Bank:
(i) if the obligation to pay such additional amounts
arose solely as a result of such Bank's failure to comply with
its obligations under Section 9.10 in respect of such Lending
Office;
25.
<PAGE>
(ii) if such Bank shall have delivered to the Company
a Form 4224 in respect of such Lending Office pursuant to Section
9.10, and such Bank shall not at any time be entitled to
exemption from deduction or withholding of United States Federal
income tax in respect of payments by the Company hereunder for
the account of such Lending Office for any reason other than a
change in United States law or regulations or in the official
interpretation of such law or regulations by any governmental
authority charged with the interpretation or administration
thereof (whether or not having the force of law) after the date
of delivery of such Form 4224; or
(iii) if the Bank shall have delivered to the Company
a Form 1001 in respect of such Lending Office pursuant to Section
9.10, and such Bank shall not at any time be entitled to
exemption from deduction or withholding of United States Federal
income tax in respect of payments by the Company hereunder for
the account of such Lending Office for any reason other than a
change in United States law or regulations or any applicable tax
treaty or regulations or in the official interpretation of any
such law, treaty or regulations by any governmental authority
charged with the interpretation or administration thereof
(whether or not having the force of law) after the date of
delivery of such Form 1001.
(f) If the Company is required to pay any amount to any Bank or the
Agent pursuant to Section 3.01(b) or (c), then such Bank shall use reasonable
efforts (consistent with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue, if such change in the sole
judgment of such Bank is not otherwise disadvantageous to such Bank.
(g) Each of the Banks and the Agent agrees that it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available
pursuant to treaty, existing administrative waiver, or otherwise); provided,
--------
however, that neither the Agent nor any Bank shall be obligated by reason of
- -------
this Section 3.01(g) to disclose any information regarding its tax affairs or
tax computations, to reorder or alter in any way its general tax or other
affairs or tax planning, or to undertake any action that such Person deems to
involve the incurrence of any risk of liability or cost to itself or which
requires any expenditure of effort which such Person deems unreasonable under
the circumstances.
3.02 Illegality. If any Bank determines that the introduction of
----------
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Bank or its applicable Lending Office to
make Offshore Rate Loans, then, on notice thereof by such Bank to the Company
through the Agent, any obligation of that Bank to make Offshore Rate Loans
shall be suspended until such Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist, and (a) if
such Bank may lawfully continue to maintain such Offshore Rate Loans to the
last day of the Interest Period with respect thereto, the Company shall repay
in full such Offshore Rate Loans, together with interest accrued thereon, on
the last day of the Interest Period thereof, or (b) if such Bank may not
lawfully continue to
26.
<PAGE>
maintain such Offshore Rate Loans to the last day of the Interest Period with
respect thereto, such Offshore Rate Loans shall automatically be converted
into Base Rate Loans and the Company shall pay, within five Business Days of
such conversion, all interest accrued on such Offshore Rate Loans prior to
such conversion and all amounts required under Section 3.04 in connection with
such conversion.
3.03 Increased Costs and Reduction of Return. (a) If any Bank
---------------------------------------
determines that, due to either (i) the introduction announced after the date
hereof of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the Offshore
Rate or in respect of the assessment rate payable by any Bank to the FDIC for
insuring U.S. deposits or a change in the rate of taxation imposed on or
measured by a Bank's net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank is organized or
maintains a lending office) in or in the interpretation of any law or
regulation or (ii) the compliance by that Bank with any guideline or request
from any central bank or other Governmental Authority announced after the date
hereof (whether or not having the force of law), there shall be any increase
in the cost to such Bank of agreeing to make or making, funding or maintaining
any Offshore Rate Loans, then the Company shall be liable for, and shall from
time to time, within 30 days after written notice from such Bank (with a copy
of such demand to be sent to the Agent), pay to the Agent for the account of
such Bank, additional amounts as are sufficient to compensate such Bank for
such increased costs.
(b) If any Bank shall have determined that (i) the introduction
announced after the date hereof of any Capital Adequacy Regulation, (ii) any
change announced after the date hereof in any Capital Adequacy Regulation,
(iii) any change announced after the date hereof in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by such Bank (or its Lending Office) or any
corporation controlling such Bank with any Capital Adequacy Regulation,
affects or would affect the amount of capital required to be maintained by the
Bank or any corporation controlling such Bank and (taking into consideration
such Bank's or such corporation's policies with respect to capital adequacy
and such Bank's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment, Loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the
Company through the Agent, the Company shall pay to such Bank, from time to
time as specified by the Bank, additional amounts sufficient to compensate
such Bank for such increase.
3.04 Funding Losses. The Company shall reimburse each Bank and hold
--------------
each Bank harmless from any loss or expense which such Bank may sustain or incur
as a consequence of: (a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan, (b) the failure of the
Company to borrow, continue or convert a Loan after the Company has given (or is
deemed to have given) a Notice of Borrowing or a Notice of Conversion/
Continuation, (c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.06, (d) the prepayment or
other payment (including after acceleration thereof) of an Offshore Rate Loan on
a day that is not the last day of the relevant Interest Period, or (e) the
conversion under Section 2.04 or Section 3.02 of any Offshore Rate Loan to a
Base Rate Loan on a day that is not the last day of the relevant Interest
Period; including any such loss or expense arising from the liquidation or
reemployment of funds
27.
<PAGE>
obtained by it to maintain its Offshore Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained; provided, however,
-------- -------
that any such loss or expense shall not include lost profit due solely to a
failure to receive the Applicable Margin relating to any such Loan for the
portion of the applicable Interest Period remaining after the date of such
prepayment.
3.05 Inability to Determine Rates. If either the Agent or the
----------------------------
Majority Banks determine (a) that for any reason adequate and reasonable means
do not exist for determining the Offshore Rate for any requested Interest
Period with respect to a proposed Offshore Rate Loan, or (b) that the Offshore
Rate applicable pursuant to Section 2.08(a) for any requested Interest Period
with respect to a proposed Offshore Rate Loan does not adequately and fairly
reflect the cost to the Agent or such Banks of funding such Loan, the Agent
will promptly so notify the Company and each Bank. Thereafter, the obligation
of the Banks to make or maintain Offshore Rate Loans, as the case may be,
hereunder shall be suspended until the Agent upon the instruction of the
Majority Banks revokes such notice in writing. Upon receipt of such notice,
the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed
by the Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued, as the case
may be, as Base Rate Loans instead of Offshore Rate Loans.
3.06 Certificates of Banks. Any Bank claiming reimbursement or
---------------------
compensation under this Article III shall deliver to the Company (with a copy
to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Bank hereunder and such certificate shall be conclusive and
binding on the Company in the absence of manifest error; provided, however,
-------- -------
that the Company shall not be liable for any such amount attributable to any
period prior to the date 180 days prior to the date that an officer at such
Bank responsible for the administration of this Agreement knew or reasonably
should have known of such claim for reimbursement or compensation.
3.07 Replacement of Bank. (a) In the event that any Bank makes a
-------------------
demand for payment pursuant to Section 3.01 or 3.03, or any Bank has suspended
its funding of Offshore Loans pursuant to Section 3.02 or 3.05, the Company
shall have the right, if no Event of Default then exists, to replace such Bank
in accordance with this Section 3.07.
(b) If the Company determines to replace a Bank pursuant to this
Section 3.07, the Company shall have the right to replace such Bank with a
Person that is an Eligible Assignee (a "Replacement Bank"); provided that such
---------------- --------
Replacement Bank: (i) if it is not already a Bank, shall be reasonably
acceptable to the Agent, (ii) shall unconditionally agree in writing (with a
copy to the Agent) to purchase all of such Bank's rights hereunder and
interest in the Loans owing to such Bank and the Note held by such Bank
without recourse at the principal amount of such Note plus interest and fees
accrued thereon to the date of such purchase on a date therein specified, and
(iii) shall, if such Replacement Bank is not already a Bank, execute and
deliver to the Agent an Assignment and Acceptance substantially in the form of
Exhibit N pursuant to which such Replacement Bank becomes a party hereto with
- ---------
a Commitment equal to that of the Bank being replaced.
28.
<PAGE>
(c) Upon (i) satisfaction of the requirements set forth in Section
3.07(b), (ii) payment to such Bank by the Replacement Bank of the purchase
price in immediately available funds, (iii) payment to such Bank by the
Company of all requested increased costs or additional amounts accrued to the
date of such purchase which the Company is obligated to pay under Article III
(including any break funding costs under Section 3.04) and all other amounts
owed by the Company to such Bank hereunder (other than the principal of and
interest on the Loans of such Bank purchased by the Replacement Bank and
interest and fees accrued thereon to the date of purchase), and (iv) payment
to the Agent by the Replacement Bank or the Company of a non-refundable
processing fee of $3,500, the Replacement Bank shall constitute a "Bank"
hereunder with a Commitment as so specified and the Bank being so replaced
shall no longer constitute a "Bank" hereunder (and this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to
reflect the addition of the Replacement Bank) and such Bank shall be relieved
of its obligations hereunder; provided, however, that such Bank being replaced
-------- -------
shall not relinquish its rights under Article III or under Sections 10.04 and
10.05 to the extent such rights relate to the time prior to the effective date
of such replacement as provided in this Section.
(d) If, however, the conditions to replacement set forth in this
Section are for any reason not satisfied, or the proposed Replacement Bank for
any reason fails to purchase such rights and interest in accordance with the
terms hereof, the Company shall continue to be obligated to pay the increased
costs or additional amounts due to such Bank pursuant to Section 3.01 or 3.03,
as applicable.
(e) In no event shall the Agent or any Bank have any obligation to be
a Replacement Bank or to assist the Company in finding a Replacement Bank.
3.08 Survival. The agreements and obligations of the Company in
--------
Section 3.01 and 3.03 shall survive the payment of all other Obligations.
ARTICLE IV - CONDITIONS PRECEDENT
---------------------------------
4.01 Conditions to Effectiveness. The effectiveness of this
---------------------------
Agreement is subject to the condition that (i) the Agent shall have received
executed counterparts of this Agreement signed by the Agent, the Company and
the Majority Banks, and (ii) the Agent shall have received on or before the
Closing Date all of the following, in form and substance satisfactory to the
Agent and the Majority Banks, and in sufficient copies for each Bank:
(a) Credit Agreement, Guaranty and Notes. This Agreement, the
------------------------------------
Guaranty and the Notes executed by each party thereto;
(b) Resolutions, Incumbency.
-----------------------
(i) Copies of the resolutions of the board of
directors of each Loan Party authorizing the transactions
contemplated hereby and the performance of the Loan Documents,
certified as of the Closing Date by the Secretary of such Loan
Party; and
29.
<PAGE>
(ii) A certificate of the Secretary of each Loan
Party certifying the names, titles and true signatures of the
officers of such Loan Party authorized to execute, deliver and
perform, as applicable, this Agreement and all other Loan
Documents to be delivered by it hereunder;
(c) Good Standing. Certificates as of a recent date for each Loan
-------------
Party (i) as to good standing and tax good standing from the Secretary of State
(or similar, applicable Governmental Authority) of its state of incorporation
and (ii) as to good standing from the Secretary of State (or similar,
applicable Governmental Authority) of the states of Idaho and Utah;
(d) Legal Opinions. Opinions of (i) David A. Channer, Esq.,
--------------
Assistant General Counsel to the Company, addressed to the Agent and the
Banks, substantially in the form of Exhibit J, dated the Closing Date; (ii)
---------
Wilson Sonsini Goodrich & Rosati PC, California counsel to the Loan Parties,
addressed to the Agent and the Banks, substantially in the form of Exhibit K,
---------
dated the Closing Date; (iii) Hawley, Troxell, Ennis & Hawley LLP, Idaho
counsel to the Loan Parties, addressed to the Agent and the Banks,
substantially in the form of Exhibit L, dated the Closing Date; and (iv)
---------
Parsons Behle & Latimer, Utah counsel to the Company, addressed to the Agent
and the Banks, substantially in the form of Exhibit M, dated the Closing Date;
---------
(e) Payment of Fees. Evidence of payment by the Company of all
---------------
accrued and unpaid fees, costs and expenses to the extent then due and payable
hereunder, under the Existing Facility or the fee letter referred to in
Section 2.09 on the Closing Date, together with Attorney Costs of BofA to the
extent invoiced prior to or on the Closing Date;
(f) Certificate. A certificate signed by a Responsible Officer,
-----------
dated as of the Closing Date, stating that: (i) the representations and
warranties contained in Article V are true and correct on and as of such date,
as though made on and as of such date; (ii) no Default or Event of Default
exists; and (iii) there has occurred since May 28, 1998, no event or
circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Effect, other than the material adverse changes, if any, as
may have been disclosed in the written projections dated August 5, 1998
delivered to the Banks prior to the date hereof;
(g) Collateral Documents and Actions Relating to Collateral. Fully
-------------------------------------------------------
executed counterparts of the Environmental Indemnity, the Deeds of Trust and
the Security Agreements, together with:
(i) evidence that all filings, registrations and
recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be
necessary to create, in favor of the Agent on behalf of the
Banks, a perfected first priority Lien on the Collateral,
including evidence of recordation of the Deeds of Trust (which
may consist of a written or telephonic confirmation from the
title insurance company), and filing of completed UCC-1 financing
statements, in each case in the filing or recording offices
described in Schedule 4.01 (the "Filing Offices");
------------- --------------
(ii) written advice relating to such Lien and judgment
searches as the Agent or any Bank shall have requested, and such
termination statements or other
30.
<PAGE>
documents as may be necessary, to confirm that the Collateral is
subject to no other Liens in favor of any Persons (other than
Permitted Liens);
(iii) evidence that all other actions necessary or, in
the opinion of the Agent and the Banks, desirable to perfect and
protect the first priority security interest created by the
Collateral Documents have been taken;
(iv) evidence that the Agent, for the ratable benefit of
the Banks, has been named as loss payee under all policies of
casualty insurance, and as additional insured under all policies
of liability insurance, required by the Security Agreements and
the Deeds of Trust; and
(v) such environmental site assessments, surveys,
appraisals, consents of landlords, estoppels from landlords,
tenant subordination agreements and other documents and
instruments in connection with the Deeds of Trust as shall
reasonably be deemed necessary by the Agent or the Banks; and
(h) Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Agent or any Bank may request.
4.02 Conditions to All Borrowings. The obligation of each Bank to
----------------------------
make any Loan to be made by it, or to continue or convert any Loan under
Section 2.04, is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date or Conversion/Continuation Date:
(a) Notice of Borrowing or Conversion/Continuation. The Agent shall
----------------------------------------------
have received a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable;
(b) Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties in Article V shall be true and correct on and
as of such Borrowing Date with the same effect as if made on and as of such
Borrowing Date (except (i) to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date, (ii) that this subsection (b) shall be deemed
instead to refer to the last day of the most recent quarter and year for which
financial statements have then been delivered in respect of the
representations and warranties made in subsections 5.11(a) and 5.11(b); and
(iii) the representations and warranties in Sections 5.05 and 5.14 shall be
true and correct as of the Closing Date and the end of each fiscal quarter);
and
(c) No Existing Default. No Default or Event of Default shall exist
-------------------
or shall result from such Borrowing.
Each Notice of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company hereunder, as of the date of each
such notice and as of each Borrowing Date that the conditions in this Section
4.02 are satisfied.
31.
<PAGE>
ARTICLE V - REPRESENTATIONS AND WARRANTIES
------------------------------------------
The Company represents and warrants to the Agent and each Bank that:
5.01 Corporate Existence and Power. The Company and each of its
-----------------------------
Semiconductor Operations Subsidiaries: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets and to
carry on its business, (c) in the case of each Loan Party, has the power and
authority to execute, deliver and perform its obligations under the Loan
Documents, (d) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification or license, and (e) is in compliance in all material respects
with all Requirements of Law; except, in each case referred to in subsection
(b), (d) or (e), to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.
5.02 Corporate Authorization; No Contravention. The execution,
-----------------------------------------
delivery and performance by each Loan Party of this Agreement and each other
Loan Document to which each Loan Party is party, have been duly authorized by
all necessary corporate action, and do not: (a) contravene the terms of any of
such Loan Party's Organization Documents, (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, any document
evidencing any material Contractual Obligation to which such Loan Party is a
party or any order, injunction, writ or decree of any Governmental Authority
to which such Loan Party or its property is subject, or (c) violate any
Requirement of Law.
5.03 Governmental Authorization. No approval, license, consent,
--------------------------
exemption, authorization, or other action by, or notice to, or filing with,
any Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Loan Party
of the Agreement or any other Loan Document except as required by this
Agreement.
5.04 Binding Effect. This Agreement and each other Loan Document
--------------
to which any Loan Party is a party constitute the legal, valid and binding
obligations of such Loan Party , enforceable against such Loan Party in
accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability.
5.05 Litigation. Except as set forth in the Forms 10K for the fiscal
----------
year ended August 28, 1997, and the Forms 10Q for the fiscal quarters ended
November 27, 1997, February 26, 1998 and May 28, 1998, respectively, and in
each case as filed or amended and filed with the SEC by the Company, there are
no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or any
of its Semiconductor Operations Subsidiaries or any of their respective
properties which (a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or
thereby, or (b) could reasonably be expected to have a Material Adverse
32.
<PAGE>
Effect. No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery or performance of this Agreement
or any other Loan Document, or directing that the transactions provided for
herein or therein not be consummated as herein or therein provided.
5.06 No Default. No Default or Event of Default exists or would
----------
result from the incurring of any Obligations by the Loan Parties. Neither the
Company nor any Semiconductor Operations Subsidiary is in default under or
with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would create an Event of Default under
Section 8.01(e).
5.07 ERISA Compliance. (a) Each Plan is in compliance in all
----------------
material respects with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter from the IRS
and to the best knowledge of the Company, nothing has occurred which would
cause the loss of such qualification. The Company and each ERISA Affiliate has
made all required contributions to any Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur, (ii) no Pension Plan has any Unfunded Pension Liability, (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA), (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan, and
(v) neither the Company nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the
-----------------------------------
Loans are to be used solely for the purposes set forth in and permitted by
Section 6.12 and Section 7.08. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties; Liens. The Company and each
--------------------------
Semiconductor Operations Subsidiary have good and marketable title to, or
valid leasehold interests in, all real property necessary or used in the
ordinary conduct of their respective businesses, except for such defects in
title as could not, individually or in the aggregate, reasonably be expected
to result in a
33.
<PAGE>
Material Adverse Effect. The property of the Company and the Semiconductor
Operations Subsidiaries is subject to no Liens, other than Permitted Liens.
5.10 Taxes. The Company and the Semiconductor Operations
-----
Subsidiaries have filed all Federal and other material tax returns and reports
required to be filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them
or their properties, income or assets otherwise due and payable, except those
which are being contested in good faith by appropriate proceedings and for
which adequate reserves have been provided in accordance with GAAP. There is
no final tax assessment against the Company or any Semiconductor Operations
Subsidiary that could reasonably be expected to result in a Material Adverse
Effect.
5.11 Financial Condition.
-------------------
(a) The unaudited consolidated balance sheet of the Company and its
Subsidiaries dated May 28, 1998 and the related consolidated statements of
operations and cash flows for the interim periods then ended: (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein, subject to
ordinary, good faith year end adjustments, (ii) present fairly in all material
respects the consolidated financial condition of the Company and its
Subsidiaries as of the date thereof and results of operations and cash flows
for the period covered thereby, and (iii) include or disclose all material
indebtedness and other liabilities, direct or contingent, of the Company and
its Subsidiaries on a consolidated basis as of the date thereof, including
liabilities for taxes, material commitments and material Contingent
Obligations.
(b) The unaudited Semiconductor Operations Supplemental Schedules
dated May 28, 1998, for the interim periods then ended: (i) include amounts
based on estimates of annual amounts and are subject to changes in estimates
and ordinary year-end adjustments, (ii) present fairly, in all material
respects, the net assets and operations and cash flows of the Company and its
Semiconductor Operations Subsidiaries (on a combined basis) for the periods
covered thereby, on the basis specified and described in the notes to such
schedules, and (iii) were prepared on a basis consistent with the basic
consolidated financial statements of the Company and its Subsidiaries except
as disclosed in the notes thereto.
(c) Since May 28, 1998, there has been no Material Adverse Effect
other than the material adverse changes, if any, as may have been disclosed in
the written projections dated August 5, 1998 delivered to the Banks prior to
the date hereof.
5.12 Environmental Matters. The Company conducts in the ordinary
---------------------
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Company has reasonably concluded that it is in
material compliance with all such Environmental Laws and that any
Environmental Claims could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person
------------------
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment
34.
<PAGE>
Company Act of 1940. The Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code, or any other Federal or state
statute or regulation limiting its ability to incur Indebtedness.
5.14 Intellectual Property. Except as set forth in the Forms 10K
---------------------
for the fiscal year ended August 28, 1997 and the Forms 10Q for the fiscal
quarters ended November 27, 1997, February 26, 1998 and May 28, 1998,
respectively, and in each case as filed or amended and filed with the SEC by
the Company, (a) the Company and its Semiconductor Operations Subsidiaries own
or are licensed to use or otherwise have the right to use (or could obtain
such ownership or licenses or rights on terms not materially adverse to the
Company and its Semiconductor Operations Subsidiaries, taken as a whole, and
under circumstances that could not reasonably be expected to have a Material
Adverse Effect) all of the patents, trademarks, service marks, trade names,
copyrights, contractual franchises and other rights that are reasonably
necessary for the operation of their semiconductor operations business, and
(b) there are no pending or, to the best knowledge of Company, threatened
claims that any slogan or other advertising device, product, process, method,
substance, part or other material now employed by the Company or any
Semiconductor Operations Subsidiary infringes upon any rights held by any
other Person, except where the consequences of such infringement could not
reasonably be expected to have a Material Adverse Effect.
5.15 Subsidiaries; Minority Interests. As of the Original Closing
--------------------------------
Date, the Company has no subsidiaries other than those specifically disclosed
in part (a) of Schedule 5.15 to the Disclosure Letter and has no equity
investments in any other Person in excess of $10,000,000, individually, other
than those specifically disclosed in part (b) of Schedule 5.15 to the
Disclosure Letter. No Material Semiconductor Operations are conducted,
individually or in the aggregate, by Subsidiaries which are not Semiconductor
Operations Subsidiaries. All Semiconductor Operations Subsidiaries are Wholly-
Owned Subsidiaries, and all Wholly-Owned Subsidiaries which conduct any active
semiconductor operations are Semiconductor Operations Subsidiaries.
5.16 Insurance. The properties of the Company and its
---------
Semiconductor Operations Subsidiaries are insured with financially sound and
reputable insurance companies not Affiliates of the Company, in such amounts,
with such deductibles and covering such risks as are customarily carried by
companies engaged in similar businesses and owning similar properties in
localities where the Company or such Semiconductor Operations Subsidiaries
operate.
5.17 Swap Obligations. Neither the Company nor any of its
----------------
Semiconductor Operations Subsidiaries has incurred any outstanding obligations
under any Swap Contracts, other than Permitted Swap Obligations. The Company
has undertaken its own independent assessment of its consolidated assets,
liabilities and commitments and has considered appropriate means of mitigating
and managing risks associated with such matters and has not relied on any swap
counterparty or any Affiliate of any swap counterparty in determining whether
to enter into any Swap Contract.
35.
<PAGE>
5.18 Full Disclosure. None of the representations or warranties
---------------
made by the Company in the Loan Documents as of the date such representations
and warranties are made or deemed made, and none of the statements contained
in any exhibit, report, written statement or certificate furnished by or on
behalf of the Company or any Semiconductor Operations Subsidiary in connection
with the Loan Documents (including the offering and disclosure materials
delivered by or on behalf of the Company to the Banks prior to the Original
Closing Date, taken together with all such exhibits, reports, written
statements and certificates filed or amended and filed by the Company with the
SEC, but excluding the items listed in Section 5.19), contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when
made or delivered. In addition, any factual information, forecasts and
projections by industry analysts, including those set forth in the information
memorandum distributed to the Banks prior to closing, have been developed
solely by such analysts and are not adopted by the Company, notwithstanding
their inclusion in such information memorandum, and the Company makes no
representations or warranties concerning same, unless such representation or
warranty is separately made by the Company.
5.19 Projections. All projections, forward-looking information or
-----------
other similar or related information furnished by or on behalf of the Company
in connection with this Agreement were prepared in good faith on the basis of
the assumptions stated therein, which assumptions were fair in the light of
conditions existing at the time of preparation of such forecasts, and
represented, at the time of preparation, the Company's reasonable estimate of
its future financial performance; provided, however, that such projections and
-------- -------
other forward-looking information are not to be viewed as factual and actual
results during the period or periods covered thereby may differ from the
projected or forecasted results.
5.20 Year 2000. The Company and its Semiconductor Operations
---------
Subsidiaries have a comprehensive program to address the "Year 2000 problem"
(that is, the inability of computers, as well as embedded microchips in
manufacturing and other equipment, to perform properly date-sensitive
functions with respect to certain dates prior to and after December 31, 1999).
The Company and its Semiconductor Operations Subsidiaries have implemented
that program substantially in accordance with its timetable, and the Company
reasonably anticipates that they will substantially avoid the Year 2000
problem as to all computers, as well as embedded microchips in manufacturing
and other equipment, that are material to the Company's and its Semiconductor
Operations Subsidiaries' business, properties or operations.
5.21 Collateral Documents.
--------------------
(a) The provisions of each of the Security Agreements are effective to
create in favor of the Agent for the benefit of the Banks, a legal, valid and
enforceable first priority Lien in all right, title and interest of the
Company and the Guarantor in the Collateral described therein, subject to
Permitted Liens; and financing statements have been filed in the Filing
Offices listed in Part 1 of Schedule 4.01.
-------------
(b) Each Deed of Trust when executed and delivered will be effective to
grant to the Agent for the benefit of the Banks a legal, valid and enforceable
Lien on all the right, title and interest of the Company in the "Property"
described therein. When each such Deed of Trust is
36.
<PAGE>
duly recorded in the applicable Filing Offices listed in Part 2 of Schedule
--------
4.01 and the recording fees and taxes in respect thereof are paid and
- ----
compliance is otherwise had with the formal requirements of state law
applicable to the recording of deeds of trust generally, such Property,
subject to the encumbrances and exceptions to title set forth therein and
except for any other Permitted Liens applicable thereto, is subject to a
legal, valid, enforceable and perfected first priority Lien; and when
Financing Statements have been filed in the applicable Filing Offices listed
in Part 2 of Schedule 4.01, such Deed of Trust also creates a legal, valid,
-------------
enforceable and perfected first priority Lien on all right, title and interest
of the Company under such Deed of Trust in all personal property and fixtures
which are covered by such Deed of Trust, subject to no other Liens, except the
encumbrances and exceptions to title set forth therein and Permitted Liens.
(c) All representations and warranties of the Company and the
Guarantor contained in the Collateral Documents are true and correct.
ARTICLE VI - AFFIRMATIVE COVENANTS
----------------------------------
So long as any Bank shall have any Commitment hereunder, or any
Loan or other Obligation (other than indemnity obligations which remain
inchoate at such time) shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
6.01 Financial Statements. The Company shall deliver to the
--------------------
Agent, in form and detail satisfactory to the Agent and the Majority Banks,
with sufficient copies for each Bank:
(a) promptly after becoming available, but not later than 100 days
after the end of each fiscal year (commencing with the fiscal year ended
September 3, 1998), a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of operations and cash flows for such year, setting
forth in each case in comparative form the figures for the previous fiscal
year, together with the related Semiconductor Operations Supplemental
Schedules, and accompanied by the opinion of PricewaterhouseCoopers LLP or
another nationally-recognized independent public accounting firm ("Independent
-----------
Auditor") which opinion shall state that (i) such consolidated financial
- -------
statements present fairly in all material respects the financial position of
the Company and its Subsidiaries on a consolidated basis as of the date
thereof and the results of operations for the periods indicated in conformity
with GAAP, except as otherwise indicated therein and (ii) such related
Semiconductor Operations Supplemental Schedules were prepared on a basis
consistent with the basic consolidated financial statements of the Company and
its Subsidiaries except as disclosed in the notes thereto and the information
therein is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole except as specifically
noted therein. Such financial statements shall be accompanied by a certificate
of a Responsible Officer which shall state that such Semiconductor Operations
Supplemental Schedules present fairly, in all material respects, the net
assets and operations and cash flows of the Company and its Semiconductor
Operations Subsidiaries (on a combined basis) for the periods covered thereby,
on the basis specified and described in the notes to such schedules. The
Company will
37.
<PAGE>
not place restrictions on the examinations of the auditors or any material
portion of the Company's or any Subsidiary's records; and
(b) promptly after becoming available, but not later than 60 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended December 3, 1998), a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of operations
for the period commencing on the first day and ending on the last day of such
quarter, and statement of cash flows for the year to date, together with the
related Semiconductor Operations Supplemental Schedules, accompanied by a
certificate of a Responsible Officer which shall state that (i) such unaudited
consolidated financial statements (A) fairly present in all material respects,
in accordance with GAAP (subject to ordinary, good faith year-end adjustments,
the financial position and the results of operations of the Company and its
Subsidiaries on a consolidated basis, and (B) include or disclose all material
indebtedness and other liabilities, direct or contingent, of the Company and
its Subsidiaries on a consolidated basis as of the date thereof, including
liabilities for taxes, material commitments and material Contingent
Obligations, and (ii) such related Semiconductor Operations Supplemental
Schedules (A) include amounts based on estimates of annual amounts and are
subject to changes in estimates and ordinary year-end adjustments, (B) present
fairly, in all material respects, the net assets and operations and cash flows
of the Company and its Semiconductor Operations Subsidiaries (on a combined
basis) for the periods covered thereby, on the basis specified and described
in the notes to such schedules, and (C) were prepared on a basis consistent
with the basic consolidated financial statements of the Company and its
Subsidiaries except as disclosed in the notes thereto.
6.02 Certificates; Other Information. The Company shall furnish
-------------------------------
to the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in Sections 6.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(b) promptly after becoming available, but not later than 20 days
after the filing thereof with the SEC or the delivery thereof to its
Shareholders, as applicable, copies of all annual reports and proxy statements
that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K,
10Q, 8K, S-1 and S-3) that the Company or any Subsidiary may make to, or file
with, the SEC; and
(c) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Semiconductor Operations
Subsidiary as the Agent, at the request of any Bank, may from time to time
reasonably request in writing.
6.03 Notices. The Company shall promptly, after any Responsible
-------
Officer becomes aware thereof or should have become aware thereof, notify the
Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that could reasonably be
expected to become a Default or Event of Default;
38.
<PAGE>
(b) of the occurrence of any breach or termination of any material
Contractual Obligation pursuant to which the Company or any of its Material
Semiconductor Operations Subsidiaries is licensed or otherwise has the right
to use any patented technology, trademarks, service marks, trade names,
copyrights or contractual franchises that are reasonably necessary for the
operation of their respective businesses ("Intellectual Property Licenses");
------------------------------
or the receipt of any written claim with respect to any Intellectual Property
License in which the licensor, seller or grantor of such intellectual property
rights states its intention (i) to terminate such Intellectual Property
License, (ii) to require the Company or any Semiconductor Operations
Subsidiary to cease using such intellectual property rights (or any material
portion thereof), or to cease marketing or selling products developed based on
intellectual property rights (or any material portion thereof) covered by such
Intellectual Property License, or (iii) to cease performing its obligations
thereunder, and which, in each of the cases set forth in clauses (i), (ii) and
(iii), could reasonably be expected to have a Material Adverse Effect;
(c) of the commencement of, or any material development in, any
litigation, arbitration or other similar proceeding affecting the Company or
any Semiconductor Operations Subsidiary with respect to any Intellectual
Property License, in which injunctive or similar relief (whether temporary or
permanent) is sought and which could reasonably be expected to have a Material
Adverse Effect;
(d) of any other matter that has resulted or could reasonably be
expected to result in a Material Adverse Effect, which matters include, for
example (but not by way of limitation): (i) breach or non-performance of, or
any default under, a Contractual Obligation of the Company or any
Semiconductor Operations Subsidiary, (ii) any dispute, litigation,
investigation, proceeding or suspension between the Company or any
Semiconductor Operations Subsidiary and any Governmental Authority, or (iii)
the commencement of, or any material development in, any litigation or
proceeding affecting the Company or any Semiconductor Operations Subsidiary,
including pursuant to any applicable Environmental Laws;
(e) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Agent and each Bank a copy of any notice with
respect to such event that is filed with a Governmental Authority and any
notice delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event: (i) an ERISA Event, (ii) a material
increase in the Unfunded Pension Liability of any Pension Plan, (iii) the
adoption of, or the commencement of contributions to, any Plan subject to
Section 412 of the Code by the Company or any ERISA Affiliate, or (iv) the
adoption of any amendment to a Plan subject to Section 412 of the Code, if
such amendment results in a material increase in contributions or Unfunded
Pension Liability;
(f) of any material change in accounting policies or financial
reporting practices by the Company and its Subsidiaries on a consolidated
basis or the Company and its Semiconductor Operations Subsidiaries on a
combined basis; provided that the description of any such changes set forth in
--------
the Company's filings with the SEC, or the notes to any financial statements
or Semiconductor Operations Supplemental Schedules included therein, when
delivered to Agent and the Banks, shall constitute notice sufficient under
this subsection (f);
39.
<PAGE>
(g) of the issuance of any Permitted Subordinated Debt, together with
a copy of any written instrument evidencing, or which is proposed to evidence,
such Indebtedness; and
(h) of any existing Subsidiary that is not a Wholly-Owned Subsidiary
that conducts semiconductor operations (i) becoming a Wholly-Owned Subsidiary,
or (ii) having Material Semiconductor Operations.
Each notice under this Section (other than under subsections
(f) and (g)) shall be accompanied by a written statement by a Responsible
Officer setting forth details of the occurrence referred to therein, and
stating what action the Company or any affected Subsidiary proposes to take
with respect thereto and at what time. Each notice under Section 6.03(a) shall
describe with particularity any and all sections or clauses of this Agreement
or other Loan Document that have been (or could reasonably be expected to be)
breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company
----------------------------------------
shall, and shall cause each Material Semiconductor Operations Subsidiary to:
(a) preserve and maintain in full force and effect its corporate existence and
good standing under the laws of its state or jurisdiction of incorporation,
except, with respect to any Material Semiconductor Operations Subsidiary, in
connection with transactions permitted by Section 7.03 or 7.04; (b) preserve
and maintain in full force and effect all material governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except in connection with
transactions permitted by Section 7.03 or 7.04; (c) use reasonable efforts, in
the ordinary course of business, to preserve its business organization and
goodwill, except, with respect to any Material Semiconductor Operations
Subsidiary, in connection with transactions permitted by Section 7.03 or 7.04;
and (d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, except where the non-preservation of which could not
reasonably be expected to have a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and
-----------------------
shall cause each Material Semiconductor Operations Subsidiary to maintain, and
preserve all its property which is used or useful in its business in good
working order and condition, ordinary wear and tear excepted and make all
reasonably necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
6.06 Insurance. The Company shall maintain, and shall cause each
---------
Semiconductor Operations Subsidiary to maintain, with financially sound and
reputable independent insurers or through self-insurance, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons.
6.07 Payment of Obligations. The Company shall, and shall cause
----------------------
each Semiconductor Operations Subsidiary to, pay and discharge as the same
shall become due and payable (or within any applicable grace period), all
their respective material obligations and liabilities, which matters may
include, for example (but not by way of limitation): (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets,
40.
<PAGE>
unless the same are being contested in good faith by appropriate proceedings
and adequate reserves in accordance with GAAP are being maintained by the
Company or such Semiconductor Operations Subsidiary, and (b) all lawful claims
which, if unpaid, would by law become a Lien upon its property, except for
Permitted Liens.
6.08 Compliance with Laws. The Company shall comply, and shall
--------------------
cause each Material Semiconductor Operations Subsidiary to comply, in all
material respects, with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act), except such as may be contested in good faith or as to which a
bona fide dispute may exist.
6.09 Compliance with ERISA. The Company shall, and shall cause
---------------------
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law, (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification, and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. (a) The
--------------------------------------------
Company shall maintain and shall cause each Semiconductor Operations
Subsidiary to maintain financial books of record and account sufficient to
permit the Company to prepare financial statements in accordance with GAAP.
(b) The Company shall permit, and shall cause each Semiconductor
Operations Subsidiary to permit, representatives and independent contractors
of the Agent (i) to visit and inspect any of their respective material
properties, (ii) to examine their respective financial records, and make
copies thereof or abstracts therefrom, and (iii) to discuss their respective
affairs, finances and accounts with their respective directors, officers, and
independent public accountants, all at the expense of the Banks and at such
reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance written notice to the Company;
provided, however, that when an Event of Default exists, the Agent or any Bank
- -------- -------
may do any of the foregoing at the expense of the Company at any time during
normal business hours and without advance written notice. At any time when no
Event of Default has occurred and is continuing, any such representative,
independent contractor or independent public accountants (other than employees
of the Agent) selected by the Agent to perform such inspections or audits,
must be reasonably acceptable to the Company.
(c) Notwithstanding the foregoing, while no Event of Default exists,
neither the Company nor any of its Semiconductor Operations Subsidiaries will
be required to disclose, permit the inspection, examination, copying or making
extracts of, or discussions of, any document, information or other matter that
(i) constitutes non-financial trade secrets or non-financial proprietary
information, or (ii) in respect to which disclosure to the Agent or any Bank
(or designated representative) is then prohibited by law or any agreement
binding upon the Company or such Semiconductor Operations Subsidiary that was
not entered into by the Company or such Semiconductor Operations Subsidiary
for the primary purpose of concealing information from Agent and the Banks or
evading the provisions of this Agreement.
41.
<PAGE>
6.11 Environmental Laws. The Company shall, and shall cause each
------------------
Material Semiconductor Operations Subsidiary to, conduct its operations and
keep and maintain its property in compliance in all material respects with all
Environmental Laws.
6.12 Use of Proceeds. The Company shall use the proceeds of the
---------------
Loans for working capital and other general corporate purposes not in
contravention of any Requirement of Law or of any Loan Document.
6.13 Ranking; Designated Senior Indebtedness. The Company shall
---------------------------------------
take, or cause to be taken, all actions necessary to ensure that the
Obligations are and continue to rank at least pari passu in right of payment
---- -----
with all other unsecured Indebtedness of the Company. The Obligations shall be
deemed "Designated Senior Debt" for purposes of Permitted Subordinated Debt
issued under the Subordinated Note Indenture and any TI Subordinated Debt.
6.14 New Semiconductor Operations Subsidiaries. The Company shall
-----------------------------------------
cause each new Wholly-Owned Subsidiary which from time to time conducts any
active semiconductor operations to be included as a Semiconductor Operations
Subsidiary in the Semiconductor Operations Supplemental Schedules.
6.15 Further Assurances. Promptly upon request by the Agent or
------------------
the Majority Banks, the Company shall (and shall cause the Guarantor to) do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as the
Agent or such Banks, as the case may be, may reasonably require from time to
time in order (i) to carry out more effectively the purposes of this Agreement
or any other Loan Document, (ii) to subject to the Liens created by any of the
Collateral Documents any of the properties, rights or interests covered by any
of the Collateral Documents, (iii) to perfect, protect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and
the Liens intended to be created thereby, and (iv) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm to the Agent and Banks
the rights granted or now or hereafter intended to be granted to the Banks
under any Loan Document or under any other document executed in connection
therewith.
ARTICLE VII - NEGATIVE COVENANTS
--------------------------------
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation (other than indemnity obligations which remain inchoate at
such time) shall remain unpaid or unsatisfied, unless the Majority Banks waive
compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not
-------------------
suffer or permit any Semiconductor Operations Subsidiary to, directly or
indirectly, make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its properties, revenues or assets, whether now
owned or hereafter acquired, other than the following ("Permitted Liens"):
---------------
42.
<PAGE>
(a) Liens existing on the Original Closing Date and set forth in
Schedule 7.01 to the Disclosure Letter securing Indebtedness outstanding on
such date (including any such Lien securing Indebtedness that is renewed,
extended or refunded after the Original Closing Date, provided that the
--------
principal amount of such Indebtedness outstanding at the time of such renewal,
extension or refunding is not increased and such Lien is not extended to any
other property, other than replacements or substitutions for such property);
(b) Liens created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 6.07;
(d) Liens consisting of carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable without
penalty or which are being contested in good faith and by appropriate
proceedings, which proceedings are for the purpose of preventing the
forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations with respect to surety and appeal bonds, or letters of
credit issued in lieu thereof, and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of business,
provided all such Liens in the aggregate could not reasonably be expected to
result (even if enforced) in a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens, arising
in circumstances not constituting an Event of Default under Section 8.01(j);
(h) Liens consisting of easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business
(including the easements, rights-of-way, restrictions and other similar
encumbrances incurred in connection with the interchange and new road to be
located on the Company's headquarters property in Boise, Idaho) which, in the
aggregate, do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the businesses of the
Company and its Semiconductor Operations Subsidiaries taken as a whole;
(i) Liens on (i) assets of corporations which become Semiconductor
Operations Subsidiaries after the date of this Agreement, (ii) assets which
are acquired at the time a corporation merges with or into the Company or a
Semiconductor Operations Subsidiary pursuant to Section 7.04, and (iii) assets
acquired in connection with the TI Acquisition and any other assets acquired
by the Company or a Semiconductor Operations Subsidiary pursuant to Section
7.05; provided, however, that such Liens existed at the time the respective
-------- -------
corporations
43.
<PAGE>
became Semiconductor Operations Subsidiaries or at the time the assets were
acquired and were not created in anticipation thereof;
(j) purchase money and other security interests, and liens in the
nature of capital leases, in personal or real property where the security
interests do not extend beyond the property purchased or financed, any
replacements, additions, attachments and accessions thereto, and the proceeds
(including insurance proceeds) thereof and the amount of indebtedness secured
thereby does not materially exceed the value of the property (except in
connection with the Italian operations acquired in the TI Acquisition) and, in
the aggregate, the amount of all indebtedness so secured does not at any time
exceed (i) in the case of U.S. domestic net property, plant and equipment, 25%
of the Company's and the Semiconductor Operations Subsidiaries' combined U.S.
domestic net property, plant and equipment and (ii) in the case of total net
property, plant and equipment, 30% of the Company's and the Semiconductor
Operations Subsidiaries' combined total net property, plant and equipment (in
each case as reflected on the Semiconductor Operations Supplemental Schedules)
as of the last day of the fiscal quarter most recently ended prior thereto
(including any such Lien securing any such indebtedness that is renewed,
extended or refunded, provided that the principal amount of such indebtedness
outstanding at the time of such renewal, extension or refunding is not
materially increased and such Lien is not extended to any other property);
(k) Liens arising solely by virtue of any statutory, common law or
contractual provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is not
--------
a dedicated cash collateral account and is not subject to restrictions against
access by the Company or any Semiconductor Operations Subsidiary in excess of
those set forth by regulations promulgated by the FRB, and (ii) such deposit
account is not intended by the Company or any Semiconductor Operations
Subsidiary to provide collateral to the depository institution;
(l) Liens securing extensions of credit made by the Company or another
Semiconductor Operations Subsidiary to such Semiconductor Operations
Subsidiaries, to the extent such extensions of credit are permitted by Section
7.06;
(m) Liens on amounts owed to the Company by a joint venture, an
interest in which is being acquired by the Company in the TI Acquisition,
which amounts are held in an escrow account by the lenders to such joint
venture and which amounts constitute Investments permitted under Section 7.05;
(n) leases and subleases of, and licenses and sublicenses with respect
to, property where the Company or a Semiconductor Operations Subsidiary is the
lessor or licensor (or sublessor or sublicensor); provided that such leases,
--------
subleases, licenses and sublicenses do not in the aggregate materially
interfere with the business of the Company and its Semiconductor Operations
Subsidiaries taken as a whole;
(o) Liens with respect to operating leases otherwise permitted by this
Agreement; provided, that such Liens encumber only property financed or
--------
leased, any replacements,
44.
<PAGE>
additions, attachments and accessions thereto, and the proceeds (including
insurance proceeds) thereof;
(p) Liens incurred in the ordinary course of business used to secure
cash reserves that have been deposited with the Company or its Semiconductor
Operations Subsidiaries by customers to obtain the rights to delivery of
future goods or services;
(q) Liens consisting of pledges of cash collateral or government
securities to secure on a mark-to-market basis Permitted Swap Obligations
only, provided that the counterparty to any Swap Contract relating to any such
--------
Permitted Swap Obligation is under a similar requirement to deliver similar
collateral from time to time to the Company or the Semiconductor Operations
Subsidiary party thereto on a mark-to-market basis; provided, however, that,
-------- -------
as of any determination date, the amount of all such outstanding secured
Permitted Swap Obligations, together with all outstanding secured Indebtedness
permitted by subsection (r) below, shall not in the aggregate exceed 5% of
Combined Tangible Assets;
(r) Liens incurred in the ordinary course of business securing
Indebtedness other than borrowed money; provided, however, that the amount of
-------- -------
all such outstanding secured Indebtedness, together with all outstanding
secured Permitted Swap Obligations permitted by subsection (q) above, shall
not in the aggregate exceed 5% of Combined Tangible Assets as of the end of
the most recent fiscal quarter;
(s) Liens securing Indebtedness permitted by Section 7.06(n); and
(t) Liens in favor of a trustee granted pursuant to any Permitted
Subordinated Debt of the type described in clause (vii) of the definition of
Permitted Subordinated Debt.
Notwithstanding the foregoing, no Liens securing Indebtedness
may exist at any time with respect to the Intellectual Property (as such term
is defined in the Company Security Agreement) of the Company and its
Semiconductor Operations Subsidiaries.
7.02 Exclusive Negative Pledge. The Company shall not, and shall
-------------------------
not permit any of its Semiconductor Operations Subsidiaries to, enter into any
Contractual Obligation (other than this Agreement) which prohibits the
creation or assumption of any Lien upon or with respect to any part of such
Persons properties or assets (including all Intellectual Property (as defined
in the Company Security Agreement) and the capital stock of Semiconductor
Operations Subsidiaries and Micron Electronics, Inc.) (such Contractual
Obligation, a "Negative Pledge"), whether now owned or hereafter acquired,
---------------
other than:
(a) Negative Pledges in favor of the Company or a Semiconductor
Operations Subsidiary with respect to the assets of a Semiconductor Operations
Subsidiary in connection with extensions of credit made by the Company or a
Semiconductor Operations Subsidiary to such Semiconductor Operations
Subsidiary, to the extent such extensions of credit are permitted by Section
7.07;
(b) Negative Pledges granted in connection with extensions of credit
(whether or not guaranteed by the Company or a Semiconductor Operations
Subsidiary) made available by
45.
<PAGE>
Persons other than the Company to a Semiconductor Operations Subsidiary to the
extent such extensions of credit are permitted by Sections 7.06(h);
(c) Negative Pledges granted in connection with Permitted Subordinated
Debt;
(d) Negative Pledges granted in connection with real or personal
property financing arrangements to the extent permitted by Section 7.01(j), in
favor of the Person providing such financing, pursuant to which the Company or
a Semiconductor Operations Subsidiary, as applicable, agrees not to create or
assume any Lien upon or with respect to the real property and equipment being
financed (together with replacements, additions, attachments, accessions and
proceeds (including insurance proceeds) thereof and accessories thereto); and
(e) Negative Pledges in connection with Indebtedness permitted under
Section 7.06(p).
7.03 Disposition of Assets. The Company shall not, and shall not
---------------------
suffer or permit any Semiconductor Operations Subsidiary to, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of transactions) any property (including accounts
and notes receivable, with or without recourse) (together, "Dispositions") or
------------
enter into any agreement to do any of the foregoing, except for:
(a) Dispositions by a Semiconductor Operations Subsidiary of all or
substantially all of its assets (upon voluntary dissolution, liquidation or
otherwise) to the Company or any other Person, provided that if such a
--------
Disposition is to a Person other than the Company or another Semiconductor
Operations Subsidiary (or a Wholly-Owned Subsidiary which, immediately
following such dissolution or liquidation, will become a Semiconductor
Operations Subsidiary), such Disposition would be a Distribution permitted
under Section 7.09(d);
(b) Dispositions of assets in the ordinary course of business (the
parties hereby agreeing that Dispositions of inventory, or used, worn-out or
surplus equipment, or equipment pursuant to Permitted Sale-Leaseback
Transactions shall be considered to be Dispositions in the ordinary course of
business);
(c) Dispositions of immaterial ($1,000,000 or less individually)
assets outside the ordinary course of business;
(d) Dispositions of material (greater than $1,000,000 individually)
assets outside the ordinary course of business (other than accounts and notes
receivable); provided that, except to the extent Commitment reductions are
--------
effected and any related prepayments made as contemplated by the last
paragraph of this Section 7.03, the aggregate Net Proceeds of all material
assets so sold, together with the aggregate Net Proceeds of any material
(greater than $1,000,000 individually) assets disposed of pursuant to sale-
leaseback transactions which do not constitute Permitted Sale-Leaseback
Transactions since the Original Closing Date, shall not exceed $200,000,000
(the disposition of assets acquired in the TI Acquisition being excluded from
the foregoing calculation);
(e) Subject to Subsection 7.03(f), dispositions of non-semiconductor
operations assets, including dispositions of the capital stock of Subsidiaries
that are not Semiconductor Operations Subsidiaries;
46.
<PAGE>
(f) Disposition of shares of Micron Electronics, Inc. stock, provided
--------
that, except to the extent Commitment reductions are effected and any related
prepayments made as contemplated by the last paragraph of this Section 7.03,
the aggregate Net Proceeds therefrom since the Original Closing Date shall not
exceed $200,000,000; and
(g) Disposition of assets acquired in the TI Acquisition.
Notwithstanding the foregoing, (i) subject to clause (ii)
below, the aggregate amount of Dispositions under subsections (d) and (f)
since the Original Closing Date shall not exceed $300,000,000 in the
aggregate; and (ii) Dispositions described in subsections (d) and (f) which
involve an amount exceeding the maximum amount permitted under this Section
7.03 will be permitted hereunder if the Commitments are reduced as
contemplated by Section 2.05 and, if required by Section 2.06 as a result of
such Commitment reductions, the Net Proceeds are paid over to the Agent for
the account of the Banks as a prepayment of the Loans in accordance with the
requirements of Section 2.06.
7.04 Consolidations and Mergers. The Company shall not, and shall
--------------------------
not suffer or permit any Semiconductor Operations Subsidiary to, liquidate,
dissolve or reorganize, or merge or consolidate with or into any other Person,
except that:
(a) the Company or any Semiconductor Operations Subsidiary may merge,
consolidate or reorganize with or into another Person (other than the Company
or another Subsidiary) in connection with an Acquisition permitted pursuant to
Section 7.05(g) or (o), provided that (i) no Default or Event of Default has
--------
occurred or would occur as a result thereof on a pro forma basis, and (ii) in
the case of a transaction involving the Company, the Company shall be the
surviving corporation, and (iii) in the case of a transaction involving a
Semiconductor Operations Subsidiary, the resulting Person shall be a
Semiconductor Operations Subsidiary;
(b) any Semiconductor Operations Subsidiary may merge, consolidate or
reorganize with or into the Company or a Semiconductor Operations Subsidiary
(or a Wholly-Owned Subsidiary which, immediately following such merger or
consolidation, will become a Semiconductor Operations Subsidiary), provided
--------
that the Company or such Wholly-Owned Subsidiary shall be the continuing or
surviving corporation;
(c) any Semiconductor Operations Subsidiary may consolidate or merge
with or into any other Semiconductor Operations Subsidiary; and
(d) any Semiconductor Operations Subsidiary may liquidate or dissolve as
permitted under Section 7.03(a).
7.05 Loans and Investments. The Company shall not purchase or
---------------------
acquire, or suffer or permit any Semiconductor Operations Subsidiary to
purchase or acquire, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make any Acquisitions,
or make any advance, loan, extension of credit or capital contribution to or
any other investment in, any Person including any Affiliate of the Company
(together, "Investments"), except for:
-----------
47.
<PAGE>
(a) Investments held by the Company or a Semiconductor Operations
Subsidiary in the form of cash equivalents and liquid investments;
(b) Investments in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services or licensing of
property in the ordinary course of business;
(c) Investments made by the Company to or in its Semiconductor
Operations Subsidiaries, or by a Semiconductor Operations Subsidiary to or in
the Company or another Semiconductor Operations Subsidiary, to the extent
permitted by Section 7.07;
(d) Investments in Micron Electronics, Inc.; provided, however, that
-------- -------
the aggregate principal amount of all advances, loans and other extensions of
credit to Micron Electronics, Inc. outstanding at any time plus the cumulative
----
amount of all equity contributions in Micron Electronics, Inc. since the
Original Closing Date shall not exceed $100,000,000 in the aggregate;
(e) [reserved];
(f) incidental loans or advances to employees in the ordinary course
of business or as part of their overall compensation package;
(g) Investments incurred in order to consummate Acquisitions or to
acquire equity minority interests in any Person that is not a Subsidiary;
provided, however, that (i) the Investment is being made in a Person that is
- -------- -------
engaged in a line of business that would be permitted under Section 7.12 if
such Person were a Semiconductor Operations Subsidiary, (ii) no Default or
Event of Default has occurred or would occur as a result of such Investment on
a pro forma basis, (iii) such Investments are undertaken in accordance with
all applicable Requirements of Law, (iv) if such Investment constitutes an
Acquisition, the prior, effective written consent or approval to such
Investment of the board of directors or equivalent governing body of the
Person acquired or in which the Investment is being made is obtained, and (v)
the cumulative aggregate consideration paid (including the assumption of
debt), the aggregate principal amount of all outstanding advances, loans and
other extension of credit, plus the cumulative amount of all equity
----
contributions made since the Original Closing Date in connection with such
Investments (excluding the consideration paid in the TI Acquisition, and
Indebtedness assumed in connection therewith and any Contingent Obligations in
respect thereof) shall not exceed an amount equal to 25% of Combined Tangible
Assets as of the last day of the most recently ended fiscal quarter;
(h) Investments consisting of guarantees by the Company and its
Semiconductor Operations Subsidiaries of the obligations of vendors and
suppliers of the Company or its Semiconductor Operations Subsidiaries entered
into in the ordinary course of business;
(i) Investments constituting Permitted Swap Obligations or payments or
advances under Swap Contracts relating to Permitted Swap Obligations;
(j) Investments existing on the Original Closing Date;
(k) Investments received in settlement of delinquent obligations or
disputes, including Investments received in connection with the bankruptcy or
reorganization of third Persons;
48.
<PAGE>
(l) Investments consisting of deposit accounts maintained in the
ordinary course of business;
(m) Investments accepted in connection with Dispositions of assets
permitted under Section 7.03;
(n) any Investment made in connection with a transaction permitted under
Section 7.04;
(o) the TI Acquisition, provided that (i) no Default or Event of
--------
Default has occurred or would occur as a result of such Investment on a pro
forma basis, and (ii) such Investment is undertaken in accordance with all
applicable Requirements of Law; and
(p) Investments in non-Semiconductor Operations Subsidiaries (other
than Micron Electronics, Inc.), and other Investments not described or covered
by any of the foregoing subsections (a) through (o) of this Section; provided
--------
that (i) no Default or Event of Default has occurred or would occur as a
result of such Investment on a pro forma basis, (ii) such Investments are
undertaken in accordance with all applicable Requirements of Law, (iii) if
such Investment constitutes an Acquisition, the prior, effective written
consent or approval to such Investment of the board of directors or equivalent
governing body of the Person acquired or in which the Investment is being made
is obtained, and (iv) the cumulative aggregate consideration paid (including
the assumption of debt), the aggregate principal amount of all outstanding
advances, loans and other extension of credit, plus the cumulative amount of
----
all equity contributions made since the Original Closing Date in connection
with such Investments shall not exceed an amount equal to 5% of Combined
Tangible Assets as of the last day of the most recently ended fiscal quarter.
7.06 Limitation on Indebtedness and Contingent Obligations.
-----------------------------------------------------
The Company shall not, and shall not suffer or permit any Semiconductor
Operations Subsidiary to, create, incur, assume, suffer to exist, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness or Contingent Obligations, except, without duplication:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness and Contingent Obligations existing on the Original
Closing Date and set forth in Schedule 7.06 to the Disclosure Letter;
(c) Contingent Obligations in the form of endorsements for collection or
deposit in the ordinary course of business;
(d) Indebtedness with respect to cash deposited by customers to obtain
the rights to delivery of future goods or services;
(e) Permitted Swap Obligations;
(f) Indebtedness permitted by Section 7.01(j);
(g) Indebtedness incurred in connection with Investments permitted by
Section 7.05;
49.
<PAGE>
(h) Indebtedness incurred by the Company or any of the Semiconductor
Operations Subsidiaries from Persons other than the Company or another
Semiconductor Operations Subsidiary up to a maximum aggregate principal amount
outstanding of $50,000,000;
(i) Indebtedness with respect to deferred compensation or employee
benefit programs incurred in the ordinary course of business or in connection
with the discontinuance or sale of businesses or facilities;
(j) (A) Indebtedness under the Subordinated Note Indenture outstanding
as of the Closing Date; and (B) Permitted Subordinated Debt incurred by the
Company in respect of TI Subordinated Debt and, subject to Section 7.10, other
Permitted Subordinated Debt incurred by the Company in an aggregate principal
amount not to exceed at any time $600,000,000;
(k) [reserved];
(l) Indebtedness or Contingent Obligations incurred in connection with
the bonding requirements of Micron Construction, Inc.;
(m) Indebtedness incurred in the ordinary course of business by the
Company or any Semiconductor Operations Subsidiary in connection with the
payment of foreign currency amounts owed to the Company or any Semiconductor
Operations Subsidiary by a customer;
(n) Indebtedness consisting of obligations with respect to standby
letters of credit issued in the ordinary course of business;
(o) Contingent Obligations of the Company with respect to Indebtedness
of its Semiconductor Operations Subsidiaries to the extent such Indebtedness
is otherwise permitted under this Section 7.06, and Contingent Obligations of
the Company with respect to Indebtedness of the Company or another
Semiconductor Operations Subsidiaries to the extent such Indebtedness is
otherwise permitted under this Section 7.06;
(p) Indebtedness of the Company and its Subsidiaries relating to or
provided for in connection with the TI Acquisition;
(q) Indebtedness and Contingent Obligations other than for borrowed
money, to the extent not otherwise permitted by this Section 7.06, in an
aggregate principal amount not exceeding $50,000,000 at any time; and
(r) any extensions, renewals and refinancings of Indebtedness
described in subsections (b), (j) and (p), provided that the principal amount
--------
of such Indebtedness being extended, renewed or refinanced does not increase;
and provided further that if any such Indebtedness being extended, renewed or
-------- -------
refinanced is Permitted Subordinated Debt, the extended, renewed or refinanced
Indebtedness shall constitute Permitted Subordinated Debt satisfying all the
conditions in the definition thereof.
7.07 Transactions with Affiliates. The Company shall not, and
----------------------------
shall not suffer or permit any Semiconductor Operations Subsidiary to, enter
into any transaction with any Affiliate of the Company, except (a) with
respect to any Affiliate which is not a Semiconductor
50.
<PAGE>
Operations Subsidiary, upon fair and reasonable terms no less favorable to the
Company or such Semiconductor Operations Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Semiconductor Operations Subsidiary, and (b) with respect to
any Affiliate which is a Semiconductor Operations Subsidiary, upon fair and
reasonable terms.
7.08 Use of Proceeds. The Company shall not, and shall not suffer
---------------
or permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (a) to purchase or carry Margin Stock, (b) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (c) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (d) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
7.09 Restricted Payments. The Company shall not, and shall not
-------------------
suffer or permit any Semiconductor Operations Subsidiary to, declare or make
any dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of any class of its
capital stock (in connection with a reclassification of such stock or
otherwise), or purchase, redeem or otherwise acquire for value any shares of
its capital stock or any warrants, rights or options to acquire such shares or
any Permitted Subordinated Debt, or make any voluntary payments on Permitted
Subordinated Debt consisting of sinking fund payments, defeasances or
redemptions thereof, now or hereafter outstanding (collectively "Restricted
----------
Payments"), except that, so long as no Default or Event of Default exists or
- --------
would result therefrom:
(a) the Company may make Restricted Payments payable solely in its
capital stock, and may distribute rights under any stockholder rights plan;
(b) the Company may make Restricted Payments with the proceeds
received from the substantially concurrent issue of new shares of its capital
stock and may redeem rights distributed under any stockholder rights plan;
(c) any Semiconductor Operations Subsidiary may declare and make
Restricted Payments on account of any shares of any class of its capital stock
or redeem or otherwise acquire for value any shares of its capital stock or
any warrants, rights or options to acquire such shares, to or from the Company
or to or from another Semiconductor Operations Subsidiary; and
(d) the Company and its Semiconductor Operations Subsidiaries may make
Restricted Payments from earnings available therefor; provided, that the
--------
aggregate amount of all such Restricted Payments paid during the then current
fiscal quarter and the three fiscal quarters immediately preceding such
quarter may not at any time exceed 25% of Combined Net Income for the most
recently ended fiscal quarter and the three fiscal quarters immediately
preceding such quarter.
7.10 Permitted Subordinated Debt. The Company shall not:
---------------------------
(a) (i) issue any Permitted Subordinated Debt if the aggregate issue
price thereof (defined as the aggregate principal amount at maturity less the
aggregate original issue discount) which, when aggregated with all other
subordinated indebtedness, would exceed the amount permitted
51.
<PAGE>
under Section 7.06(j) immediately after giving effect to the issuance thereof;
or (ii) issue or refinance any Permitted Subordinated Debt if a Default or
Event of Default shall exist either immediately prior to, or after giving
effect to, the incurrence of such Permitted Subordinated Debt;
(b) except as permitted under Section 7.09, pay any principal
(including sinking fund payments) or any other amount (including scheduled
interest payments) with respect to any Permitted Subordinated Debt (including
the payment of cash in connection with such a conversion thereof), or purchase
or redeem (or offer to purchase or redeem) any Permitted Subordinated Debt, or
deposit any monies, securities or other Property with any trustee or other
Person to provide assurance that the principal or any portion thereof of any
Permitted Subordinated Debt will be paid when due or otherwise to provide for
the defeasance of any Permitted Subordinated Debt; except, subject to the
------
subordination provisions contained in any Permitted Subordinated Debt therein,
the Company may: (i) pay scheduled interest payments on Permitted Subordinated
Debt; (ii) make mandatory payments consisting of prepayments or redemptions of
Permitted Subordinated Debt in each case scheduled at the time of issuance of
Permitted Subordinated Debt; and (iii) deliver securities, cash and other
property upon the conversion of the Permitted Subordinated Debt in accordance
with the terms thereof (including the payment of cash in lieu of fractional
shares in connection with such a conversion); or
(c) amend, waive, supplement or otherwise modify any instrument
relating to any Permitted Subordinated Debt (including any modifications to
the Subordinated Note Indenture made pursuant to a supplemental indenture,
Section 301 of the Subordinated Note Indenture or otherwise) if, as a result
thereof, such Permitted Subordinated Debt would no longer satisfy all the
conditions set forth in the definition of "Permitted Subordinated Debt" or as
otherwise approved by the Majority Banks.
7.11 ERISA. The Company shall not, and shall not suffer or permit
-----
any of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could be reasonably expected to result in liability of the
Company in an aggregate amount in excess of 5% of Combined Tangible Net Worth,
or (b) engage in a transaction that could reasonably be expected to subject
the Company to liability under Section 4069 or 4212(c) of ERISA.
7.12 Business or Accounting Changes. The Company shall not, and
------------------------------
shall not suffer or permit any Semiconductor Operations Subsidiary to: (a)
engage in any material line of business substantially different from those
lines of business carried on by the Company and its Semiconductor Operations
Subsidiaries on the date hereof, together with businesses which are
appropriate extensions of or are reasonably related or incidental to the
current businesses of the Company and its Semiconductor Operations
Subsidiaries, or (b) make any significant change in accounting treatment or
reporting practices, except as required or permitted by GAAP, or change the
convention for determining the fiscal year of the Company or of any
Semiconductor Operations Subsidiary.
7.13 Minimum Cash and Equivalents. The Company shall not permit
----------------------------
the sum of its cash, cash equivalents and liquid investments as of the last
day of any fiscal quarter
52.
<PAGE>
occurring (i) prior to the TI Acquisition to be less than $100,000,000, and
(ii) on or after the closing date of the TI Acquisition to be less than
$200,000,000.
7.14 Combined Tangible Net Worth. The Company shall not permit,
---------------------------
as of the last day of any fiscal quarter, Combined Tangible Net Worth to be
less than an amount equal to $1,900,000,000, plus the sum of (a) 75% of
----
Combined Net Income (not reduced by Combined Net Loss for any period) earned
in each fiscal quarterly accounting period commencing with the fiscal quarter
ending September 3, 1998, and (b) 50% of the amount by which Combined Tangible
Net Worth increases as a result of any secondary public or private offering of
equity securities by the Company and its Semiconductor Operations Subsidiaries
(not in connection with an Acquisition or employee stock option or purchase
plans or the TI Acquisition) after the Closing Date.
7.15 Leverage Ratio. The Company shall not permit, as of the last
--------------
day of any fiscal quarter, the Leverage Ratio to exceed 1.00 to 1.00.
7.16 Maximum Indebtedness to Capitalization. The Company shall
--------------------------------------
not permit, as of the last day of any fiscal quarter, the aggregate amount of
all Indebtedness of the Company and the Semiconductor Operations Subsidiaries
on a combined basis to be an amount which exceeds 60% of Capitalization.
7.17 [Reserved]
7.18 Material Semiconductor Operations. The Company shall not
---------------------------------
permit any Material Semiconductor Operations to be conducted, individually or
in the aggregate, by any Subsidiaries which are not Semiconductor Operations
Subsidiaries. The Company shall not permit any Semiconductor Operations
Subsidiary to be a non Wholly-Owned Subsidiary.
ARTICLE VIII - EVENTS OF DEFAULT
--------------------------------
8.01 Event of Default. Any of the following shall constitute an
----------------
"Event of Default":
----------------
(a) Non-Payment. (i) The Company fails to pay, when and as required to
-----------
be paid herein, (A) any amount of principal of any Loan, or (B) any amount of
interest or commitment fee payable hereunder within five days after the same
becomes due; or (ii) any Loan Party fails to pay any other amount payable
hereunder or under any other Loan Document within 30 days after the same
becomes due; or
(b) Representation or Warranty. Any representation or warranty by any
--------------------------
Loan Party or any Semiconductor Operations Subsidiary made or deemed made
herein or in any other Loan Document is incorrect in any material respect on
or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
-----------------
term, covenant or agreement contained in Section 6.13 or in Article VII; or
53.
<PAGE>
(d) Other Defaults. (i) The Company fails to perform or observe any
--------------
term, covenant or agreement contained in any of Sections 6.01, 6.02(a),
6.02(b), 6.03 or 6.10(b), and such default shall continue unremedied for a
period of five days after the earlier of (a) the date upon which a Responsible
Officer knew or reasonably should have known of such failure, and (b) the date
upon which written notice thereof is given to the Company by the Agent or any
Bank; or (ii) any Loan Party fails to perform or observe any other term or
covenant contained in this Agreement or any other Loan Document, and such
default shall continue unremedied for a period of 20 days after the earlier of
(x) the date upon which a Responsible Officer knew or reasonably should have
known of such failure, and (y) the date upon which written notice thereof is
given to the Company by the Agent or any Bank; or
(e) Cross-Acceleration -- Indebtedness. The Company or any
----------------------------------
Semiconductor Operations Subsidiary (i) fails to make any payment in respect
of any individual item of Indebtedness having an aggregate principal amount
(including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $10,000,000, or with respect to any multiple
items of Indebtedness having an aggregate principal amount (including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than $20,000,000, when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) and such failure continues
after the applicable grace or notice period, if any, specified in the relevant
document on the date of such failure, or (ii) fails to perform or observe any
other condition or covenant, or any other event shall occur or condition
exist, under any agreement or instrument relating to any such Indebtedness
described in Section 8.01(e)(i) hereof and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document
on the date of such failure, if, in the case of clause (i) or clause (ii), the
effect of such failure, event or condition results in the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) declaring such Indebtedness to be due and payable prior to its
stated maturity; or
(f) Cross-Acceleration - Swap Obligations. There occurs under any
-------------------------------------
Swap Contract an Early Termination Date (as defined in such Swap Contract)
resulting from (i) any event of default under such Swap Contract as to which
the Company or any Semiconductor Operations Subsidiary is the Defaulting Party
(as defined in such Swap Contract), or (ii) any Termination Event (as defined
in such Swap Contract) as to which the Company or any Semiconductor Operations
Subsidiary is an Affected Party (as defined in such Swap Contract), and, in
either event, the Swap Termination Value owed by the Company or such
Semiconductor Operations Subsidiary as a result thereof is greater than
$10,000,000; or
(g) Insolvency; Voluntary Proceedings. The Company or any
---------------------------------
Semiconductor Operations Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to pay, its debts
as they become due, subject to applicable grace periods, if any, whether at
stated maturity or otherwise, (ii) voluntarily ceases to conduct its business
in the ordinary course, except as may otherwise be permitted herein, (iii)
voluntarily commences any Insolvency Proceeding with respect to itself, or
(iv) takes any action to effectuate or authorize any of the foregoing; or
54.
<PAGE>
(h) Involuntary Proceedings. (i) Any involuntary Insolvency
-----------------------
Proceeding is commenced or filed against the Company or any Semiconductor
Operations Subsidiary, or any writ, judgment, warrant of attachment, execution
or similar process, is issued or levied against a substantial part of the
Company's or any Semiconductor Operations Subsidiary's properties, and any
such proceeding or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement, filing or levy,
(ii) the Company or any Semiconductor Operations Subsidiary admits the
material allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding, or (iii) the Company or any Semiconductor Operations
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or
business; or
(i) ERISA. (i) An ERISA Event shall occur with respect to a Pension
-----
Plan or Multiemployer Plan which has resulted or could reasonably be expected
to result in liability of the Company under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of 5% of
Combined Tangible Net Worth, (ii) the aggregate amount of Unfunded Pension
Liability among all Pension Plans at any time exceeds 5% of Combined Tangible
Net Worth, or (iii) the Company or any ERISA Affiliate shall fail to pay when
due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan in an aggregate amount in excess of 5% of Combined
Tangible Net Worth; or
(j) Monetary Judgments. One or more non-interlocutory judgments, non-
------------------
interlocutory orders, decrees or arbitration awards is entered against the
Company or any Semiconductor Operations Subsidiary involving in the aggregate
a liability (to the extent not covered by independent third-party insurance as
to which the insurer does not dispute coverage) as to any single or related
series of transactions, incidents or conditions, of $20,000,000 or more, and
the same shall remain unsatisfied, unvacated and unstayed pending appeal for a
period of 30 consecutive days after the entry thereof; or
(k) Non-Monetary Judgments. Any non-monetary judgment, order or
----------------------
decree is entered against the Company or any Semiconductor Operations
Subsidiary which could reasonably be expected to have a Material Adverse
Effect, and there shall be any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(l) Change of Control. If (i) any Person or two or more Persons
-----------------
acting in concert, other than TI, J.R. Simplot, J.R. Simplot Company, Simplot
Canada Limited, a member of J.R. Simplot's immediate family and any other
Persons controlled by or under common control with any of the foregoing, shall
either acquire beneficial ownership, directly or indirectly, of, or acquire by
contract or otherwise, or enter into a contract or arrangement which upon
consummation will result in its or their acquisition of, or control over,
securities of the Company (or other securities convertible into such
securities) representing 30% or more of the combined voting power of all
securities of the Company entitled to vote in the election of directors; or
(ii) during any period of up to 12 consecutive months, commencing after the
Original Closing Date,
55.
<PAGE>
individuals who at the beginning of such 12-month period were directors of the
Company shall cease for any reason to constitute a majority of the Board of
Directors of the Company unless the persons replacing such individuals were
nominated by the Board of Directors of the Company; or
(m) Loss of Governmental Licenses. Any Governmental Authority revokes
-----------------------------
or fails to renew any material license, permit or franchise of the Company or
any Semiconductor Operations Subsidiary, or the Company or any Semiconductor
Operations Subsidiary for any reason loses any material governmental license,
permit or franchise, or the Company or any Semiconductor Operations Subsidiary
suffers the imposition of any restraining order, escrow, suspension or impound
of funds in connection with any proceeding (judicial or administrative) with
respect to any material governmental license, permit or franchise and the
effect of such revocation, failure to renew, loss or imposition could
reasonably be expected to have a Material Adverse Effect; or
(n) Permitted Subordinated Debt; Loss of Subordination. Any event
--------------------------------------------------
occurs which gives the holder or holders of any Permitted Subordinated Debt
(or an agent or trustee on its or their behalf) the right to declare such
Permitted Subordinated Debt due before the date on which it otherwise would
become due, or the right to require the issuer thereof to redeem or purchase,
or offer to redeem or purchase, all or any portion of any Permitted
Subordinated Debt; or a final unstayed judgment is entered by a court of
competent jurisdiction that any Permitted Subordinated Debt is not
subordinated in accordance with its terms to the Obligations.
(o) Guarantor Defaults. The Guarantor fails in any material respect
------------------
to perform or observe any term, covenant or agreement in the Guaranty; or the
Guaranty is for any reason partially (including with respect to future
advances) or wholly revoked or invalidated, or otherwise ceases to be in full
force and effect, or the Guarantor or any other Person contests in any manner
the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder.
(p) Collateral. (i) Any provision of any Collateral Document shall
----------
for any reason cease to be valid and binding on or enforceable against the
Company or any Subsidiary party thereto or the Company or any Subsidiary party
thereto shall so state in writing or bring an action to limit its obligations
or liabilities thereunder; (ii) any Collateral Document shall for any reason
(other than pursuant to the terms thereof) cease to create a valid security
interest in the Collateral purported to be covered thereby or such security
interests shall for any reason cease to be a perfected and first priority
security interest subject only to Permitted Liens; or (iii) any "Event of
Default" (as defined) shall occur and be continuing under any Collateral
Document.
8.02 Remedies. If any Event of Default occurs, the Agent shall, at
--------
the request of, or may, with the consent of, the Majority Banks: (a) declare
the obligation of each Bank to make Loans to be terminated, whereupon such
obligation and such Bank's Commitment shall be terminated, (b) declare the
unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company, and (c) exercise on behalf of itself and the Banks all
rights and remedies available to it and the Banks under the Loan Documents or
applicable law; provided, however, that upon the occurrence of any event
-------- -------
56.
<PAGE>
specified in subsection (g) or (h) of Section 8.01 (in the case of clause (i)
of subsection (h) upon the expiration of the 60-day period mentioned therein),
the obligation of each Bank to make Loans shall automatically terminate and
the unpaid principal amount of all outstanding Loans and all interest and
other amounts as aforesaid shall automatically become due and payable without
further act of the Agent or any Bank.
8.03 Rights Not Exclusive. The rights provided for in this
--------------------
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
8.04 Certain Financial Covenant Defaults. In the event that,
-----------------------------------
after taking into account any extraordinary charge to earnings taken or to be
taken as of the end of any fiscal period of the Company (a "Charge"), and if
------
solely by virtue of such Charge, there would exist an Event of Default due to
the breach of any of Sections 7.13, 7.14, 7.15 or 7.16 as of such fiscal
period end date, such Event of Default shall be deemed to arise upon the
earlier of (a) the date after such fiscal period end date on which the Company
announces publicly it will take, is taking or has taken such Charge (including
an announcement in the form of a statement in a report filed with the SEC) or,
if such announcement is made prior to such fiscal period end date, the date
that is such fiscal period end date, and (b) the date the Company delivers to
the Agent its audited annual or unaudited quarterly financial statements in
respect of such fiscal period reflecting such Charge as taken.
ARTICLE IX - THE AGENT
----------------------
9.01 Appointment and Authorization; "Agent". Each Bank hereby
--------------------------------------
irrevocably (subject to Section 9.09) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or any
other Loan Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
9.02 Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The
57.
<PAGE>
Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
9.03 Liability of Agent. None of the Agent-Related Persons shall
------------------
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure
of the Company or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Company or any of the Company's Subsidiaries or Affiliates.
9.04 Reliance by Agent. (a) The Agent shall be entitled to rely,
-----------------
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance
with a request or consent of the Majority Banks and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with,
each document or other matter either sent by the Agent to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.05 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless the
Agent shall have received written notice from a Bank or the Company referring
to this Agreement, describing such Default or Event of Default and stating
that such notice is a "notice of default". The Agent will notify the Banks of
its receipt of any such notice. The Agent shall take such action with respect
to such Default or Event of Default as may be
58.
<PAGE>
requested by the Majority Banks in accordance with Article VIII; provided,
--------
however, that unless and until the Agent has received any such request, the
- -------
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable or in the best interest of the Banks.
9.06 Credit Decision. Each Bank acknowledges that none of the
---------------
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
credit worthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Company
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations
as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and credit worthiness of
the Company. Except for notices, reports and other documents expressly herein
required to be furnished to the Banks by the Agent, the Agent shall not have
any duty or responsibility to provide any Bank with any credit or other
information concerning the business, prospects, operations, property,
financial and other condition or credit worthiness of the Company which may
come into the possession of any of the Agent-Related Persons.
9.07 Indemnification of Agent. Whether or not the transactions
------------------------
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro
rata, from and against any and all Indemnified Liabilities; provided, however,
-------- -------
that no Bank shall be liable for the payment to the Agent-Related Persons of
any portion of such Indemnified Liabilities resulting solely from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank shall reimburse the Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under, this Agreement, any other Loan Document,
or any document contemplated by or referred to herein, to the extent that the
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
9.08 Agent in Individual Capacity. BofA (and any successor Agent
----------------------------
pursuant to Section 9.09) and its Affiliates may make loans to, issue letters
of credit for the account of, accept deposits from, acquire equity interests
in and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Company and its Subsidiaries
59.
<PAGE>
and Affiliates as though BofA (or such successor Agent) were not the Agent
hereunder and without notice to or consent of the Banks. The Banks acknowledge
that, pursuant to such activities, BofA (and any successor Agent pursuant to
Section 9.09) or its Affiliates may receive information regarding the Company
or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA (and any successor Agent
pursuant to Section 9.09) shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not
the Agent, and the terms "Bank" and "Banks" include BofA (or such successor
Agent) in its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of the
---------------
Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If
the Agent resigns under this Agreement, the Majority Banks shall appoint from
among the Banks a successor agent for the Banks, which successor agent shall
be approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
9.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
---------------
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 before the
payment of any interest or fees in the first calendar year and before
the payment of any interest or fees in each third succeeding calendar
year during which interest or fees may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest or fees are due in the first
taxable year of such Bank and in each succeeding taxable year of such
Bank during which interest or fees may be paid under this Agreement;
and
60.
<PAGE>
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part
of the Obligations of the Company owing to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company owing
to such Bank, such Bank agrees to notify the Agent of the percentage amount
which it is no longer the beneficial owner of Obligations of the Company to
such Bank. To the extent of such percentage amount, the Agent will treat such
Bank's IRS Form 4224 as no longer valid.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into
account such reduction. However, if the forms or other documentation required
by subsection (a) of this Section are not delivered to the Agent, then the
Agent may withhold from any interest payment to such Bank not providing such
forms or other documentation an amount equivalent to the applicable
withholding tax imposed by Sections 1441 and 1442 of the Code, without
reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank because the
appropriate form was not delivered or was not properly executed, or because
such Bank failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses including Attorney Costs). The obligation of the
Banks under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
9.11 Co-Agents. None of the Banks identified on the facing page
---------
or signature pages of this Agreement as a "co-agent" shall have any right,
power, obligation, liability, responsibility or duty under this Agreement
other than those applicable to all Banks as such. Without limiting the
foregoing, none of the Banks so identified as a "co-agent" shall have or be
deemed to have any fiduciary relationship with any Bank. Each Bank
acknowledges that it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
61.
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9.12 Collateral Matters. (a) The Agent is authorized on behalf
------------------
of all the Banks to execute the Collateral Agreements and, without the
necessity of any notice to or further consent from the Banks, from time to
time to take any action with respect to any Collateral or the Collateral
Documents which may be necessary to perfect and maintain perfected the
security interest in and Liens upon the Collateral granted pursuant to the
Collateral Documents.
(b) The Banks irrevocably authorize the Agent, at its option and in
its discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment in full of all
Loans and all other Obligations known to the Agent and payable under this
Agreement or any other Loan Document; (ii) constituting property sold or to be
sold or disposed of as part of or in connection with any disposition permitted
hereunder; (iii) constituting property in which the Company or any Subsidiary
owned no interest at the time the Lien was granted or at any time thereafter;
(iv) constituting property to be leased by the Company or the Guarantor or
constituting security for Indebtedness to be incurred by the Company or the
Guarantor, in each case in a transaction permitted under this Agreement; (v)
consisting of an instrument evidencing Indebtedness or other debt instrument,
if the indebtedness evidenced thereby has been paid in full; or (vi) if
approved, authorized or ratified in writing by the Majority Banks (as
specifically contemplated in the Loan Documents) or all the Banks, as the case
may be, as provided in subsection 10.01(f). Upon request by the Agent at any
time, the Banks will confirm in writing the Agent's authority to release
particular types or items of Collateral pursuant to this subsection 9.12(b),
provided that the absence of any such confirmation for whatever reason shall
- --------
not affect the Agent's rights under this Section 9.12.
ARTICLE X - MISCELLANEOUS
-------------------------
10.01 Amendments and Waivers. No amendment or waiver of any
----------------------
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company or any applicable Subsidiary
therefrom, shall be effective unless the same shall be in writing and signed
by the Majority Banks (or by the Agent at the written request of the Majority
Banks) and the Company and acknowledged by the Agent, and then any such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no such waiver,
-------- -------
amendment, or consent shall, unless in writing and signed by all the Banks and
the Company and acknowledged by the Agent, do any of the following: (a)
increase or extend the Commitment of any Bank (or reinstate any Commitment
terminated pursuant to Section 8.02), (b) postpone or delay any date fixed by
this Agreement or any other Loan Document for any payment of principal,
interest, fees or other amounts due to the Banks (or any of them) hereunder or
under any other Loan Document, (c) reduce the principal of, or the rate of
interest specified herein on any Loan, or (subject to clause (ii) below) any
fees or other amounts payable hereunder or under any other Loan Document, (d)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans which is required for the Banks or any of them to take any
action hereunder, (e) amend this Section, Section 2.13 or Section 2.14, or any
provision herein providing for consent or other action by all Banks, or (f)
discharge the Guarantor, or release any of the Collateral, except as otherwise
may be provided herein or in the Collateral Documents or except where the
consent of the Majority Banks only is
62.
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specifically provided for; and, provided further, that (i) no amendment,
-------- -------
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Majority Banks or all the Banks, as the case may be, affect the rights
or duties of the Agent under this Agreement or any other Loan Document, (ii)
the fee letter referred to in Section 2.09 may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto;
and (iii) nothing herein shall be construed to prohibit deemed amendments from
taking effect pursuant to Sections 3.07 or 10.08(c) hereof.
10.02 Notices. (a) All notices, requests, consents, approvals,
-------
waivers and other communications shall be in writing (including, unless the
context expressly otherwise provides, by facsimile transmission, provided that
any matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.02, and (ii) shall be followed promptly by delivery of a hard copy
- -------- -----
original thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 10.02; or, as directed to the Company
-------- -----
or the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon receipt by the addressee, or if
delivered, upon delivery; except that notices pursuant to Article II or IX to
the Agent shall not be effective until actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Company to give such notice and the Agent and the Banks shall not have any
liability to the Company or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Loans shall not be affected
in any way or to any extent by any failure by the Agent and the Banks to
receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
10.03 No Waiver; Cumulative Remedies. No failure to exercise and
------------------------------
no delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) and
the Lead Arranger for all reasonable costs and expenses incurred by them in
connection with the development, preparation, delivery,
63.
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administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement,
any Loan Document and any other documents prepared in connection herewith or
therewith, the consummation of the transactions contemplated hereby and
thereby, and in connection with any borrowing base audit of the Company by the
Agent, including Attorney Costs incurred by them with respect thereto, and
including all title, appraisal (including the allocated cost of internal
appraisal services), survey, audit, environmental inspection, consulting,
search, recording, filing and similar costs, fees and expenses incurred or
sustained by the Agent or any of its Affiliates in connection with the
Collateral Documents or the Collateral; and
(b) pay or reimburse the Agent, the Lead Arranger and each Bank for
all costs and expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans (including
in connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding). The
agreements in this Section shall survive the payment of all other Obligations.
10.05 Company Indemnification. Whether or not the transactions
-----------------------
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each,
an "Indemnified Person") harmless from and against any and all liabilities,
------------------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted
against any such Person in favor of any third-party in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding
(including any Insolvency Proceeding or appellate proceeding) related to or
arising out of this Agreement or the Loans or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the Company shall
----------------------- --------
have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
10.06 Payments Set Aside. To the extent that the Company makes a
------------------
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or
64.
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such set-off had not occurred, and (b) each Bank severally agrees to pay to
the Agent upon demand its pro rata share of any amount so recovered from or
repaid by the Agent.
10.07 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
10.08 Assignments, Participations, etc. (a) Any Bank may, with
---------------------------------
the written consent of the Company (at all times other than during the
existence of an Event of Default) and the Agent, which consents shall not
unreasonably be withheld, at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the Company or the
Agent shall be required in connection with any assignment and delegation by a
Bank to an Eligible Assignee that is an Affiliate of such Bank or to another
Bank party hereto) (each an "Assignee") all, or any ratable part of all, of
--------
the Loans, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $5,000,000, or such lesser amount which
represents a Bank's entire Commitment (provided that no minimum amount
--------
limitation shall apply in connection with any assignment and delegation by a
Bank to an Eligible Assignee that is an Affiliate of such Bank or to another
Bank party hereto); provided, however, that the Company and the Agent may
-------- -------
continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
substantially in the form of Exhibit N ("Assignment and Acceptance"), together
--------- -------------------------
with any Note or Notes subject to such assignment, and (iii) the assignor Bank
or Assignee has paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor Bank
that the Agent and the Company have received (and provided their consent, if
required, with respect to) an executed Assignment and Acceptance and payment
of the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents; provided, however, that the assignor
-------- -------
Bank shall not relinquish its rights under Article III or under Sections 10.04
and 10.05 to the extent such rights relate to the time prior to the effective
date of the Assignment and Acceptance.
(c) Within five Business Days after the Company's receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and
payment of the processing fee, (and provided that the Company consents to such
assignment in accordance with Section 10.08(a)), the Company shall execute and
deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and
Commitment and, if the assignor Bank has retained a portion of its Loans and
its Commitment, replacement Notes in the principal amount of the Loans
retained by the assignor Bank (such Notes to be in exchange for, but not in
payment of, the Notes held by such
65.
<PAGE>
Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
---------
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
-----------
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan
Documents; provided, however, that (i) the originating Bank's obligations
-------- -------
under this Agreement shall remain unchanged, (ii) the originating Bank shall
remain solely responsible for the performance of such obligations, (iii) the
Company and the Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no
Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the
extent such amendment, consent or waiver would require unanimous consent of
the Banks as described in the first proviso to Section 10.01. In the case of
----- -------
any such participation, the Participant shall be entitled to the benefit of
Sections 3.01, 3.03 and 10.05 as though it were also a Bank hereunder
(provided, however, that no Participant shall be entitled to greater benefits
-------- -------
under any such Section than the Bank which sold such participation would have
been entitled to), and if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time, without the consent of any Person, create a security interest
in, or pledge, all or any portion of its rights under and interest in this
Agreement and any Note held by it in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
(S)203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
10.09 Confidentiality. Each Bank agrees to take and to cause its
---------------
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all confidential information provided to it by
the Company or any Subsidiary, or by the Agent on the Company's or such
Subsidiary's behalf, under this Agreement or any other Loan Document, and
neither it nor any of its Affiliates shall use any such information other than
in connection with or in enforcement of this Agreement and the other Loan
Documents or in connection with other business now or hereafter existing or
contemplated with the Company or any Subsidiary; except to the extent such
information (i) was or becomes generally available to the public other than as
a result of disclosure by the Bank, or (ii) was or becomes available on a non-
confidential basis from a source other than the Company, provided that such
source is not bound by a confidentiality agreement with the Company known to
the Bank; provided, however, that any Bank may disclose such information (A)
-------- -------
at the request or pursuant to any requirement of any Governmental Authority to
which the Bank is subject or in connection with an examination of
66.
<PAGE>
such Bank by any such authority; (B) pursuant to subpoena or other court
process, provided, that the Bank shall use its reasonable, good faith efforts
to provide prior written notice (unless prohibited from doing so by any
applicable Requirement of Law) to the Company to allow the Company to seek a
protective order; (C) when required to do so in accordance with the provisions
of any applicable Requirement of Law; (D) to the extent reasonably required in
connection with any litigation or proceeding (except as set forth in clause
(E)) to which the Agent, any Bank or their respective Affiliates may be party,
provided, that the Bank shall use its reasonable, good faith efforts to
provide prior written notice (unless prohibited from doing so by any
applicable Requirement of Law) to the Company to allow the Company to seek a
protective order; (E) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Loan Document; (F) to such
Bank's independent auditors and other professional advisors, provided such
persons have a need to know such information and agree to be bound by the
terms of this Section 10.09 as so they were a party hereto; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent required
of the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party or is deemed
party with such Bank or such Affiliate; and (I) to its Affiliates. Upon the
execution hereof by all the parties, the confidentiality undertaking set forth
in this Section shall replace and supersede the terms of any confidentiality
agreement between the Company and any of the Agent or the Banks executed prior
to the Original Closing Date and shall survive the termination of this
Agreement for a period of 12 months.
10.10 Set-off. In addition to any rights and remedies of the Banks
-------
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, upon
obtaining the prior written consent of the Agent, and without prior notice to
the Company, any such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the
account of the Company against any and all Obligations owing to such Bank, now
or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made
by such Bank; provided, however, that the failure to give such notice shall
-------- -------
not affect the validity of such set-off and application.
10.11 Notification of Addresses, Lending Offices, Etc. Each Bank
-----------------------------------------------
shall notify the Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably
request.
10.12 Counterparts. This Agreement may be executed in any number
------------
of separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this Agreement and any other Loan Document
67.
<PAGE>
may be delivered by any party hereto or thereto either in the form of an
executed original or an executed original sent by facsimile transmission to be
followed promptly by mailing of a hard copy original, and that receipt by the
Agent of a facsimile transmitted document purportedly bearing the signature of
a Bank or the Company shall bind such Bank or the Company, respectively, with
the same force and effect as the delivery of a hard copy original. Any failure
by the Agent to receive the hard copy executed original of such document shall
not diminish the binding effect of receipt of the facsimile transmitted
executed original of such document of the party whose hard copy page was not
received by the Agent.
10.13 Severability. The illegality or unenforceability of any
------------
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
thereunder.
10.14 No Third Parties Benefited. This Agreement is made and
--------------------------
entered into for the sole protection and legal benefit of the Company, the
Banks, the Agent, the Indemnified Persons, and the Agent-Related Persons, and
their permitted successors and assigns, and no other Person shall be a direct
or indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other Loan
Documents.
10.15 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE
------------------------------
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE
AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT
AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
--------------------
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
10.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT
--------------------
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY
68.
<PAGE>
OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS
AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.17 Entire Agreement. This Agreement, together with the other
----------------
Loan Documents, embodies the entire agreement and understanding among the
Company, the Banks and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
10.18 Amendment and Restatement of Existing Facility. From and
----------------------------------------------
after the Closing Date, this Agreement amends and restates the Existing
Facility.
69.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in San Francisco, California by their proper and
duly authorized officers as of the day and year first above written.
MICRON TECHNOLOGY, INC.
By:
---------------------------------------
Name: Norman Schlachter
Title: Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:
---------------------------------------
Name: Dietmar Schiel
Title: Vice President
ABN AMRO BANK N.V., as Co-Agent and a Bank
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
By:
---------------------------------------
Name: Michael J. McCutchin
Title: Managing Director
<PAGE>
THE BANK OF NOVA SCOTIA, as Co-Agent
and a Bank
By:
---------------------------------------
Name:
Title:
FLEET NATIONAL BANK, as Co-Agent and a Bank
By:
---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and a Bank
By:
---------------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION, as Co-Agent
and a Bank
By:
---------------------------------------
Name:
Title:
ROYAL BANK OF CANADA
By:
---------------------------------------
Name:
Title:
<PAGE>
BANQUE NATIONALE DE PARIS
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------------
Name:
Title:
MELLON BANK, N.A.
By:
---------------------------------------
Name:
Title:
THE DAI-ICHI KANGYO BANK, LIMITED,
LOS ANGELES AGENCY
By:
---------------------------------------
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY
By:
---------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
SAN FRANCISCO AGENCY
By:
---------------------------------------
Name:
Title:
THE SUMITOMO BANK LIMITED
By:
---------------------------------------
Name:
Title:
FIRST SECURITY BANK, N.A.
By:
---------------------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By:
---------------------------------------
Name:
Title:
<PAGE>
THE SAKURA BANK, LIMITED
By:
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
---------------------------------------
Name:
Title:
PARIBAS
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
<PAGE>
ANNEX I
-------
PRICING GRID
------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
INDEBTEDNESS TO CAPITALIZATION LESS THAN 40% INDEBTEDNESS TO
CAPITALIZATION GREATER THAN
OR EQUAL TO 40%
LEVEL EBITDA LIBOR Base Rate Commitment LIBOR Base Rate Commitment
Margin Margin Fee Margin Margin Fee
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1 Greater than
$2.0 BN 0.875% 0.000% 0.3500% 1.125% 0.1250% 0.3500%
2 $1.6-$2.0 BN 1.000% 0.000% 0.3500% 1.250% 0.2500% 0.3750%
3 $1.2-$1.6 BN 1.250% 0.250% 0.3750% 1.500% 0.5000% 0.4000%
4 $0.8-$1.2 BN 1.500% 0.500% 0.4000% 1.750% 0.7500% 0.5000%
5 $0.4-$0.8 BN 1.625% 0.625% 0.4375% 1.875% 0.8750% 0.5000%
6 Less than $0.4 BN 1.750% 0.750% 0.5000% 2.000% 1.0000% 0.5000%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
EBITDA and Indebtedness to Capitalization used to compute the LIBOR Margin,
the Base Rate Margin and the Commitment Fee set forth above shall be EBITDA
and Indebtedness to Capitalization as set forth in the Compliance Certificate
most recently delivered by the Company to the Agent pursuant to Section
6.02(a) of the Credit Agreement. EBITDA shall be determined (i) as of 9/3/98
by multiplying EBITDA for the fiscal quarter ending 9/3/98 by four; (ii) as
of 12/3/98 by multiplying the sum of EBITDA for the fiscal quarters ending
9/3/98 and 12/3/98 by two; (iii) as of 3/4/99 by dividing the sum of EBITDA
for the fiscal quarters ending 9/3/98, 12/3/98 and 3/4/99 by three, and then
multiplying such amount by four; and (iv) and thereafter for the four
consecutive fiscal quarters ending on the date of the financial statements
referred to in the Compliance Certificate.
The Applicable Fee Percentage shall be adjusted automatically as to the
commitment fee then accruing effective as of the 100th day after the end of
each fiscal year and the 60th day after the end of the first three fiscal
quarters of each fiscal year based on EBITDA and Indebtedness to
Capitalization set forth in the most recently delivered Compliance
Certificate; provided, however, that for the period from the Closing Date
-------- -------
through the 100th day after the end of the Company's fiscal year ending
9/3/98, the Applicable Fee Percentage shall be 0.5000%.
The Applicable Margin shall be adjusted automatically as to all Loans then
outstanding effective as of the 100th day after the end of each fiscal year
and the 60th day after the end of the first three fiscal quarters of each
fiscal year based on EBITDA and Indebtedness to Capitalization as set forth
in the most recently delivered Compliance Certificate; provided, however,
-------- -------
that for the period from the Closing Date through the 100th day after the end
of the Company's fiscal year ending 9/3/98, the Applicable Margin shall be
1.750% (LIBOR Margin) and 0.750% (Base Rate Margin).
If the Company shall fail to deliver a Compliance Certificate within the
number of days after the end of any fiscal quarter or fiscal year as required
pursuant to Section 6.02(a) (without giving effect to any grace period), the
Applicable Fee Percentage and the Applicable Margin from the first day after
the date on which such Compliance Certificate was required to be delivered to
the
PRICING GRID
1.
<PAGE>
Agent to the day the Company delivers to the Agent a Compliance Certificate
shall conclusively equal the highest Applicable Fee Percentage and Applicable
Margin set forth above.
PRICING GRID
2.
<PAGE>
SCHEDULE 2.01
-------------
COMMITMENTS AND PRO RATA SHARES
-------------------------------
<TABLE>
<CAPTION> Pro Rata
Bank Commitment Share
---- ------------ --------
<S> <C> <C>
Bank of America National
Trust and Savings Association $ 35,200,000 8.8%
ABN AMRO Bank, N.V. 28,000,000 7.0
The Bank of Nova Scotia 28,000,000 7.0
Fleet National Bank 28,000,000 7.0
PNC Bank, National Association 28,000,000 7.0
U.S. Bank National Association 28,000,000 7.0
Royal Bank of Canada 24,000,000 6.0
Banque Nationale de Paris 20,000,000 5.0
KeyBank National Association 20,000,000 5.0
Mellon Bank, N.A. 20,000,000 5.0
The Dai-Ichi Kangyo Bank, Limited,
Los Angeles Agency 20,000,000 5.0
The Fuji Bank, Limited,
Los Angeles Agency 20,000,000 5.0
The Industrial Bank of Japan, Limited,
San Francisco Agency 20,000,000 5.0
The Sumitomo Bank Limited 20,000,000 5.0
First Security Bank, N.A. 12,800,000 3.2
The Long-Term Credit Bank of Japan, Ltd.,
Los Angeles Agency 12,800,000 3.2
The Sakura Bank, Limited 12,800,000 3.2
The Bank of New York 11,200,000 2.8
Paribas 11,200,000 2.8
============ =====
TOTAL $400,000,000 100.0
</TABLE>
COMMITMENTS AND PRO RATA SHARES
1.
<PAGE>
SCHEDULE 4.01
-------------
FILING OFFICES
--------------
1. FILING OFFICES AS TO COLLATERAL PROVIDED PURSUANT TO THE SECURITY
AGREEMENTS.
a) Secretary of State of the State of Idaho (Company and Guarantor)
b) Office of the County Recorder of Ada County, Idaho (Company and
Guarantor)
c) Division of Corporations and Commercial Code, Utah Department of
Commerce (Company and Guarantor)
d) Office of the County Recorder of Utah County, Utah (Company and
Guarantor)
e) Secretary of State of the State of Texas (Company and Guarantor)
f) Secretary of State of California (Company and Guarantor)
g) Secretary of State of North Carolina, UCC Division (Company and
Guarantor)
h) Office of the County Recorder of Durham County, North Carolina (Company
and Guarantor)
i) Secretary of State of the State of South Dakota, UCC Division Central
Filing (Company and Guarantor)
j) State Corporation Commission of the State of Virginia (Company and
Guarantor)
k) Office of the County Recorder of Richmond County, Virginia (Company and
Guarantor)
2. FILING OFFICES AS TO COLLATERAL PROVIDED PURSUANT TO THE DEEDS OF TRUST
a) Office of the County Recorder of Ada County, Idaho (Company)
b) Office of the County Recorder of Utah County, Utah (Company)
FILING OFFICES
1.
<PAGE>
SCHEDULE 10.02
--------------
OFFSHORE AND DOMESTIC LENDING OFFICES,
--------------------------------------
ADDRESSES FOR NOTICES
---------------------
MICRON TECHNOLOGY, INC.
Notices:
Micron Technology, Inc.
8000 S. Federal Way
Mail Stop 157
Boise, Idaho 83716-9632
Attention: Norman L. Schlachter
Treasurer
Telephone: (208) 368-3766
Facsimile: (208) 368-4095
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS AGENT
Address for Notices of Borrowing and
Notices of Conversion/Continuation:
Bank of America National Trust
and Savings Association
Agency Administrative Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Blanca Vinje
Sr. Associate Agency Officer
Telephone: (415) 675-8432
Facsimile: (415) 675-8500
LENDING OFFICES AND ADDRESSES
1.
<PAGE>
Notices (other than Notice of Borrowing
and Notices of Conversion/Continuation):
Bank of America National Trust
and Savings Association
Agency Management #10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
Vice President
Telephone: (415) 436-3420
Facsimile: (415) 436-3425
Payment Office:
Bank of America National Trust
and Savings Association
ABA No. 121-000-358
1850 Gateway Boulevard, Fifth Floor
Concord, California 94520
Account No.: 12332-15032
Reference: Micron Technology, Inc.
Attention: Agency Administrative Services #5596
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
Notices (other than Notice of Borrowing
and Notices of Conversion/Continuation):
Bank of America National Trust
and Savings Association
Credit Products-High Technology-SF #3697
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Michael J. McCutchin
Managing Director
Telephone: (415) 622-4589
Facsimile: (415) 622-2514
LENDING OFFICES AND ADDRESSES
2.
<PAGE>
Domestic and Offshore Lending Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Reference: Micron Technology, Inc.
Attention: Marlene Clarine
Telephone: (925) 675-7335
Facsimile: (925) 603-7254
PNC BANK, NATIONAL ASSOCIATION
Notices:
PNC Bank, National Association
One PNC Plaza
249 5th Avenue, Mail Stop: P-1-P0PP-02-4
Pittsburgh, PA 15222
Attention: Philip Liebscher
Vice President
Telephone: (412) 762-3202
Facsimile: (412) 762-6484
Domestic and Offshore Lending Office:
PNC Bank, National Association
One PNC Plaza
249 5th Avenue, Mail Stop: P-1-P0PP-02-4
Pittsburgh, PA 15222
Attention: Sally Hunter
Telephone: (412) 768-3807
Facsimile: (412) 768-4586
LENDING OFFICES AND ADDRESSES
3.
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
Notices:
U.S. Bank National Association
111 S.W. Fifth Avenue
Suite 400
Portland, OR 97204
Attention: Ross Beaton
Treasury Director
Telephone: (503) 275-5172
Facsimile: (503) 275-5795
Domestic and Offshore Lending Office:
U.S. Bank National Association
Oregon Corporate Loan Servicing
555 S.W. Oak
Suite PL7
Portland, OR 97204
Attention: Lan Tran
Telephone: (503) 275-3337
Facsimile: (503) 275-4600
ABN AMRO BANK, N.V.
Notices:
ABN AMRO Bank, N.V.
135 S. LaSalle Street
Suite 2805
Chicago, IL 60603
Attention: Credit Administration
Telephone: (312) 904-8835
Facsimile: (312) 904-8840
LENDING OFFICES AND ADDRESSES
4.
<PAGE>
With a copy to:
ABN AMRO Bank, N.V.
600 University Street, Suite 2323
One Union Square
Suite 2323
Seattle, WA 98101
Attention: Lee-Lee Miao
Vice President
Telephone: (206) 654-0362
Facsimile: (206) 682-5641
Domestic and Offshore Lending Office:
ABN AMRO Bank, N.V.
135 S. LaSalle Street
Suite 625
Chicago, IL 60603
Attention: Loan Administration
Telephone: (312) 904-8855
Facsimile: (312) 904-1287
THE BANK OF NOVA SCOTIA
Notices:
The Bank of Nova Scotia
580 California Street
Suite 2100
San Francisco, CA 94104
Attention: Maarten Van Otterloo
Senior Relationship Manager
Telephone: (415) 616-4161
Facsimile: (415) 397-0791
Domestic and Offshore Lending Office:
The Bank of Nova Scotia
580 California Street
Suite 2100
San Francisco, CA 94104
Attention: Maarten Van Otterloo
Senior Relationship Manager
Telephone: (415) 616-4161
Facsimile: (415) 397-0791
LENDING OFFICES AND ADDRESSES
5.
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
SAN FRANCISCO AGENCY
Notices:
The Industrial Bank of Japan, Limited,
San Francisco Agency
555 California Street
Suite 3110
San Francisco, CA 94104
Attention: Greg Stewart
Vice President
Telephone: (415) 693-1824
Facsimile: (415) 982-1917
Domestic and Offshore Lending Office:
The Industrial Bank of Japan, Limited,
San Francisco Agency
555 California Street
Suite 3110
San Francisco, CA 94104
Attention: Jeannette O'Donnell
Telephone: (415) 693-1831
Facsimile: (415) 982-1917
KEYBANK NATIONAL ASSOCIATION
Notices:
KeyBank National Association
700 Fifth Avenue
48th Floor
Seattle, WA 98104
Attention: John H. Brock
Senior Vice President and Manager
Telephone: (206) 684-6031
Facsimile: (206) 684-6035
Domestic and Offshore Lending Office:
KeyBank National Association
700 Fifth Avenue
48th Floor
Seattle, WA 98104
LENDING OFFICES AND ADDRESSES
6.
<PAGE>
ROYAL BANK OF CANADA
Notices:
Royal Bank of Canada
600 Wilshire Boulevard
Suite 800
Los Angeles, CA 90017
Attention: Michael Cole
Manager
Telephone: (213) 955-5328
Facsimile: (213) 955-5350
Domestic and Offshore Lending Office:
Royal Bank of Canada
600 Wilshire Boulevard
Suite 800
Los Angeles, CA 90017
BANQUE NATIONALE DE PARIS
Notices:
Banque Nationale de Paris
180 Montgomery Street
3rd Floor
San Francisco, CA 94104
Attention: Michael McCorriston
Vice President
Telephone: (415) 956-0707
Facsimile: (415) 296-8954
Domestic and Offshore Lending Office:
Banque Nationale de Paris, San Francisco Branch
180 Montgomery Street
San Francisco, CA 94104
Telephone: (415) 956-0707
Facsimile: (415) 989-9041
LENDING OFFICES AND ADDRESSES
7.
<PAGE>
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY
Notices:
The Fuji Bank, Limited,
Los Angeles Agency
333 South Grand Avenue
25th Floor, Suite 3900
Los Angeles, CA 90071
Attention: Steve Brennan
Vice President and Manager
Telephone: (213) 253-4174
Facsimile: (213) 253-4198
Domestic and Offshore Lending Office:
The Fuji Bank, Limited,
Los Angeles Agency
333 South Grand Avenue
25th Floor, Suite 3900
Los Angeles, CA 90071
Attention: Vivian Chang
Telephone: (213) 253-4129
Facsimile: (213) 253-4198
THE BANK OF NEW YORK
Notices:
The Bank of New York
10990 Wilshire Boulevard
Suite 1125
Los Angeles, CA 90024
Attention: Robert Louk
Vice President
Telephone: (310) 996-8663
Facsimile: (310) 996-8667
LENDING OFFICES AND ADDRESSES
8.
<PAGE>
Domestic and Offshore Lending Office:
The Bank of New York
One Wall Street
22nd Floor
New York, NY 10286
Attention: Sandra Morgan
Telephone: (212) 635-6743
Facsimile: (212) 635-6877
THE DAI-ICHI KANGYO BANK, LIMITED,
LOS ANGELES AGENCY
Notices:
The Dai-Ichi Kangyo Bank, Limited,
San Francisco Agency
101 California Street
Suite 4000
San Francisco, CA 94111
Attention: Virgilio N. Madrid
Vice President
Telephone: (415) 393-1811
Facsimile: (415) 788-7868
Domestic and Offshore Lending Office:
The Dai-Ichi Kangyo Bank, Limited,
Los Angeles Agency
Credit Administration
555 W. Fifth Street
Los Angeles, CA 90013
Attention: Matilda Chiriboga
Telephone: (213) 243-4713
Facsimile: (213) 243-4896
LENDING OFFICES AND ADDRESSES
9.
<PAGE>
FIRST SECURITY BANK, N.A.
Notices:
First Security Bank, N.A.
3276 Elder Street
Boise, ID 83705
Attention: Brian W. Cook
Vice President
Telephone: (208) 393-2162
Facsimile: (208) 393-2472
Domestic and Offshore Lending Office:
First Security Bank, N.A.
3276 Elder Street
Boise, ID 83705
Attention: Rhonda Miller
Telephone: (208) 393-4117
Facsimile: (208) 393-4540
FLEET NATIONAL BANK
Notices:
Fleet National Bank
One Federal Street
Boston, MA 02211
Attention: Frank Benesh
Vice President
Telephone: (617) 346-0617
Facsimile: (617) 346-0568
Domestic and Offshore Lending Office:
Fleet National Bank
One Federal Street
Boston, MA 02211
Attention: Pauline Kowalczyk
Telephone: (617) 346-0622
Facsimile: (617) 346-0595
LENDING OFFICES AND ADDRESSES
10.
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY
Notices:
The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency
350 South Grand Avenue, Suite 3000
Los Angeles, CA 90071
Attention: Tamotsu Ukai
Vice President
Telephone: (213) 689-63345
Facsimile: (213) 626-1067
Domestic and Offshore Lending Office:
The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency
350 South Grand Avenue, Suite 3000
Los Angeles, CA 90071
Attention: Cindy Ly
Telephone: (213) 689-6247
Facsimile: (213) 626-1067
MELLON BANK, N.A.
Notices:
Mellon Bank, N.A.
Info Tech Group Rep Office
435 Tasso Street, Suite 100
Palo Alto, CA 93401
Attention: Edwin Wiest
First Vice President
Telephone: (415) 326-3005
Facsimile: (415) 326-2382
LENDING OFFICES AND ADDRESSES
11.
<PAGE>
Domestic and Offshore Lending Office:
Mellon Bank, N.A.
3 Mellon Bank Center
Room 2304
Pittsburgh, PA 15259
Attention: D. Carr
Telephone: (412) 234-1872
Facsimile: (412) 234-5049
THE SUMITOMO BANK LIMITED
Notices:
The Sumitomo Bank Limited
1201 Third Avenue
Suite 5320
Seattle, WA 98101
Attention: Bob Granfelt
Vice President
Telephone: (206) 223-4050
Facsimile: (206) 623-8551
Domestic and Offshore Lending Office:
The Sumitomo Bank Limited
777 S. Figueroa #2600
Los Angeles, CA 90017
Attention: Miriam Delgado
Vice President
Telephone: (213) 955-0867
Facsimile: (213) 623-6832
THE SAKURA BANK, LIMITED
Notices:
The Sakura Bank, Limited
U.S. Corporate Finance Department
Los Angeles Agency
515 South Figueroa St., Suite 400
Los Angeles, CA 90071-3301
Attention: Jonathan R. Hainer
Telephone: (213) 489-6479
Facsimile: (213) 623-8692
LENDING OFFICES AND ADDRESSES
12.
<PAGE>
Domestic and Offshore Lending Office:
The Sakura Bank, Limited
New York Branch
Loan Administration Dept.
277 Park Avenue, 45th Floor
New York, NY 10172
Attention: Patricia L. Walsh
Telephone: (212) 756-6788
Facsimile: (212) 756-6781
PARIBAS
Notices:
Paribas
101 California Street, Suite 3150
San Francisco, CA 94111
Attention: Jonathan Leone
Vice President
Telephone: (415) 398-6811
Facsimile: (415) 398-4240
Domestic and Offshore Lending Office:
Paribas
2029 Century Park East, Suite 3900
Los Angeles, CA 90067
Attention: Shirley Williams
Telephone: (310) 551-7360
Facsimile: (310) 553-1504 OR (310) 556-8759
LENDING OFFICES AND ADDRESSES
13.
<PAGE>
EXHIBIT A
---------
FORM OF NOTICE OF BORROWING
---------------------------
Date: _____________
To: Bank of America National Trust and Savings Association, as Agent for the
Banks party to the Second Amended and Restated Revolving Credit Agreement
dated as of September 1, 1998 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement") among Micron Technology, Inc.,
----------------
the several financial institutions from time to time party to the Credit
Agreement (the "Banks"), and Bank of America National Trust and Savings
-----
Association, as Agent
Ladies and Gentlemen:
The undersigned, Micron Technology, Inc. (the "Company"), refers to the
-------
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of
the Credit Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is ______________.
2. The aggregate amount of the proposed Borrowing is $_______________.
3. The Borrowing is to be comprised of $___________ of [Base Rate]
[Offshore Rate] Loans.
[4. The duration of the Interest Period for the Offshore Rate Loans
included in the Borrowing shall be _____ months.]
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on
and as of such date, except (i) to the extent such representations and
warranties relate to an earlier date, in which case they were true and
correct as of such earlier date, (ii) that this subparagraph (a) shall be
deemed instead to refer to the last day of the most recent quarter and year
for which financial statements have then been delivered in respect of the
representations and warranties made in subsections 5.11(a) and 5.11(b),
and (iii) the representations and warranties contained in Sections 5.05 and
5.14 shall be true and correct as of the Closing Date and as of the end of
each fiscal quarter;
NOTICE OF BORROWING
A-1.
<PAGE>
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing; and
(c) the proposed Borrowing will not cause the aggregate principal
amount of all outstanding Loans to exceed the combined Commitments of the
Banks.
MICRON TECHNOLOGY, INC.
By:______________________________
Title:
NOTICE OF BORROWING
A-2.
<PAGE>
EXHIBIT B
---------
FORM OF NOTICE OF CONVERSION/CONTINUATION
-----------------------------------------
Date: _____________
To: Bank of America National Trust and Savings Association, as Agent for the
Banks party to the Second Amended and Restated Revolving Credit Agreement
dated as of September 1, 1998 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement") among Micron Technology, Inc.,
----------------
the several financial institutions from time to time party to the Credit
Agreement (the "Banks"), and Bank of America National Trust and Savings
-----
Association, as Agent
Ladies and Gentlemen:
The undersigned, Micron Technology, Inc. (the "Company"), refers to
-------
the Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of
the Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein, that:
1. The Conversion/Continuation Date is ______________.
2. The aggregate amount of the Loans to be [converted] [continued]
is $_______________.
3. The Loans are to be [converted into] [continued as] [Offshore
Rate] [Base Rate] Loans.
[4. The duration of the Interest Period for the Offshore Rate Loans
included in the [conversion] [continuation] shall be ___ months.]
MICRON TECHNOLOGY, INC.
By:________________________________
Title:
FORM OF NOTICE OF CONVERSION/CONTINUATION
B-1.
<PAGE>
EXHIBIT C
---------
FORM OF MASTER PROMISSORY NOTE
------------------------------
$____________________ _________, 1998
FOR VALUE RECEIVED, the undersigned Micron Technology, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to the order of
-------
______________________ (the "Bank"), at the Agent's Payment Office, the
----
aggregate unpaid principal amount of all Loans made by the Bank to the Company
from time to time pursuant to the Credit Agreement described below at the times
and in the amounts specified in the Credit Agreement. The Company also promises
to pay interest on such unpaid principal amount at the times and at the rates
specified in the Credit Agreement.
The Bank is hereby authorized to endorse the date, amount, and
maturity of each Loan made by it and the amount and date of each payment of
principal made by the Company with respect thereto on the schedule annexed to
this Note and on continuations of such schedule, both schedule and continuations
being hereby made a part of this Note; provided, that any failure to endorse
such information on such schedule or continuation thereof shall not in any
manner affect any obligation of the Company under the Credit Agreement and this
Note.
This Master Promissory Note is one of the Notes referred to in, and is
issued under, the Second Amended and Restated Revolving Credit Agreement dated
as of September 1, 1998 (as extended, renewed, amended or restated from time to
time, the "Credit Agreement") among the Company, the several financial
----------------
institutions from time to time party to the Credit Agreement (the "Banks"), and
-----
Bank of America National Trust and Savings Association, as Agent, and amends and
restates any prior promissory noted delivered to the holder under the Existing
Facility.
The holder of this Master Promissory Note shall be entitled to the
benefits provided for in the Credit Agreement. Reference is made to the Credit
Agreement for the provisions on (i) the obligation of the Bank to advance funds
under this Master Promissory Note, (ii) the manner in which interest is computed
and accrued, (iii) the Company's rights, if any, to prepay all or part of the
Loans, (iv) the events upon which the maturity of this Master Promissory Note
may be accelerated or shall be automatically accelerated, as the case may be,
(v) Attorneys Costs and other fees and expenses incurred in any enforcement of
this Master Promissory Note, (vi) the Company's right to cure certain Events of
Default, and (vii) the Bank's rights to assign all or part of this Master
Promissory Note to Eligible Assignees and/or to sell participating interests in
any Loans, as more fully set forth in the Credit Agreement. Terms defined in
the Credit Agreement shall have the same meanings herein.
This Master Promissory Note shall be governed by and construed and
enforced in accordance with the laws of the State of California.
FORM OF PROMISSORY NOTE
C-1.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Master Promissory
Note to be executed by its officer thereunto duly authorized.
MICRON TECHNOLOGY, INC.
By:________________________________
Title:
FORM OF PROMISSORY NOTE
C-2.
<PAGE>
SCHEDULE
<TABLE>
<CAPTION>
Date Loan Amount of Loan Maturity Date Principal Date Principal
Disbursed Payment Paid
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
======================================================================================================
</TABLE>
FORM OF PROMISSORY NOTE
C-3.
<PAGE>
EXHIBIT D
---------
FORM OF COMPLIANCE CERTIFICATE
------------------------------
Micron Technology, Inc.
Financial Statement Date: ______________
Reference is made to that certain Second Amended and Restated Revolving
Credit Agreement dated as of September 1, 1998 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among Micron Technology,
----------------
Inc. (the "Company"), the several financial institutions from time to time party
-------
to this Credit Agreement (the "Banks"), and Bank of America National Trust and
-----
Savings Association, as agent for the Banks (in such capacity, the "Agent").
-----
Unless otherwise defined herein, capitalized terms used herein have the
respective meanings assigned to them in the Credit Agreement.
The undersigned Responsible Officer of the Company hereby certifies as of
the date hereof that he/she is the [Chief Financial Officer] [Treasurer] of the
Company, and that, as such, he/she is authorized to execute and deliver this
Certificate to the Banks and the Agent on the behalf of the Company and its
consolidated Subsidiaries, and that:
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by Section 6.01(a) of the Credit Agreement.]
1. Attached as Schedule 1 hereto are true and correct copies of the audited
----------
consolidated balance sheet of the Company and its Subsidiaries as at the end of
the fiscal year ended _______________, and the related consolidated statements
of operations and cash flows for the year then ended, setting forth in each case
in comparative form the figures for the previous fiscal year, together with the
related Semiconductor Operations Supplemental Schedules, and accompanied by the
report of the Independent Auditor, whose opinion (a) states (i) that such
consolidated financial statements present fairly in all material respects the
financial position of the Company and its Subsidiaries on a consolidated basis
as of the date thereof and the results of operations for the periods indicated
in conformity with GAAP, except as otherwise indicated therein, and (ii) such
related Semiconductor Operations Supplemental Schedules were prepared on a basis
consistent with the basic consolidated financial statements of the Company and
its Subsidiaries except as disclosed in the notes thereto and the information
therein is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole except as specifically noted
therein. Such Semiconductor Operations Supplemental Schedules present fairly, in
all material respects, the net assets and operations and cash flows of the
Company and its Semiconductor Operations Subsidiaries (on a combined basis) for
the periods covered thereby, on the basis specified and described in the notes
to such schedules.
FORM OF COMPLIANCE CERTIFICATE
D-1.
<PAGE>
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by Section 6.01(b) of the Credit Agreement.]
1. Attached as Schedule 1 hereto are true and correct copies of the
----------
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of the fiscal quarter ended ______________ and the related consolidated
statements of operations and cash flows for the interim periods then ended,
together with the related Semiconductor Operations Supplemental Schedules. The
unaudited consolidated financial statements of the Company and its Subsidiaries
(a) fairly present in all material respects, in accordance with GAAP (subject to
ordinary, good faith year-end adjustments, the financial position and the
results of operations of the Company and its Subsidiaries on a consolidated
basis, and (b) include or disclose all material indebtedness and other
liabilities, direct or contingent, of the Company and its Subsidiaries on a
consolidated basis as of the date thereof, including liabilities for taxes,
material commitments and material Contingent Obligations. Such related
Semiconductor Operations Supplemental Schedules (x) include amounts based on
estimates of annual amounts and are subject to changes in estimates and ordinary
year-end adjustments, (y) present fairly, in all material respects, the net
assets and operations and cash flows of the Company and its Semiconductor
Operations Subsidiaries (on a combined basis) for the periods covered thereby,
on the basis specified and described in the notes to such schedules, and (z)
were prepared on a basis consistent with the basic consolidated financial
statements of the Company and its Subsidiaries except as disclosed in the notes
thereto.
2. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of the Company during the accounting period covered by the attached
financial statements.
3. The Company, during such period, has observed, performed or satisfied
all of its covenants and other agreements, and satisfied every condition in the
Credit Agreement to be observed, performed or satisfied by the Company, and the
undersigned has no knowledge of any Default or Event of Default.
4. The representations and warranties of the Company contained in Article V
of the Credit Agreement are true and correct as though made on and as of the
date hereof (except (i) to the extent such representations and warranties relate
to an earlier date, in which case they were true and correct as of such earlier
date, (ii) that this paragraph (4) shall be deemed instead to refer to the last
day of the most recent quarter and year for which financial statements have then
been delivered in respect of the representations and warranties made in
subsections 5.11(a) and 5.11(b), and (iii) the representations and warranties
contained in Sections 5.05 and 5.14 shall be true and correct as of the Closing
Date and as of the end of each fiscal quarter.
5. The following financial covenant analyses and information set forth on
Schedule 2 attached hereto are true and accurate on and as of the date of this
- ----------
Certificate.
FORM OF COMPLIANCE CERTIFICATE
D-2.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
______________.
MICRON SEMICONDUCTOR PRODUCTS, INC.
By: __________________________
Title:
FORM OF COMPLIANCE CERTIFICATE
D-3.
<PAGE>
SCHEDULE 2
----------
to the Compliance Certificate
($ in 000's)
Date: ___________________
For the fiscal quarter/year
ended ___________________
(Unless otherwise noted, all calculations are to be made on
basis of the Company and the Semiconductor Operations
Subsidiaries on a combined basis.)
A. Section 7.13: Minimum Cash and Equivalents:
--------------------------------------------
1. Sum of cash, cash equivalents and liquid
investments: $__________
Line A.1 not to exceed $100,000,000 (prior to TI Acquisition)
and $200,000,000 (on or after date of TI Acquisition)
B. Section 7.14: Combined Tangible Net Worth.
------------------------------------------
1. Total net assets:/1/ $__________
2. Net book value of intangible assets:/1/ $__________
3. Line B.1 less Line B.2: $
==========
4. 75% of Combined Net Income (not reduced
by Combined Net Loss) commencing with
FQ ending 9/3/98: $__________
5. 50% of increases in Combined Tangible Net
Worth resulting from certain equity offerings
after Original Closing Date: $__________
6. $1,900,000,000 + Line B.4 + B.5: $
==========
Line B.3 not to be less than Line B.6
____________________
/1/ Excluding non-semiconductor operations and assets otherwise included
therein.
SCHEDULE TO COMPLIANCE CERTIFICATE
1.
<PAGE>
C. Section 7.15: Leverage Ratio.
-----------------------------
1. Combined Adjusted Total Liabilities:
a. Total liabilities:
(excluding operating leases) $_____________
b. Certain off-balance sheet obligations: $_____________
c. Total liabilities (Lines C.1a + C.1b): $_____________
d. Permitted Subordinated Debt $_____________
e. Adjusted total liabilities
(line C.1c less line C.1d): $
=============
2. Line B.3 (Combined Tangible Net Worth): $_____________
3. Leverage Ratio (Line C.1e divided by
Line C.2): ___ to 1.00
Leverage Ratio not to exceed 1.0 to 1.0
D. Section 7.16: Maximum Indebtedness to Capitalization.
-----------------------------------------------------
1. Combined Indebtedness: $_____________
2. Capitalization:
a. Line D.1 (Combined Indebtedness) $_____________
b. Line B.3 (Combined Tangible Net Worth) $_____________
c. Capitalization (lines D.2a + D.2b) $
=============
3. 60% of Line D.2c $_____________
Line D.1 not to exceed Line D.3
E. Section 7.01(j): Purchase Money Liens.
---------------------------------------
1. Indebtedness secured by purchase money and
other security interests on combined U.S. net
property, plant and equipment: $_____________
2. Combined U.S. net property, plant and
equipment: $_____________
3. 25% of Line E.2: $_____________
SCHEDULE TO COMPLIANCE CERTIFICATE
2.
<PAGE>
Line E.1 not to exceed Line E.3
4. Indebtedness secured by purchase money and
other security interests on combined total
U.S. property, plant and equipment $_____________
5. Combined total net property, plant and
equipment: $_____________
6. 30% of Line E.5 $_____________
Line E.4 not to exceed Line E.6
F. Sections 7.01(q), (r): Secured Permitted Swap Obligations; Ordinary
--------------------------------------------------------------------
Course Secured Indebtedness.
- ---------------------------
1. Permitted Swap Obligations secured by cash
collateral or government securities: $_____________
2. Ordinary course secured Indebtedness for
other than borrowed money: $_____________
3. Combined Tangible Assets: $_____________
a. Total assets:/2/ $_____________
b. Line B.2: $_____________
c. Line F.3a less Line F.3b: $
=============
4. 5% of Line F.3c: $_____________
Lines F.1 + F.2 not to exceed Line F.4
G. Sections 7.03(d), (f): Certain Dispositions.
--------------------------------------------
1. Aggregate Net Proceeds from all material
(greater than $1,000,000 individually)
assets sold outside ordinary course of
business since Original Closing Date: $_____________
2. Aggregate Net Proceeds of all material
(greater than $1,000,000 individually)
assets disposed of pursuant to sale-leaseback
transactions not constituting Permitted
Sale-Leaseback Transactions since Original
Closing Date: $_____________
__________________________
/2/ Excluding non-semiconductor operations and assets otherwise included
therein.
SCHEDULE TO COMPLIANCE CERTIFICATE
3.
<PAGE>
3. Lines G.1 + G.2: $
============
Line G.3 not to exceed $200,000,000
4. Aggregate Net Proceeds of all Micron
Electronics, Inc. stock sold since Original
Closing Date: $____________
Line G.4 not to exceed $200,000,000
5. Lines G.3 + G.4 $____________
Line G.5 not to exceed $300,000,000 (unless
Commitment reductions and any related Loan
prepayments effected under Sections 2.05
and 2.06)
H. Section 7.05(d): Investments in Micron Electronics, Inc.
--------------------------------------------------------
1. Aggregate principal amount of all outstanding
extensions of credit to, plus cumulative
amount of all equity contributions made since
Original Closing Date in, Micron Electronics,
Inc: $____________
Line H.1 not to exceed $100,000,000
I. Section 7.05(g): Acquisitions or Minority Interests.
----------------------------------------------------
Cumulative aggregate consideration paid
(including assumption of debt), aggregate
principal amount of all outstanding extensions
of credit, plus cumulative amount of all equity
contributions made since Original Closing Date
(excluding TI Acquisition) in connection with: $____________
1. Acquisitions: $____________
2. Acquisitions of minority interests: $____________
3. Lines I.1 + I.2: $
============
4. 25% of Line F.3c (Combined Tangible Assets): $____________
Line I.3 not to exceed Line I.4
J. Section 7.05(p): Other Investments.
-----------------------------------
1. Cumulative aggregate consideration paid
(including assumption of debt), aggregate
principal amount of all
SCHEDULE TO COMPLIANCE CERTIFICATE
4.
<PAGE>
outstanding extensions of credit,
plus cumulative amount of all equity
contributions made in non-Semiconductor
Operations Subsidiaries (other than Micron
Electronics, Inc.) since Original Closing
Date not otherwise permitted by
Section 7.05. $____________
2. 5% of Line F.3c (Combined Tangible Assets): $____________
Line J.1 not to exceed Line J.2
K. Section 7.06(h): Indebtedness Incurred from other than Company or
------------------------------------------------------------------
Semiconductor Operations Subsidiaries.
- -------------------------------------
1. Indebtedness incurred by the Company or any
Semiconductor Operations Subsidiaries from
Persons other than Company or Semiconductor
Operations Subsidiaries: $____________
Line K.1 not to exceed $50,000,000
L. Sections 7.06(j) and 7.06(r): Permitted Subordinated Debt.
----------------------------------------------------------
1. TI Subordinated Debt of Company (and/or any
Indebtedness resulting from a refinancing
thereof) $____________
Line L.1 not to exceed $950,000,000
2. Other Permitted Subordinated Debt of Company: $____________
Line L.2 not to exceed $600,000,000
M. Section 7.06(q): Other Indebtedness and Contingent Obligations for Other
------------------------------------------------------------------------
Than Borrowed Money.
- -------------------
1. Other Indebtedness and Contingent Obligations
other than for borrowed money: $____________
Line M.1 not to exceed $50,000,000
N. Section 7.09(d): Restricted Payments.
------------------------------------
1. Restricted Payments during Subject Period: $____________
2. Combined Net Income for four consecutive
quarters ending on date of above financial
statements: $____________
3. 25% of Line O.2 (Combined Net Income): $
============
SCHEDULE TO COMPLIANCE CERTIFICATE
5.
<PAGE>
Line N.1 not to exceed Line N.3
O. Section 1.01: EBITDA.
---------------------
1. EBITDA for applicable period or periods
(as set forth in the Annex I) ("Subject
Period")
Subject Period ______________:
a. Combined Net Income or
Combined Net Loss: $____________
b. Interest expense:/3/ $____________
c. Income tax expense:/3/ $____________
d. Depreciation expense:/3/ $____________
e. Amortization expense:/3/ $____________
f. EBITDA (Lines O.1a + b +c + d + e): $
============
(Repeat O.1a-f as required by Annex I)
________________________
/3/ To the extent deducted in determining Combined Net Income or Combined
Net Loss.
SCHEDULE TO COMPLIANCE CERTIFICATE
6.
<PAGE>
EXHIBIT E
---------
FORM OF GUARANTY
----------------
THIS GUARANTY (this "Guaranty"), dated as of September 1, 1998, is
--------
made by Micron Semiconductor Products, Inc., an Idaho corporation (the
"Guarantor"), in favor of the Banks party to the Credit Agreement referred to
- ----------
below and Bank of America National Trust and Savings Association, as agent for
itself and such Banks (in such capacity, the "Agent").
-----
RECITALS
--------
WHEREAS, Micron Technology, Inc., a Delaware corporation (the
"Company"), certain financial institutions as lenders (the "Banks") and the
------- -----
Agent are parties to a Second Amended and Restated Revolving Credit Agreement
among the Company, the Banks and the Agent dated as of September 1, 1998 (as
amended, modified, renewed or extended from time to time, the "Credit
------
Agreement");
WHEREAS, it is a condition precedent to the occurrence of the Closing
Date under the Credit Agreement that the Guarantor guarantee the indebtedness
and other obligations of the Company to the Agent and the Banks under or in
connection with the Credit Agreement as set forth herein; and
WHEREAS, the Guarantor, as a subsidiary of the Company, will derive
substantial direct and indirect benefits from the credit extensions to the
Company pursuant to the Credit Agreement and the amendments contemplated by the
Credit Agreement (which benefits are hereby acknowledged by the Guarantor).
NOW, THEREFORE, to induce the Banks to enter into the Credit Agreement
and in consideration thereof, the Guarantor hereby agrees as follows:
SECTION 1 Definitions; Interpretation.
---------------------------
(a) Terms Defined in Credit Agreement. All capitalized terms used in
---------------------------------
this Guaranty and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
(b) Certain Defined Terms. As used in this Guaranty, the following
---------------------
terms shall have the following meanings:
"Guaranteed Obligations" has the meaning set forth in Section 2.
----------------------
"Guarantor Documents" means this Guaranty, the Guarantor Security
-------------------
Agreement and all other certificates, documents, agreements and instruments
delivered to the Agent and the Banks under or in connection with this Guaranty.
FORM OF GUARANTY
E-1.
<PAGE>
"Solvent" means, as to any Person at any time, that (a) the fair value
-------
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
California Uniform Fraudulent Transfer Act; (b) the present fair saleable value
of the property of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured; (c) such Person is able to realize upon its property and
pay its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business; (d)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subordinated Debt" has the meaning set forth in Section 7.
-----------------
(c) Interpretation. The rules of interpretation set forth in Section
--------------
1.03 of the Credit Agreement shall be applicable to this Guaranty and are
incorporated herein by this reference.
SECTION 2 Guaranty.
--------
(a) Guaranty. The Guarantor hereby unconditionally and irrevocably
--------
guarantees to the Agent and the Banks, and their respective successors,
endorsees, transferees and assigns, the full and prompt payment when due
(whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise) and performance of the indebtedness, liabilities and other
obligations of the Company to the Agent and the Banks under or in connection
with the Credit Agreement, the Notes and the other Loan Documents, including all
unpaid principal of the Loans, all interest accrued thereon, all fees due under
the Credit Agreement and all other amounts payable by the Company to the Agent
and the Banks thereunder or in connection therewith. The terms "indebtedness,"
"liabilities" and "obligations" are used herein in their most comprehensive
sense and include any and all advances, debts, obligations and liabilities, now
existing or hereafter arising, whether voluntary or involuntary and whether due
or not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether recovery upon such indebtedness, liabilities and
obligations may be or hereafter become unenforceable or shall be an allowed or
disallowed claim under the Bankruptcy Code or other applicable law. The
foregoing indebtedness, liabilities and other obligations of the Company, and
all other indebtedness, liabilities and obligations to be paid or performed by
the Guarantor in connection with this Guaranty (including any and all amounts
due under Section 15), shall hereinafter be collectively referred to as the
"Guaranteed Obligations."
- -----------------------
(b) Limitation of Guaranty. To the extent that any court of competent
----------------------
jurisdiction shall impose by final judgment under applicable law (including the
California Uniform Fraudulent Transfer Act and (S)(S)544 and 548 of the
Bankruptcy Code) any limitations on the amount of the Guarantor's liability with
respect to the Guaranteed Obligations which the Agent or the Banks can enforce
under this Guaranty, the Agent and the Banks by their acceptance hereof accept
such limitation on the amount of the Guarantor's liability hereunder to
FORM OF GUARANTY
E-2.
<PAGE>
the extent needed to make this Guaranty and the Guarantor Documents fully
enforceable and nonavoidable.
SECTION 3 Liability of Guarantor. The liability of the Guarantor
----------------------
under this Guaranty shall be irrevocable, absolute, independent and
unconditional, and shall not be affected by any circumstance which might
constitute a discharge of a surety or guarantor other than the indefeasible
payment and performance in full of all Guaranteed Obligations. In furtherance
of the foregoing and without limiting the generality thereof, the Guarantor
agrees as follows:
(i) the Guarantor's liability hereunder shall be the immediate,
direct, and primary obligation of the Guarantor and shall not be contingent upon
the Agent's or any Bank's exercise or enforcement of any remedy it may have
against the Company or any other Person, or against any Collateral;
(ii) this Guaranty is a guaranty of payment when due and not merely of
collectibility;
(iii) the Guarantor's payment of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge the
Guarantor's liability for any portion of the Guaranteed Obligations remaining
unsatisfied; and
(iv) the Guarantor's liability with respect to the Guaranteed
Obligations shall remain in full force and effect without regard to, and shall
not be impaired or affected by, nor shall the Guarantor be exonerated or
discharged by, any of the following events:
(A) any Insolvency Proceeding with respect to the Company, any
other guarantor or any other Person;
(B) any limitation, discharge, or cessation of the liability of
the Company, any other guarantor or any other Person for any Guaranteed
Obligations due to any statute, regulation or rule of law, or any invalidity or
unenforceability in whole or in part of any of the Guaranteed Obligations or the
Loan Documents;
(C) any merger, acquisition, consolidation or change in structure
of the Company, the Guarantor or any other guarantor or Person, or any sale,
lease, transfer or other disposition of any or all of the assets or shares of
the Company, the Guarantor, any other guarantor or other Person;
(D) any assignment or other transfer, in whole or in part, of the
Agent's or any Bank's interests in and rights under this Guaranty or the other
Loan Documents, including the Agent's or any Bank's right to receive payment of
the Guaranteed Obligations, or any assignment or other transfer, in whole or in
part, of the Agent's or any Bank's interests in and to any of the Collateral;
(E) any claim, defense, counterclaim or setoff, other than that
of prior performance, that the Company, the Guarantor, any other guarantor or
other Person may have or assert, including any defense of incapacity or lack of
corporate or other authority to execute any of the Loan Documents;
FORM OF GUARANTY
E-3.
<PAGE>
(F) the Agent's or any Bank's amendment, modification, renewal,
extension, cancellation or surrender of any Loan Document, any Collateral, or
the Agent's or any Bank's exchange, release, or waiver of any Collateral;
(G) the Agent's or any Bank's exercise or nonexercise of any
power, right or remedy with respect to any of the Collateral, including the
Agent's or any Bank's compromise, release, settlement or waiver with or of the
Company, any other guarantor or any other Person;
(H) the Agent's or any Bank's vote, claim, distribution,
election, acceptance, action or inaction in any Insolvency Proceeding related to
the Guaranteed Obligations;
(I) any impairment or invalidity of any of the Collateral or any
other collateral securing any of the Guaranteed Obligations or any failure to
perfect any of the Liens of the Agent and the Banks thereon or therein; and
(J) any other guaranty, whether by the Guarantor or any other
Person, of all or any part of the Guaranteed Obligations or any other
indebtedness, obligations or liabilities of the Company to the Agent or the
Banks.
SECTION 4 Consents of Guarantor. The Guarantor hereby
---------------------
unconditionally consents and agrees that, without notice to or further assent
from the Guarantor:
(i) the principal amount of the Guaranteed Obligations may be
increased or decreased and additional indebtedness or obligations of the Company
under the Loan Documents may be incurred, by one or more amendments,
modifications, renewals or extensions of any Loan Document or otherwise;
(ii) the time, manner, place or terms of any payment under any Loan
Document may be extended or changed, including by an increase or decrease in the
interest rate on any Guaranteed Obligation or any fee or other amount payable
under such Loan Document, by an amendment, modification or renewal of any Loan
Document or otherwise;
(iii) the time for the Company's (or any other Person's) performance
of or compliance with any term, covenant or agreement on its part to be
performed or observed under any Loan Document may be extended, or such
performance or compliance waived, or failure in or departure from such
performance or compliance consented to, all in such manner and upon such terms
as the Agent and the Banks may deem proper;
(iv) the Agent or the Banks may discharge or release, in whole or in
part, any other guarantor or any other Person liable for the payment and
performance of all or any part of the Guaranteed Obligations, and may permit or
consent to any such action or any result of such action, and shall not be
obligated to demand or enforce payment upon any of the Collateral or any other
collateral, nor shall the Agent or the Banks be liable to the Guarantor for any
failure to collect or enforce payment or performance of the Guaranteed
Obligations from any Person or to realize on the Collateral or other collateral
therefor;
FORM OF GUARANTY
E-4.
<PAGE>
(v) in addition to the Collateral, the Agent and the Banks may take
and hold other security (legal or equitable) of any kind, at any time, as
collateral for the Guaranteed Obligations, and may, from time to time, in whole
or in part, exchange, sell, surrender, release, subordinate, modify, waive,
rescind, compromise or extend such security and may permit or consent to any
such action or the result of any such action, and may apply such security and
direct the order or manner of sale thereof;
(vi) the Agent and the Banks may request and accept other guaranties
of the Guaranteed Obligations and any other indebtedness, obligations or
liabilities of the Company to the Agent or the Banks and may, from time to time,
in whole or in part, surrender, release, subordinate, modify, waive, rescind,
compromise or extend any such guaranty and may permit or consent to any such
action or the result of any such action; and
(vii) the Agent and the Banks may exercise, or waive or otherwise
refrain from exercising, any other right, remedy, power or privilege (including
the right to accelerate the maturity of any Loan and any power of sale) granted
by any Loan Document or other security document or agreement, or otherwise
available to the Agent and the Banks, with respect to the Guaranteed Obligations
or any of the Collateral, even if the exercise of such right, remedy, power or
privilege affects or eliminates any right of subrogation or any other right of
the Guarantor against the Company;
all as the Agent and the Banks may deem advisable, and all without impairing,
abridging, releasing or affecting this Guaranty.
SECTION 5 Guarantor's Waivers.
-------------------
(a) Certain Waivers. The Guarantor waives and agrees not to assert:
---------------
(i) any right to require the Agent or any Bank to marshal assets in
favor of the Company, the Guarantor, any other guarantor or any other Person, to
proceed against the Company, any other guarantor or any other Person, to proceed
against or exhaust any of the Collateral, to give notice of the terms, time and
place of any public or private sale of personal property security constituting
the Collateral or other collateral for the Guaranteed Obligations or comply with
any other provisions of (S)9504 of the California UCC (or any equivalent
provision of any other applicable law) or to pursue any other right, remedy,
power or privilege of the Agent or any Bank whatsoever;
(ii) the defense of the statute of limitations in any action hereunder
or for the collection or performance of the Guaranteed Obligations;
(iii) any defense arising by reason of any lack of corporate or other
authority or any other defense of the Company, the Guarantor or any other
Person;
(iv) any defense based upon the Agent's or any Bank's errors or
omissions in the administration of the Guaranteed Obligations;
(v) any rights to set-offs and counterclaims;
FORM OF GUARANTY
E-5.
<PAGE>
(vi) any defense based upon an election of remedies (including, if
available, an election to proceed by nonjudicial foreclosure) which destroys or
impairs the subrogation rights of the Guarantor or the right of the Guarantor to
proceed against the Company or any other obligor of the Guaranteed Obligations
for reimbursement; and
(vii) without limiting the generality of the foregoing, to the
fullest extent permitted by law, any defenses or benefits that may be derived
from or afforded by applicable law limiting the liability of or exonerating
guarantors or sureties, or which may conflict with the terms of this Guaranty,
including any and all benefits that otherwise might be available to the
Guarantor under California Civil Code (S)(S)1432, 2809, 2810, 2815, 2819, 2839,
2845, 2848, 2849, 2850, 2899 and 3433 and California Code of Civil Procedure
(S)(S)580a, 580b, 580d and 726, and any similar laws in any states in which any
real property Collateral is situated. Accordingly, the Guarantor waives all
rights and defenses that the Guarantor may have because the Company's debt is
secured by real property. This means, among other things: (A) the Agent and
the Banks may collect from the Guarantor without first foreclosing on any real
or personal property Collateral pledged by the Company; and (B) if the Agent
forecloses on any real property Collateral pledged by the Company: (1) the
amount of the debt may be reduced only by the price for which that Collateral is
sold at the foreclosure sale, even if the Collateral is worth more than the sale
price, and (2) the Agent and the Banks may collect from the Guarantor even if
the Agent, by foreclosing on the real property Collateral, has destroyed any
right the Guarantor may have to collect from the Company. This is an
unconditional and irrevocable waiver of any rights and defenses the Guarantor
may have because the Company's debt is secured by real property. These rights
and defenses include, but are not limited to, any rights of defenses based upon
Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure
(b) Additional Waivers. The Guarantor waives any and all notice of
------------------
the acceptance of this Guaranty, and any and all notice of the creation,
renewal, modification, extension or accrual of the Guaranteed Obligations, or
the reliance by the Agent and the Banks upon this Guaranty, or the exercise of
any right, power or privilege hereunder. The Guaranteed Obligations shall
conclusively be deemed to have been created, contracted, incurred and permitted
to exist in reliance upon this Guaranty. The Guarantor waives promptness,
diligence, presentment, protest, demand for payment, notice of default, dishonor
or nonpayment and all other notices to or upon the Company, the Guarantor or any
other Person with respect to the Guaranteed Obligations.
(c) Independent Obligations. The obligations of the Guarantor
-----------------------
hereunder are independent of and separate from the obligations of the Company
and any other guarantor and upon the occurrence and during the continuance of
any Event of Default, a separate action or actions may be brought against the
Guarantor, whether or not the Company or any such other guarantor is joined
therein or a separate action or actions are brought against the Company or any
such other guarantor.
(d) Financial Condition of Company. The Guarantor shall not have any
------------------------------
right to require the Agent or the Banks to obtain or disclose any information
with respect to: (i) the financial condition or character of the Company or the
ability of the Company to pay and perform the Guaranteed Obligations; (ii) the
Guaranteed Obligations; (iii) the Collateral; (iv) the existence or nonexistence
of any other guarantees of all or any part of the Guaranteed
FORM OF GUARANTY
E-6.
<PAGE>
Obligations; (v) any action or inaction on the part of the Agent or the Banks or
any other Person; or (vi) any other matter, fact or occurrence whatsoever.
SECTION 6 Subrogation. Until the Guaranteed Obligations shall be
-----------
satisfied in full and the Commitments shall be terminated, the Guarantor shall
not have, and shall not directly or indirectly exercise, (i) any rights that it
may acquire by way of subrogation under this Guaranty, by any payment hereunder
or otherwise, (ii) any rights of contribution, indemnification, reimbursement or
similar suretyship claims arising out of this Guaranty or (iii) any other right
which it might otherwise have or acquire (in any way whatsoever) which could
entitle it at any time to share or participate in any right, remedy or security
of the Banks or the Agent as against the Company or other guarantors, whether in
connection with this Guaranty, any of the other Loan Documents or otherwise. If
any amount shall be paid to the Guarantor on account of the foregoing rights at
any time when all the Guaranteed Obligations shall not have been paid in full,
such amount shall be held in trust for the benefit of the Agent and the Banks
and shall forthwith be paid to the Agent to be credited and applied to the
Guaranteed Obligations, whether matured or unmatured, in accordance with the
terms of the Loan Documents.
SECTION 7 Subordination.
-------------
(a) Subordination to Payment of Guaranteed Obligations. All payments
--------------------------------------------------
on account of all indebtedness, liabilities and other obligations of the Company
to the Guarantor, whether created under, arising out of or in connection with
any documents or instruments evidencing any credit extensions to Company or
otherwise, including all principal on any such credit extensions, all interest
accrued thereon, all fees and all other amounts payable by the Company to the
Guarantor in connection therewith, whether now existing or hereafter arising,
and whether due or to become due, absolute or contingent, liquidated or
unliquidated, determined or undetermined (the "Subordinated Debt") shall be
-----------------
subject, subordinate and junior in right of payment and exercise of remedies, to
the extent and in the manner set forth herein, to the prior payment in full in
cash or cash equivalents of the Guaranteed Obligations.
(b) No Payments. As long as any of the Guaranteed Obligations shall
-----------
remain outstanding and unpaid, the Guarantor shall not accept or receive any
payment or distribution by or on behalf of the Company, directly or indirectly,
of assets of the Company of any kind or character, whether in cash, property or
securities, including on account of the purchase, redemption or other
acquisition of Subordinated Debt, as a result of any collection, sale or other
disposition of collateral, or by setoff, exchange or in any other manner, for or
on account of the Subordinated Debt ("Subordinated Debt Payments"), except that
--------------------------
if no Event of Default exists and no notice described below has been received by
the Guarantor, the Guarantor shall be entitled to accept and receive regularly
scheduled payments and other payments in the ordinary course on the Subordinated
Debt, in accordance with the terms of the documents and instruments governing
the Subordinated Debt and other Subordinated Debt Payments in respect of
Subordinated Debt not evidenced by documents or instruments (including in
respect of Dispositions), in each case to the extent permitted under Article VII
of the Credit Agreement. During the existence of an Event of Default (or if any
Event of Default would exist immediately after the making of a Subordinated Debt
Payment), and upon receipt by the Company of notice from the Agent or any Bank
of such Default, and until such Event of Default is cured or waived,
FORM OF GUARANTY
E-7.
<PAGE>
the Company shall not make, accept or receive any Subordinated Debt Payment. In
the event that, notwithstanding the provisions of this Section 7, any
Subordinated Debt Payments shall be received in contravention of this Section 7
by the Guarantor before all Guaranteed Obligations are paid in full in cash or
cash equivalents, such Subordinated Debt Payments shall be held in trust for the
benefit of the Agent and the Banks and shall be paid over or delivered to the
Agent for application to the payment in full in cash or cash equivalents of all
Guaranteed Obligations remaining unpaid to the extent necessary to give effect
to this Section 7, after giving effect to any concurrent payments or
distributions to the Agent and the Banks in respect of the Guaranteed
Obligations.
(c) Subordination of Remedies. As long as any Guaranteed Obligations
-------------------------
shall remain outstanding and unpaid, the Guarantor shall not, without the prior
written consent of the Agent:
(i) accelerate or bring suit or institute any other actions or
proceedings to enforce its rights or interests under or in respect of the
Subordinated Debt;
(ii) exercise any rights under or with respect to (A) any guaranties
of the Subordinated Debt, or (B) any collateral held by it, including causing or
compelling the pledge or delivery of any collateral, any attachment of, levy
upon, execution against, foreclosure upon or the taking of other action against
or institution of other proceedings with respect to any collateral held by it,
notifying any account debtors of the Company or asserting any claim or interest
in any insurance with respect to any collateral, or attempt to do any of the
foregoing;
(iii) exercise any rights to set-offs and counterclaims in respect of
any indebtedness, liabilities or obligations of the Guarantor to the Company
against any of the Subordinated Debt; or
(iv) commence, or cause to be commenced, or join with any creditor
other than the Agent and the Banks in commencing, any Insolvency Proceeding.
(d) Subordination Upon Any Distribution of Assets of the Company. In
------------------------------------------------------------
the event of any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, upon any Insolvency
Proceeding with respect to or involving the Company, (i) all amounts owing on
account of the Guaranteed Obligations, including all interest accrued thereon at
the contract rate both before and after the initiation of any such proceeding,
whether or not an allowed claim in any such proceeding, shall first be paid in
full in cash, or payment provided for in cash or in cash equivalents, before any
Subordinated Debt Payment is made; and (ii) to the extent permitted by
applicable law, any Subordinated Debt Payment to which the Guarantor would be
entitled except for the provisions hereof, shall be paid or delivered by the
trustee in bankruptcy, receiver, assignee for the benefit of creditors or other
liquidating agent making such payment or distribution directly to the Agent (on
behalf of the Banks) for application to the payment of the Guaranteed
Obligations in accordance with clause (i), after giving effect to any concurrent
payment or distribution or provision therefor to the Agent or the Banks in
respect of such Guaranteed Obligations.
FORM OF GUARANTY
E-8.
<PAGE>
(e) Authorization to Agent. If, while any Subordinated Debt is
----------------------
outstanding, any Insolvency Proceeding is commenced by or against the Company or
its property:
(i) the Agent, when so instructed by the Majority Banks, is hereby
irrevocably authorized and empowered (in the name of the Banks or in the name of
the Guarantor or otherwise), but shall have no obligation, to demand, sue for,
collect and receive every payment or distribution in respect of the Subordinated
Debt and give acquittance therefor and to file claims and proofs of claim and
take such other action (including voting the Subordinated Debt) as it may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Agent and the Banks; and
(ii) the Guarantor shall promptly take such action as the Agent (on
instruction from the Majority Banks) may reasonably request (A) to collect the
Subordinated Debt for the account of the Banks and to file appropriate claims or
proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver
to the Agent, such powers of attorney, assignments and other instruments as it
may request to enable it to enforce any and all claims with respect to the
Subordinated Debt, and (C) to collect and receive any and all Subordinated Debt
Payments.
SECTION 8 Continuing Guaranty; Reinstatement.
----------------------------------
(a) Continuing Guaranty. This Guaranty is a continuing guaranty and
-------------------
agreement of subordination and shall continue in effect and be binding upon the
Guarantor until termination of the Commitments and payment and performance in
full of the Guaranteed Obligations.
(b) Reinstatement. This Guaranty shall continue to be effective or
-------------
shall be reinstated and revived, as the case may be, if, for any reason, any
payment of the Guaranteed Obligations by or on behalf of the Company (or receipt
of any proceeds of Collateral) shall be rescinded, invalidated, declared to be
fraudulent or preferential, set aside, voided or otherwise required to be repaid
to the Company, its estate, trustee, receiver or any other Person (including
under the Bankruptcy Code or other state or federal law), or must otherwise be
restored by the Agent or any Bank, whether as a result of Insolvency Proceedings
or otherwise. To the extent any payment is so rescinded, set aside, voided or
otherwise repaid or restored, the Guaranteed Obligations shall be revived in
full force and effect without reduction or discharge for such payment. All
losses, damages, costs and expenses that the Agent or the Banks may suffer or
incur as a result of any voided or otherwise set aside payments shall be
specifically covered by the indemnity in favor of the Banks and the Agent
contained in Section 16.
SECTION 9 Payments. The Guarantor hereby agrees, in furtherance of
--------
the foregoing provisions of this Guaranty and not in limitation of any other
right which the Agent or any Bank or any other Person may have against the
Guarantor by virtue hereof, upon the failure of the Company to pay any of the
Guaranteed Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under (S)362(a) of the Bankruptcy Code), the Guarantor shall forthwith pay,
or cause to be paid, in cash, to the Agent an amount equal to the amount of the
Guaranteed Obligations then due as
FORM OF GUARANTY
E-9.
<PAGE>
aforesaid (including interest which, but for the filing of a petition in any
Insolvency Proceeding with respect to the Company, would have accrued on such
Guaranteed Obligations, whether or not a claim is allowed against the Company
for such interest in any such Insolvency Proceeding). The Guarantor shall make
each payment hereunder, unconditionally in full without set-off, counterclaim or
other defense, or deduction for any Taxes, on the day when due in Dollars and in
same day or immediately available funds, to the Agent at such office of the
Agent and to such account as are specified in the Credit Agreement. All such
payments shall be promptly applied from time to time by the Agent as provided in
the Credit Agreement.
SECTION 10 Representations and Warranties. The Guarantor represents
------------------------------
and warrants to the Agent and each Bank that:
(a) Organization and Powers. The Guarantor is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, is qualified to do business and
is in good standing in each jurisdiction in which the failure so to qualify or
be in good standing would have a Material Adverse Effect and has all requisite
power and authority to own its assets and carry on its business and, with
respect to the Guarantor, to execute, deliver and perform its obligations under
the Guarantor Documents.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance by the Guarantor of this Guaranty and any other Guarantor Documents
have been duly authorized by all necessary corporate action of the Guarantor,
and do not and will not: (i) contravene the terms of the Guarantor's
organization documents or (ii) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing any
material Contractual Obligation to which the Guarantor is a party or any order,
injunction, writ or decree of any Governmental Authority to which the Guarantor
or its property is subject, or (iii) violate any Requirement of Law.
(c) Binding Obligation. This Guaranty and the other Guarantor
------------------
Documents constitute the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
(d) Governmental Consents. No authorization, consent, approval,
---------------------
license, exemption of, or filing or registration with, any Governmental
Authority, or approval or consent of any other Person, is required for the due
execution, delivery or performance by, or enforcement against, the Guarantor of
the Guarantor Documents.
(e) No Prior Assignment. The Guarantor has not previously assigned
-------------------
any interest in the Subordinated Debt or any collateral relating thereto, no
Person other than the Guarantor owns an interest in the Subordinated Debt or any
such collateral (whether as joint holders of the Subordinated Debt, participants
or otherwise), and the entire Subordinated Debt is owing only to the Guarantor.
(f) Solvency. Immediately prior to and after and giving effect to the
--------
incurrence of the Guarantor's obligations under this Guaranty the Guarantor will
be Solvent.
FORM OF GUARANTY
E-10.
<PAGE>
(g) Consideration. The Guarantor has received at least "reasonably
-------------
equivalent value" (as such phrase is used in (S)548 of the Bankruptcy Code, in
(S)3439.04 of the California Uniform Fraudulent Transfer Act and in comparable
provisions of other applicable law) and more than sufficient consideration to
support its obligations hereunder in respect of the Guaranteed Obligations and
under any of the Collateral Documents to which it is a party.
(h) Independent Investigation. The Guarantor hereby acknowledges that
-------------------------
it has undertaken its own independent investigation of the financial condition
of the Company and all other matters pertaining to this Guaranty and further
acknowledges that it is not relying in any manner upon any representation or
statement of the Agent or any Bank with respect thereto. The Guarantor
represents and warrants that it has received and reviewed copies of the Loan
Documents and that it is in a position to obtain, and it hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Company and any other matters pertinent hereto that
the Guarantor may desire. The Guarantor is not relying upon or expecting the
Agent or any Bank to furnish to the Guarantor any information now or hereafter
in the Agent's or any such Bank's possession concerning the financial condition
of the Company or any other matter.
SECTION 11 Reporting Covenant. So long as any Guaranteed Obligations
------------------
shall remain unsatisfied or any Bank shall have any Commitment, the Guarantor
agrees that it shall furnish to the Agent such information respecting the
operations, properties, business or condition (financial or otherwise) of the
Guarantor or its Subsidiaries as the Agent, at the request of any Bank, may from
time to time reasonably request.
SECTION 12 Additional Covenants. So long as any Guaranteed
--------------------
Obligations shall remain unsatisfied or any Bank shall have any Commitment, the
Guarantor agrees that:
(a) Preservation of Existence, Etc. The Guarantor shall, and shall
------------------------------
cause each of its Subsidiaries to, maintain and preserve (i) its legal existence
and (ii) its rights to transact business and all other rights, franchises and
privileges necessary or desirable in the normal course of its business and
operations and the ownership of its properties, except in the case of this
clause (ii) where the non-preservation could not reasonably be expected to have
a Material Adverse Effect.
(b) Further Assurances and Additional Acts. The Guarantor shall
--------------------------------------
execute, acknowledge, deliver, file, notarize and register at its own expense
all such further agreements, instruments, certificates, documents and assurances
and perform such acts as the Agent or the Majority Banks shall deem reasonably
necessary or appropriate to effectuate the purposes of this Guaranty and the
other Guarantor Documents, and promptly provide the Agent with evidence of the
foregoing satisfactory in form and substance to the Agent and the Majority
Banks.
SECTION 13 Notices. All notices, requests or other communications
-------
hereunder shall be given in the manner and to the addresses specified in the
Credit Agreement. Notices to the Guarantor shall be sent or delivered to the
address set forth therein for the Company. All such notices, requested and
communications shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or transmitted in
legible form
FORM OF GUARANTY
E-11.
<PAGE>
by facsimile machine, respectively, or if mailed, upon receipt by the addressee,
or if delivered, upon delivery.
SECTION 14 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
the Agent or any Bank to exercise, and no delay in exercising on the part of the
Agent or any Bank, any right, remedy, power or privilege hereunder or under any
other Guarantor Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
SECTION 15 Costs and Expenses; Indemnification.
-----------------------------------
(a) Costs and Expenses. The Guarantor shall:
------------------
(i) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent for all costs and expenses incurred by
it in connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Guaranty, any other Guaranty Document
and any other documents prepared in connection herewith or therewith and the
consummation of the transactions contemplated hereby and thereby; and
(ii) pay or reimburse the Agent, the Lead Arranger and each Bank for
all costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Guaranty or any other Guaranty Document during the existence
of an Event of Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding).
(b) Indemnification. The Company shall indemnify, defend and hold the
---------------
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
- -------------------
obligations, losses, damages, penalties, actions, judgments, suites, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time be imposed on, incurred by or asserted
against any such Person in favor of any third-party in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or arising out of this
Agreement or relating to the Collateral, whether or not any Indemnified Person
is a "Indemnified Liabilities"); provided that the Company shall have no
----------------------- --------
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting from the gross negligence or willful misconduct of such
Indemnified Person.
FORM OF GUARANTY
E-12.
<PAGE>
(c) Defense. At the election of any Indemnified Person, the Guarantor
-------
shall defend such Indemnified Person using legal counsel satisfactory to such
Indemnified Person in such Person's sole discretion, at the sole cost and
expense of the Guarantor.
(d) Interest. Any amounts payable to the Agent or any Bank under this
--------
Section 15 if not paid upon demand shall bear interest from the date of such
demand until paid in full, at the rate of interest set forth in Section 2.08 of
the Credit Agreement.
(e) Survival. The agreements in this Section shall survive payment of
--------
all other Secured Obligations.
SECTION 16 Right of Set-Off. In addition to any rights and remedies
----------------
of the Banks provided by law, if an Event of Default exists or the Loans have
been accelerated, each Bank is hereby authorized at any time and from time to
time, upon obtaining the prior written consent of the Agent, and without notice
to the Guarantor (any such notice being expressly waived by the Guarantor), to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Bank to or for the credit or the account of the Guarantor against any
and all of the obligations of the Guarantor now or hereafter existing under this
Guaranty, irrespective of whether or not such Bank shall have made any demand
upon the Company or the Guarantor under the Loan Documents and although such
obligations may be contingent and unmatured. Each Bank shall promptly notify
the Guarantor (through the Agent) after any such set-off and application made by
it; provided, however, that the failure to give such notice shall not affect the
-------- -------
validity of such setoff and application. The rights of the Banks under this
Section 16 are in addition to other rights and remedies (including other rights
of set-off) which the Banks may have.
SECTION 17 Marshalling; Payments Set Aside. Neither the Agent nor
-------------------------------
the Banks shall be under any obligation to marshal any assets in favor of the
Guarantor or any other Person or against or in payment of any or all of the
Guaranteed Obligations. To the extent that the Guarantor makes a payment to the
Agent or the Banks, or the Agent or the Banks exercise their right of set-off,
and such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the Agent or
such Bank in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred, and (b) each
Bank severally agrees to pay to the Agent upon demand its pro rata share of any
amount so recovered from or repaid by the Agent.
SECTION 18 Benefits of Guaranty. This Guaranty is entered into for
--------------------
the sole protection and benefit of the Agent and each Bank and its successors
and assigns, and no other Person (other than any Indemnified Person specified
herein) shall be a direct or indirect beneficiary of, or shall have any direct
or indirect cause of action or claim in connection with, this Guaranty. The
Agent and the Banks, by their acceptance of this Guaranty, shall not have any
obligations under this Guaranty to any Person other than the Guarantor, and such
obligations shall be limited to those expressly stated herein.
FORM OF GUARANTY
E-13.
<PAGE>
SECTION 19 Binding Effect; Assignment.
--------------------------
(a) Successors and Assigns. The provisions of this Guaranty shall be
----------------------
binding upon and insure to the benefit of the parties hereto and their
respective successors and assigns.
(b) Assignment. The Guarantor shall not have the right to assign or
----------
transfer its rights and obligations hereunder or under any other Guarantor
Documents without the prior written consent of the Majority Banks. Each Bank
may, without notice to or consent by the Guarantor, sell, assign, transfer or
grant participations in all or any portion of such Bank's rights and obligations
hereunder and under the other Guarantor Documents in connection with any sale,
assignment, transfer or grant of a participation by such Bank in accordance with
Section 10.08 of the Credit Agreement of or in its rights and obligations
thereunder and under the other Loan Documents. The Guarantor agrees that in
connection with any such sale, assignment, transfer or grant by any Bank, such
Bank may deliver to the prospective participant or assignee financial statements
and other relevant information relating to the Guarantor and its Subsidiaries.
SECTION 20 Governing Law and Jurisdiction.
------------------------------
(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR
ANY OTHER GUARANTOR DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND
THE GUARANTOR HEREBY CONSENTS, AND BY ACCEPTANCE OF THIS GUARANTY, EACH OF THE
AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE COMPANY IRREVOCABLY WAIVES, AND
EACH OF THE AGENT AND THE BANKS BY ITS ACCEPTANCE HEREOF IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
--------------------
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
GUARANTY OR ANY GUARANTOR DOCUMENT. THE COMPANY WAIVES, AND EACH OF THE AGENT
AND THE BANKS BY ITS ACCEPTANCE HEREOF WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
SECTION 21 Waiver of Jury Trial. THE GUARANTOR HEREBY AGREES TO
--------------------
WAIVE, AND THE AGENT AND THE BANKS BY THEIR ACCEPTANCE HEREOF HEREBY AGREE TO
WAIVE, THEIR RESPECTIVE RIGHTS TO A TRAIL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE OTHER
GUARANTOR DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
FORM OF GUARANTY
E-14.
<PAGE>
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE GUARANTOR HEREBY AGREES, AND THE AGENT AND THE BANKS BY THEIR ACCEPTANCE
HEREOF HEREBY AGREE, THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT IN ANY WAY LIMITING THE FOREGOING, THE
GUARANTOR FURTHER AGREES, AND THE AGENT AND THE BANKS BY THEIR ACCEPTANCE HEREOF
FURTHER AGREE, THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM, OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS GUARANTY OR THE OTHER GUARANTOR DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE OTHER GUARANTOR DOCUMENTS.
SECTION 22 Entire Agreement; Amendments. This Guaranty, together
----------------------------
with the other Guaranty Documents, embodies the entire agreement of the
Guarantor with respect to the matters set forth herein, and supersedes all prior
or contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof and shall not be
amended except by written agreement of the Guarantor, the Agent and the Majority
Banks.
SECTION 23 Severability. The illegality or unenforceability of any
------------
provision of this Guaranty or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Guaranty or any instrument or agreement required
hereunder.
SECTION 24 Amendment and Restatement of Existing Guaranty. From and
----------------------------------------------
after the Closing Date, this Guaranty amends and restates the existing Guaranty
of the Guarantor dated as of June 16, 1998.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty, as of
the date first above written.
MICRON SEMICONDUCTOR
PRODUCTS, INC.
By: __________________________
Title:
FORM OF GUARANTY
E-15.
<PAGE>
EXHIBIT F
---------
FORM OF COMPANY SECURITY AGREEMENT
----------------------------------
THIS SECURITY AGREEMENT (this "Agreement"), dated as of September 1,
---------
1998, is made between Micron Technology, Inc., a Delaware corporation (the
"Company"), and Bank of America National Trust and Savings Association, as agent
- --------
for itself and the Banks referred to below (in such capacity, the "Agent").
-----
RECITALS
--------
WHEREAS, the Company, certain financial institutions as lenders (the
"Banks") and the Agent are parties to a Second Amended and Restated Revolving
- ------
Credit Agreement dated as of September 1, 1998 among the Company, the Banks and
the Agent (as amended, modified, renewed or extended from time to time, the
"Credit Agreement"); and
- -----------------
WHEREAS, it is a condition precedent to the occurrence of the Closing
Date under the Credit Agreement that the Company enter into this Agreement and
grant to the Agent, for itself and for the ratable benefit of the Banks, the
security interests hereinafter provided to secure the obligations of the Company
described below.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Definitions; Interpretation.
---------------------------
(a) Terms Defined in Credit Agreement. All capitalized terms used in
---------------------------------
this Agreement and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
(b) Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings:
"Accounts" means any and all accounts receivable owed to the Company,
--------
whether now existing or hereafter acquired or arising, arising out of or in
connection with the sale or lease of merchandise, goods or commodities or the
rendering of services or arising from any other transaction, however evidenced,
and whether or not earned by performance, all guaranties, indemnities and
security with respect to the foregoing, and all letters of credit relating
thereto, in each case whether now existing or hereafter acquired or arising.
"Books" means all books, records and other written, electronic or
-----
other documentation in whatever form maintained now or hereafter by or for the
Company in connection with the ownership of the Collateral or evidencing or
containing information relating to the Collateral, including: (i) ledgers; (ii)
records indicating, summarizing, or evidencing the Collateral), business
operations or financial condition; (iii) computer programs and software; (iv)
computer discs, tapes, files, manuals, spreadsheets; (v) computer printouts and
output of
FORM OF COMPANY SECURITY AGREEMENT
F-1.
<PAGE>
whatever kind; (vi) any other computer prepared or electronically stored,
collected or reported information and equipment of any kind; and (vii) any and
all other rights now or hereafter arising out of any contract or agreement
between the Company and any service bureau, computer or data processing company
or other Person charged with preparing or maintaining any of the Company's books
or records or with credit reporting, including with regard to the Company's
Accounts.
"Collateral" has the meaning set forth in Section 2.
----------
"Company Intellectual Property" means any Intellectual Property owned
-----------------------------
or held by the Company or in which the Company otherwise has any interest that
allows for transfer or sublicense to third parties, now existing or hereafter
acquired or arising, whether or not relating to or arising out of or existing in
connection with the Equipment.
"Documents" means any and all documents of title, bills of lading,
---------
dock warrants, dock receipts, warehouse receipts and other documents of the
Company relating to Collateral, whether or not negotiable, and includes all
other documents which purport to be issued by a bailee or agent and purport to
cover goods in any bailee's or agent's possession which are either identified or
are fungible portions of an identified mass, including such documents of title
made available to the Company for the purpose of ultimate sale or exchange of
goods or for the purpose of loading, unloading, storing, shipping,
transshipping, manufacturing, processing or otherwise dealing with goods in a
manner preliminary to their sale or exchange, in each case whether now existing
or hereafter acquired or arising.
"Equipment" means all now existing or hereafter acquired equipment of
---------
the Company in all of its forms, located at the Idaho Facility and the Utah
Facility, and including any and all machinery, furniture, equipment, furnishings
and fixtures in which the Company now or hereafter acquires any right, and all
other goods and tangible personal property (other than Inventory), including
tools, parts and supplies, automobiles, trucks, tractors and other vehicles,
computer and other electronic data processing equipment and other office
equipment, Vendor Intellectual Property, and all additions, substitutions,
replacements, parts, accessories, and accessions to and for the foregoing, now
owned or hereafter acquired, and including any of the foregoing which are or are
to become fixtures on real property.
"Excluded Collateral" means the Collateral set forth on Schedule 1.
------------------- ----------
"Financing Statements" has the meaning set forth in Section 3.
--------------------
"General Intangibles" means all general intangibles of the Company in
-------------------
any way relating to or arising out of or existing in connection with the
Accounts, Inventory and Equipment constituting Collateral, now existing or
hereafter acquired or arising and shall include Vendor Intellectual Property and
exclude Company Intellectual Property.
"Intellectual Property" means the following properties and assets:
---------------------
(i) all patents and patent applications, domestic or foreign and all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, all licenses relating to any of the foregoing and all income and
royalties with respect to any licenses, all rights arising therefrom and
pertaining thereto (collectively, "Patents"); (ii) all copyrights and
-------
applications for copyright, domestic or
FORM OF COMPANY SECURITY AGREEMENT
F-2.
<PAGE>
foreign, together with the underlying works of authorship (including titles),
and all rights of renewal and extension of copyright; (iii) all state (including
common law), federal and foreign trademarks, service marks and trade names, and
applications for registration of such trademarks, service marks and trade names,
all licenses relating to any of the foregoing and all income and royalties with
respect to any licenses, whether registered or unregistered and wherever
registered, and all rights arising therefrom and pertaining thereto and all
reissues, extensions and renewals thereof; (iv) all trade secrets, trade dress,
trade styles, logos, other source of business identifiers, mask-works, mask-work
registrations, mask-work applications, software, confidential information,
customer lists, license rights, advertising materials, operating manuals,
methods, processes, know-how, algorithms, formulae, databases, quality control
procedures, product, service and technical specifications, operating, production
and quality control manuals, sales literature, drawings, specifications, blue
prints, descriptions, inventions, name plates and catalogs; and (v) the entire
goodwill of or associated with the businesses now or hereafter conducted by the
Company connected with and symbolized by any of the aforementioned properties
and assets.
"Inventory" means any and all of the Company's inventory in all of its
---------
forms, wherever located, whether now owned or hereafter acquired, and in any
event includes all goods (including goods in transit) which are held for sale,
lease or other disposition, including those held for display or demonstration or
out on lease or consignment or to be furnished under a contract of service, or
which are raw materials, work in process, finished goods or materials used or
consumed in the Company's business, and the resulting product or mass, and all
repossessed, returned, rejected, reclaimed and replevied goods, together with
all parts, components, supplies and other materials used or usable in connection
with the manufacture, production, packing, shipping, advertising, selling or
furnishing of such goods; and all other items hereafter acquired by the Company
by way of substitution, replacement, return, repossession or otherwise, and all
additions and accessions thereto, and any Document representing or relating to
any of the foregoing at any time.
"Proceeds" means whatever is receivable or received from or upon the
--------
sale, lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Collateral or other assets of the Company,
including "proceeds" as defined at UCC Section 9306, any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to or for the account of the
Company from time to time with respect to any of the Collateral, any and all
payments (in any form whatsoever) made or due and payable to the Company from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of governmental authority), any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral or for or on account of any damage or injury to or
conversion of any Collateral by any Person, any and all other tangible or
intangible property received upon the sale or disposition of Collateral, and all
proceeds of proceeds.
"Rights to Payment" means all Accounts and any and all rights and
-----------------
claims to the payment or receipt of money or other forms of consideration of any
kind in, to and under all Documents, General Intangibles and Proceeds.
FORM OF COMPANY SECURITY AGREEMENT
F-3.
<PAGE>
"Secured Obligations" means the indebtedness, liabilities and other
-------------------
obligations of the Company to the Agent and the Banks under or in connection
with the Credit Agreement and the Notes, including all unpaid principal of the
Loans, all interest accrued thereon, all fees due under the Credit Agreement and
all other amounts payable by the Company to the Agent and the Banks thereunder
or in connection therewith, whether now existing or hereafter arising, and
whether due or to become due, absolute or contingent, liquidated or
unliquidated, determined or undetermined.
"UCC" means the Uniform Commercial Code as the same may, from time to
---
time, be in effect in the State of California; provided, however, in the event
-------- -------
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of definitions
related to such provisions.
"Vendor Intellectual Property" means any Intellectual Property owned
----------------------------
by or originating with a vendor from whom Company purchased Equipment, where
such Intellectual Property (i) accompanied the sale of such Equipment to
Company, (ii) which Company utilized or accessed in the operation of such
Equipment, (iii) to which Company was licensed, either expressly or by
implication, and (iv) as to which Vendor placed no restrictions on transfer in
connection with the resale of Equipment.
(c) Terms Defined in UCC. Where applicable and except as otherwise
--------------------
defined herein, terms used in this Agreement shall have the meanings assigned to
them in the UCC.
(d) Interpretation. The rules of interpretation set forth in Section
--------------
1.03 of the Credit Agreement shall be applicable to this Agreement and are
incorporated herein by this reference.
SECTION 2 Security Interest.
-----------------
(a) Grant of Security Interest. As security for the payment and
--------------------------
performance of the Secured Obligations, the Company hereby pledges, assigns,
transfers, hypothecates and sets over to the Agent, for itself and on behalf of
and for the ratable benefit of the Banks, and hereby grants to the Agent, for
itself and on behalf of and for the ratable benefit of the Banks, a security
interest in all of the Company's right, title and interest in, to and under the
following property, wherever located and whether now existing or owned or
hereafter acquired or arising but excluding the Company's right, title and
interest in, to and under the Excluded Collateral (collectively, the
"Collateral"): (i) all Accounts; (ii) all Documents; (iii) all Equipment; (iv)
----------
all General Intangibles; (v) all Inventory; (vi) all Books; and (vii) all
products and Proceeds of any and all of the foregoing.
FORM OF COMPANY SECURITY AGREEMENT
F-4.
<PAGE>
(b) Continuing Security Interest. The Company agrees that this
----------------------------
Agreement shall create a continuing security interest in the Collateral which
shall remain in effect until terminated in accordance with Section 22.
(c) Excluded General Intangibles. Notwithstanding the foregoing
----------------------------
provisions of this Section 2, the grant of a security interest as provided
herein shall not extend to, and the term "Collateral" shall not include, any
General Intangibles of the Company (whether owned or held as licensee or lessee,
or otherwise), to the extent that (i) such General Intangibles are not
assignable or capable of being encumbered as a matter of law or under the terms
of the license, lease or other agreement applicable thereto (but solely to the
extent that any such restriction shall be enforceable under applicable law),
without the consent of the licensor or lessor thereof or other applicable party
thereto and (ii) such consent has not been obtained; provided, however, that the
-------- -------
foregoing grant of security interest shall extend to, and the term "Collateral"
shall include, (A) any General Intangible which is an Account or a proceed of,
or otherwise related to the enforcement or collection of, any Account, or goods
which are the subject of any Account, (B) any and all proceeds of any General
Intangibles which are otherwise excluded to the extent that the assignment or
encumbrance of such proceeds is not so restricted, and (C) upon obtaining the
consent of any such licensor, lessor or other applicable party's consent with
respect to any such otherwise excluded General Intangibles, such General
Intangibles as well as any and all proceeds thereof that might have theretofore
have been excluded from such grant of a security interest and the term
"Collateral".
SECTION 3 Perfection Procedures. The Company shall execute and
---------------------
deliver at any time and from time to time after execution of this Agreement all
other or additional financing statements, continuation financing statements,
termination statements, security agreements, chattel mortgages, assignments,
patent, copyright and trademark collateral assignments, fixture filings,
warehouse receipts, documents of title, affidavits, reports, notices, schedules
of account, letters of authority and all other documents and instruments, in
form satisfactory to the Agent (the "Financing Statements"), and take all other
--------------------
action, as the Agent may request, to perfect and continue perfected, maintain
the priority of or provide notice of the Agent's security interest in the
Collateral and to accomplish the purposes of this Agreement. Without limiting
the generality of the foregoing, (i) on or prior to the Closing Date the Company
shall execute and deliver Financing Statements for filing in the Filing Offices,
and (ii) after the Closing Date the Company shall execute and deliver Financing
Statements for filing in the appropriate filing office or offices in any state
identified by the Company in a notice delivered to the Agent pursuant to Section
5(e).
SECTION 4 Representations and Warranties. In addition to the
------------------------------
representations and warranties of the Company set forth in the Credit Agreement,
which are incorporated herein by this reference, the Company represents and
warrants to each Bank and the Agent that:
(a) Location of Chief Executive Office and Collateral. The Company's
-------------------------------------------------
chief executive office and principal place of business is located at the address
set forth in Part 1 of Schedule 1.
----------
(b) Locations of Books. All locations where Books pertaining to the
------------------
Rights to Payment are kept, including all equipment necessary for accessing such
Books and the names
FORM OF COMPANY SECURITY AGREEMENT
F-5.
<PAGE>
and addresses of all service bureaus, computer or data processing companies and
other Persons keeping any Books or collecting Rights to Payment for the Company,
are set forth in Part 2 of Schedule 1.
----------
(c) Trade Names and Trade Styles. All trade names and trade styles
----------------------------
under which the Company presently conducts its business operations are set forth
in Part 3 of Schedule 1.
----------
(d) Ownership of Collateral. The Company is, and, except as permitted
-----------------------
by Section 5(i), will continue to be, the sole and complete owner of the
Collateral (or, in the case of after-acquired Collateral, at the time the
Company acquires rights in such Collateral, will be the sole and complete owner
thereof), free from any Lien other than Permitted Liens.
(e) Enforceability; Priority of Security Interest. (i) This Agreement
---------------------------------------------
creates a security interest which is enforceable against the Collateral in which
the Company now has rights and will create a security interest which is
enforceable against the Collateral in which the Company hereafter acquires
rights at the time the Company acquires any such rights; and (ii) the Agent has
a perfected and first priority security interest in the Collateral covered by
the Financing Statements filed in the Filing Offices and any other Financing
Statements required hereunder, and will have a perfected security interest in
the Collateral, subject only to Permitted Liens, referred to in the Financing
Statements filed in the Filing Offices, and any other Financing Statements filed
hereunder, in which the Company hereafter acquires rights at the time the
Company acquires any such rights, in each case securing the payment and
performance of the Secured Obligations, and free from any Lien other than
Permitted Liens.
(f) Rights to Payment.
-----------------
(i) The Rights to Payment represent valid, binding and enforceable
obligations of the account debtors or other Persons obligated thereon,
representing undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto, and are and
will be genuine, free from Liens, and not subject to any adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, discounts, retainages,
holdbacks or conditions precedent of any kind of character, except to the extent
reflected by the Company's reserves for uncollectible Rights to Payment or to
the extent, if any, that such account debtors or other Persons may be entitled
to normal and ordinary course trade discounts, returns, adjustments and
allowances in accordance with Section 5(k) or otherwise occurring in the
ordinary course of business;
(ii) all Rights to Payment comply in all material respects with all
applicable laws concerning form, content and manner of preparation and
execution, including where applicable any federal or state consumer credit laws;
(iii) the Company has not assigned any of its rights under the Rights
to Payment except as provided in this Agreement or as set forth in the other
Loan Documents; and
(iv) all statements made, all unpaid balances and all other
information in the Books and other documentation relating to the Rights to
Payment are true and correct in all material respects and in all material
respects what they purport to be.
FORM OF COMPANY SECURITY AGREEMENT
F-6.
<PAGE>
SECTION 5 Covenants. In addition to the covenants of the Company set
---------
forth in the Credit Agreement, which are incorporated herein by this reference,
so long as any of the Secured Obligations remain unsatisfied or any Bank shall
have any Commitment, the Company agrees that:
(a) Defense of Collateral. The Company will appear in and defend any
---------------------
action, suit or proceeding which may affect to a material extent its title to,
or right or interest in, or the Agent's right or interest in, any material
portion of Collateral.
(b) Preservation of Collateral. The Company will do and perform all
--------------------------
reasonable acts that may be necessary and appropriate to maintain, preserve and
protect any material Collateral.
(c) Compliance with Laws, Etc. The Company will comply with all laws,
-------------------------
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral, except where the failure to do so could not reasonably be expected
to have a material adverse effect on the Collateral position of the Agent and
the Banks.
(d) Location of Books and Chief Executive Office. The Company will
--------------------------------------------
give at least 30 days' prior written notice to the Agent of (A) any changes in
any such location where Books pertaining to the Rights to Payment are kept,
including any change of name or address of any service bureau, computer or data
processing company or other Person preparing or maintaining Books or collecting
material Rights to Payment for the Company or (B) any change in the location of
the Company's chief executive office or principal place of business.
(e) Location of Collateral. If any Inventory of the Company shall be
----------------------
relocated to, or otherwise be located in, a state of the United States in which
a Financing Statement has not already been filed with respect to such Inventory,
and the aggregate value of such Inventory equals or exceeds $5,000,000 (as
determined by the Company using net book values as determined in accordance with
GAAP), the Company will give the Agent prompt notice thereof (and in any event
not later than one Business Day after becoming aware thereof).
(f) Change in Name, Identity or Structure. The Company will give at
-------------------------------------
least 30 days' prior written notice to the Agent of (i) any change in its name
and (ii) any changes in its identity or structure in any manner which might make
any Financing Statement filed hereunder incorrect or misleading.
(g) Maintenance of Records. The Company will keep Books with respect
----------------------
to the Collateral which are accurate in all material respects.
(h) Invoicing of Sales. The Company will invoice all of its sales and
------------------
maintain proof of delivery and customer acceptance of goods in accordance with
past practices.
(i) Liens. The Company will keep the Collateral free of all Liens
-----
except Permitted Liens.
FORM OF COMPANY SECURITY AGREEMENT
F-7.
<PAGE>
(j) Expenses. The Company will pay all expenses of protecting,
--------
storing, warehousing, insuring, handling and shipping the Collateral.
(k) Rights to Payment. The Company will:
-----------------
(i) with such frequency as the Agent may require upon the occurrence
and during the continuance of an Event of Default or after any acceleration of
the Secured Obligations (but in no event more than once during any calendar
month), furnish to the Agent full and complete reports, in form and substance
reasonably satisfactory to the Agent, with respect to the Accounts, including
information as to concentration, aging, identity of account debtors, letters of
credit securing Accounts, disputed Accounts and other matters, as the Agent
shall reasonably request;
(ii) give only normal discounts, allowances and credits as to
Accounts and other Rights to Payment, in the ordinary course of business,
according to normal trade practices, and enforce all Accounts and other Rights
to Payment, and during the existence of an Event of Default, take all such
action to such end as may from time to time be reasonably requested by the
Agent, except that the Company may grant any extension of the time for payment
or enter into any agreement to make a rebate or otherwise to reduce the amount
owing on or with respect to, or compromise or settle for less than the full
amount thereof, any Account or other Right to Payment, in the ordinary course of
business, according to normal trade practices;
(iii) if any discount, allowance, credit, extension of time for
payment, agreement to make a rebate or otherwise to reduce the amount owing on,
or compromise or settle, an Account or other Right to Payment exists or occurs,
or if, to the knowledge of the Company, any dispute, setoff, claim, counterclaim
or defense exists with respect to an Account or other Right to Payment, disclose
such fact in the Books relating to such Account or other Right to Payment;
(iv) to the extent required in accordance with its sound business
judgment perform and comply in all material respects with its obligations in
respect of the Accounts and other Rights to Payment;
(v) upon the request of the Agent at any time that Loans are
outstanding (A) upon the occurrence and during the continuance of an Event of
Default, notify all or any designated portion of the account debtors and other
obligors on the Rights to Payment of the security interest hereunder, and (B)
upon the occurrence and during the continuance of an Event of Default, notify
the account debtors and other obligors on the Rights to Payment or any
designated portion thereof that payment shall be made directly to the Agent or
to such other Person or location as the Agent shall specify; and
(vi) upon the occurrence and during the continuance of any Event of
Default, upon the request of Agent, at any time that Loans are outstanding,
establish such lockbox or similar arrangements for the payment of the Accounts
and other Rights to Payment as the Agent shall require.
(l) Instruments, Etc. Upon the request of the Agent, the Company will
----------------
(i) immediately deliver to the Agent, or an agent designated by it,
appropriately endorsed or accompanied by appropriate instruments of transfer or
assignment, Documents, all letters of credit relating to the Collateral, and all
Rights to Payment at any time evidenced by promissory
FORM OF COMPANY SECURITY AGREEMENT
F-8.
<PAGE>
notes, trade acceptances or other instruments, (ii) mark all Documents with such
legends as the Agent shall reasonably specify, and (iii) obtain consents from
any letter of credit issuers with respect to the assignment to the Agent of any
Letter of Credit Proceeds.
(m) Inventory. The Company will:
---------
(i) at such times as the Agent shall request, prepare and deliver to
the Agent a report of all Inventory, in form and substance reasonably
satisfactory to the Agent; and
(ii) upon the reasonable request of the Agent, take a physical
listing of the Inventory (including specification of all locations thereof) and
promptly deliver a copy of such physical listing to the Agent.
(n) Notices, Reports and Information. The Company will (i) notify the
--------------------------------
Agent of any other modifications of or additions to the information contained in
Schedule 1; (ii) notify the Agent of any material claim made or asserted against
- ----------
the Collateral by any Person or other event other than market changes which
could materially adversely affect the value of the Collateral or the Agent's
Lien thereon; (iii) furnish to the Agent such statements and schedules further
identifying and describing the Collateral and such other reports and other
information in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail; and (iv) upon the reasonable request of the
Agent make such demands and requests for information and reports as the Company
is entitled to make in respect of the Collateral.
(o) [reserved]
(p) Insurance. All insurance maintained by the Company, as required
---------
under Section 6.06 of the Credit Agreement, with respect to Collateral as well
as all "Property" referred to in the Deeds of Trust shall name the Agent as loss
payee/mortgagee and/or as additional insured, for the benefit of the Banks, as
their interests may appear. Upon request of the Agent or any Bank, the Company
shall furnish the Agent, with sufficient copies for each Bank, at reasonable
intervals (but not more than once per calendar year) a certificate of a
Responsible Officer of the Company (and, if requested by the Agent, any
insurance broker of the Company) setting forth the nature and extent of all
insurance maintained by the Company and its Subsidiaries in accordance with this
Section or any other Collateral Documents. Additionally, the Company shall also
furnish to the Agent at least once in each calendar year a certificate of the
Company's insurance broker or other insurance specialist stating that all
premiums then due on the policies relating to such insurance required hereunder
and under the other Collateral Documents have been paid and that such policies
are in full force and effect. All insurance policies required under this
subsection shall provide that they shall not be terminated or cancelled nor
shall any such policy be materially changed without at least 30 days' prior
written notice to the Company and the Agent. Receipt of notice of termination
or cancellation of any such insurance policies or material reduction of
coverages or amounts thereunder shall entitle the Agent to renew any such
policies, cause the coverages and amounts thereof to be maintained at levels
required pursuant to the first sentence of this subsection or otherwise to
obtain similar insurance in place of such policies, in each case at the expense
of the Company.
SECTION 6 Rights to Payment.
-----------------
FORM OF COMPANY SECURITY AGREEMENT
F-9.
<PAGE>
(a) Collection of Rights to Payment. Until the Agent exercises its
-------------------------------
rights hereunder to collect Rights to Payment, the Company shall endeavor in the
first instance diligently to collect all amounts due or to become due on or with
respect to the Rights to Payment unless in its reasonable business judgment it
decides not to collect a Right to Payment. At the request of the Agent, upon
and after the occurrence and during the continuance of any Event of Default if
Loans are outstanding, all remittances received by the Company shall be held in
trust for the Agent and, in accordance with the Agent's instructions, remitted
to the Agent or deposited to an account with the Agent in the form received
(with any necessary endorsements or instruments of assignment or transfer).
SECTION 7 Authorization; Agent Appointed Attorney-in-Fact. The Agent
-----------------------------------------------
shall have the right to, in the name of the Company, or in the name of the Agent
or otherwise, without notice to or assent by the Company, and the Company hereby
constitutes and appoints the Agent (and any of the Agent's officers or employees
or agents designated by the Agent) as the Company's true and lawful attorney-in-
fact, with full power and authority to:
(i) if the Company fails to do so promptly, sign any of the Financing
Statements which must be executed or filed to perfect or continue perfected,
maintain the priority of or provide notice of the Agent's security interest in
the Collateral;
(ii) take possession of and endorse any notes, acceptances, checks,
drafts, money orders or other forms of payment or security and collect any
Proceeds of any Collateral;
(iii) sign and endorse any invoice or bill of lading relating to any
of the Collateral, warehouse or storage receipts, drafts against customers or
other obligors, assignments, notices of assignment, verifications and notices to
customers or other obligors;
(iv) send requests for verification of Rights to Payment to the
customers or other obligors of the Company;
(v) contact, or direct the Company to contact, all account debtors
and other obligors on the Rights to Payment and instruct such account debtors
and other obligors to make all payments directly to the Agent;
(vi) assert, adjust, sue for, compromise or release any claims under
any policies of insurance;
(vii) notify each Person maintaining lockbox or similar arrangements
for the payment of the Rights to Payment to remit all amounts representing
collections on the Rights to Payment directly to the Agent;
(viii) ask, demand, collect, receive and give acquittances and
receipts for any and all Rights to Payment, enforce payment or any other rights
in respect of the Rights to Payment and other Collateral, grant consents, agree
to any amendments, modifications or waivers of the agreements and documents
governing the Rights to Payment and other Collateral, and otherwise file any
claims, take any action or institute, defend, settle or adjust any actions,
suits or proceedings with respect to the Collateral, as the Agent may deem
necessary or desirable to
FORM OF COMPANY SECURITY AGREEMENT
F-10.
<PAGE>
maintain, preserve and protect the Collateral, to collect the Collateral or to
enforce the rights of the Agent with respect to the Collateral;
(ix) execute any and all applications, documents, papers and
instruments necessary for the Agent to use the Intellectual Property and grant
or issue any exclusive or non-exclusive license or sublicense with respect to
any Intellectual Property in connection with the exercise of the Agent's rights
and remedies under Section 10;
(x) execute any and all endorsements, assignments or other documents
and instruments necessary to sell, lease, assign, convey or otherwise transfer
title in or dispose of the Collateral; and
(xi) execute any and all such other documents and instruments, and do
any and all acts and things for and on behalf of the Company, which the Agent
may deem necessary or advisable to (A) realize upon the Collateral, and (B)
maintain, protect, and preserve the Collateral and the Agent's security interest
therein and to accomplish the purposes of this Agreement.
The Agent agrees that, except upon and after the occurrence and during the
continuance of an Event of Default and while Loans are outstanding, it shall not
exercise the power of attorney, or any rights granted to the Agent, pursuant to
clauses (ii) through (x) and (xi)(A). The foregoing power of attorney is
coupled with an interest and irrevocable so long as the Banks have any
Commitments or the Secured Obligations have not been paid and performed in full.
The Company hereby ratifies, to the extent permitted by law, all that the Agent
shall lawfully and in good faith do or cause to be done by virtue of and in
compliance with this Section 7.
SECTION 8 Agent Performance of Company Obligations. If the Company
----------------------------------------
fails to do so promptly after notice, the Agent may perform or pay any
obligation which the Company has agreed to perform or pay under or in connection
with this Agreement, and the Company shall reimburse the Agent on demand for any
amounts paid by the Agent pursuant to this Section 8.
SECTION 9 Agent's Duties. Notwithstanding any provision contained in
--------------
this Agreement, the Agent shall have no duty to exercise any of the rights,
privileges or powers afforded to it and shall not be responsible to the Company
or any other Person for any failure to do so or delay in doing so. Beyond the
exercise of reasonable care to assure the safe custody of Collateral in the
Agent's possession and the accounting for moneys actually received by the Agent
hereunder, the Agent shall have no duty or liability to exercise or preserve any
rights, privileges or powers pertaining to the Collateral.
SECTION 10 Remedies.
--------
(a) Remedies. Upon the occurrence and during the continuance of an
--------
Event of Default and acceleration of the Secured Obligations under Section 8.02
of the Credit Agreement, the Agent shall have, in addition to all other rights
and remedies granted to it in this Agreement, the Credit Agreement or any other
Loan Document, all rights and remedies of a secured party under the UCC and
other applicable laws. Without limiting the generality of the foregoing, the
Company agrees that upon the occurrence and during the continuance of an Event
of Default and acceleration of the Secured Obligations under Section 8.02 of the
Credit
FORM OF COMPANY SECURITY AGREEMENT
F-11.
<PAGE>
Agreement the Agent may exercise the following rights and remedies, in
accordance with the direction or consent of the Majority Banks:
(i) The Agent may peaceably and without notice enter any premises of
the Company, and using reasonable care, take possession of any Collateral,
remove or dispose of all or part of the Collateral on any premises of the
Company or elsewhere, or, in the case of Equipment, render it nonfunctional, and
otherwise collect, receive, appropriate and realize upon all or any part of the
Collateral, and demand, give receipt for, settle, renew, extend, exchange,
compromise, adjust, or sue for all or any part of the Collateral, as the Agent
may determine.
(ii) The Agent may require the Company to assemble all or any part of
the Collateral and make it available to the Agent, at any place and time
designated by the Agent.
(iii) The Agent may secure the appointment of a receiver of the
Collateral or any part thereof (to the extent and in the manner provided by
applicable law).
(iv) The Agent may sell, resell, lease, use, assign, transfer or
otherwise dispose of any or all of the Collateral in its then condition or
following any commercially reasonable preparation or processing (utilizing in
connection therewith any of the Company's assets, without charge or liability to
the Agent therefor, except that Company Intellectual Property may only be used
as provided in Subsection (b)) at public or private sale, by one or more
contracts, in one or more parcels, at the same or different times, for cash or
credit or for future delivery without assumption of any credit risk, all as the
Agent deems advisable; provided, however, that the Company shall be credited
-------- -------
with the net proceeds of sale only when such proceeds are finally collected by
the Agent. The Agent and each of the Banks shall have the right upon any such
public sale, and, to the extent permitted by law, upon any such private sale, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption, which right or equity of redemption the Company hereby
releases, to the extent permitted by law. The Company hereby agrees that the
sending of notice by ordinary mail, postage prepaid, to the address of the
Company set forth in the Credit Agreement, of the place and time of any public
sale or of the time after which any private sale or other intended disposition
is to be made, shall be deemed reasonable notice thereof if such notice is sent
ten days prior to the date of such sale or other disposition or the date on or
after which such sale or other disposition may occur, provided that the Agent
--------
may provide the Company shorter notice or no notice, to the extent permitted by
the UCC or other applicable law.
(b) License. Solely for the purpose of enabling the Agent to exercise
-------
its rights and remedies under this Section 10 or otherwise in connection with
the disposition of Inventory in accordance with this Agreement, the Company
hereby grants to the Agent an irrevocable, non-exclusive and assignable license
(exercisable without payment or royalty or other compensation to the Company) of
the Intellectual Property necessary to sell or otherwise dispose of Inventory,
provided that such license to use such Intellectual Property does not include
the right to manufacture Inventory.
(c) Application of Proceeds. The cash proceeds actually received from
-----------------------
the sale or other disposition or collection of Collateral, and any other amounts
received in respect of the Collateral the application of which is not otherwise
provided for herein, shall be applied as
FORM OF COMPANY SECURITY AGREEMENT
F-12.
<PAGE>
provided in the Credit Agreement. Any surplus thereof which exists after payment
and performance in full of the Secured Obligations shall be promptly paid over
to the Company or otherwise disposed of in accordance with the UCC or other
applicable law. The Company shall remain liable to the Agent and the Banks for
any deficiency which exists after any sale or other disposition or collection of
Collateral.
SECTION 11 Certain Waivers. The Company waives, to the fullest
---------------
extent permitted by law, (i) any right of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any, of
marshalling of the Collateral or other collateral or security for the Secured
Obligations; (ii) any right to require the Agent or the Banks (A) to proceed
against any Person, (B) to exhaust any other collateral or security for any of
the Secured Obligations, (C) to pursue any remedy in the Agent's or any of the
Banks' power, or (D) to make or give any presentments, demands for performance,
notices of nonperformance, protests, notices of protests or notices of dishonor
in connection with any of the Collateral; and (iii) all claims, damages, and
demands against the Agent or the Banks arising out of the repossession,
retention, sale or application of the proceeds of any sale of the Collateral,
other than any resulting from the gross negligence or willful misconduct of such
Person.
SECTION 12 Notices. All notices, requests or other communications
-------
hereunder shall be given in the manner and to the addresses specified in the
Credit Agreement. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon receipt by the addressee, or if
delivered, upon delivery.
SECTION 13 No Waiver; Cumulative Remedies. No failure to exercise
------------------------------
and no delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
SECTION 14 Costs and Expenses; Indemnification; Other Charges.
--------------------------------------------------
(a) Costs and Expenses. The Company shall:
------------------
(i) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent for all reasonable costs and expenses
incurred by it in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement and
any other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby; and
(ii) pay or reimburse the Agent, the Lead Arranger and each Bank for
all costs and expenses (including Attorney Costs) incurred by them in connection
FORM OF COMPANY SECURITY AGREEMENT
F-13.
<PAGE>
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement during the existence of an Event of Default or
after acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
(b) Indemnification. The Company shall indemnify, defend and hold the
---------------
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
- -------------------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time be imposed on, incurred by or asserted
against any such Person in favor of any third-party in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or arising out of this
Agreement or relating to the Collateral, whether or not any Indemnified Person
is a party thereto (all of the foregoing, collectively, the "Indemnified
-----------
Liabilities"); provided, that the Company shall have no obligation hereunder to
- ----------- --------
any Indemnified Person with respect to Indemnified Liabilities resulting from
the gross negligence or willful misconduct of such Indemnified Person.
(c) Other Charges. The Company agrees to indemnify the Agent and each
-------------
of the Banks against and hold each of them harmless from any and all present and
future stamp, transfer, documentary and other such taxes, levies, fees,
assessments and other charges made by any jurisdiction by reason of the
execution, delivery, performance and enforcement of this Agreement.
(d) Interest. Any amounts payable to the Agent or any Bank under this
--------
Section 14 or otherwise under this Agreement if not paid upon demand shall bear
interest from the date of such demand until paid in full, at the rate of
interest set forth in Section 2.08(c) of the Credit Agreement.
(e) Survival. The agreements in this Section shall survive payment of
--------
all other Secured Obligations.
SECTION 15 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank.
SECTION 16 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN
RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN
CALIFORNIA.
SECTION 17 Entire Agreement; Amendment. This Agreement, together
---------------------------
with the other Loan Documents, embodies the entire agreement and understanding
among the
FORM OF COMPANY SECURITY AGREEMENT
F-14.
<PAGE>
Company, the Banks and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof and shall not be amended except by the
written agreement of the parties as provided in the Credit Agreement.
SECTION 18 Severability. The illegality or unenforceability of any
------------
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
SECTION 19 Counterparts. This Agreement may be executed in any
------------
number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this Agreement may be delivered by any party hereto
or thereto either in the form of an executed original or an executed original
sent by facsimile transmission to be followed promptly by mailing of a hard copy
original, and that receipt by the Agent of a facsimile transmitted document
purportedly bearing the signature of a Bank of or the Company shall bind such
Bank or the Company, respectively, with the same force and effect as the
delivery of a hard copy original. Any failure by the Agent to receive the hard
copy executed original of such document shall not diminish the binding effect of
receipt of the facsimile transmitted executed original of such document of the
party whose hard copy page was not received by the Agent.
SECTION 20 Incorporation of Provisions of the Credit Agreement. To
---------------------------------------------------
the extent the Credit Agreement contains provisions of general applicability to
the Loan Documents, including any such provisions contained in Article X
thereof, such provisions are incorporated herein by this reference.
SECTION 21 No Inconsistent Requirements. The Company acknowledges
----------------------------
that this Agreement and the other Loan Documents may contain covenants and other
terms and provisions variously stated regarding the same or similar matters, and
agrees that all such covenants, terms and provisions are cumulative and all
shall be performed and satisfied in accordance with their respective terms.
SECTION 22 Termination. Upon the termination of the Commitments of
-----------
the Banks and payment and performance in full of all Secured Obligations, this
Agreement shall terminate and the Agent shall promptly execute and deliver to
the Company such documents and instruments reasonably requested by the Company
as shall be necessary to evidence termination of all security interests given by
the Company to the Agent hereunder; provided, however, that the obligations of
-------- -------
the Company under Section 14 shall survive such termination.
SECTION 23 Amendment and Restatement of Existing Security Agreement.
--------------------------------------------------------
From and after the Closing Date, this Agreement amends and restates the existing
Security Agreement dated as of June 16, 1998 between the Agent and the Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
FORM OF COMPANY SECURITY AGREEMENT
F-15.
<PAGE>
THE COMPANY
-----------
MICRON TECHNOLOGY, INC.
By __________________________
Title:
THE AGENT
---------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By __________________________
Title:
FORM OF COMPANY SECURITY AGREEMENT
F-16.
<PAGE>
SCHEDULE 1
to the Security Agreement
1. LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF
---------------------------------------------------------------------
COLLATERAL
----------
Chief Executive Office and Principal Place of Business:
8000 South Federal Way
Boise, Idaho 83707
2. LOCATIONS OF BOOKS PERTAINING TO RIGHTS TO PAYMENT
--------------------------------------------------
8000 South Federal Way
Boise, Idaho 83707
3. TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS NAMES;
-------------------------------------------------------------------------
ETC.
---
FORM OF COMPANY SECURITY AGREEMENT
F-17.
<PAGE>
EXHIBIT G
---------
FORM OF GUARANTOR SECURITY AGREEMENT
------------------------------------
THIS SECURITY AGREEMENT (this "Agreement"), dated as of September 1,
---------
1998, is made between Micron Semiconductor Products, Inc., an Idaho corporation
(the "Guarantor"), and Bank of America National Trust and Savings Association,
---------
as agent for itself and the Banks referred to below (in such capacity, the
"Agent").
- ------
RECITALS
--------
WHEREAS, Micron Technology, Inc. (the "Company"), certain financial
-------
institutions as lenders (the "Banks") and the Agent are parties to a Second
-----
Amended and Restated Revolving Credit Agreement dated as of September 1, 1998
among the Company, the Banks and the Agent (as amended, modified, renewed or
extended from time to time, the "Credit Agreement");
----------------
WHEREAS, to guarantee the indebtedness and other obligations of the
Company under the Credit Agreement, the Guarantor has made a Guaranty dated as
of the date hereof (as amended, modified, renewed or extended from time to time,
the "Guaranty") in favor of the Agent; and
--------
WHEREAS, it is a condition precedent to the occurrence of the Closing
Date under the Credit Agreement that the Guarantor enter into this Agreement and
grant to the Agent, for itself and for the ratable benefit of the Banks, the
security interests hereinafter provided to secure the obligations of the
Guarantor under the Guaranty described below.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Definitions; Interpretation.
---------------------------
(a) Terms Defined in Credit Agreement. All capitalized terms used in
---------------------------------
this Agreement and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
(b) Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings:
"Accounts" means any and all accounts receivable owed to the
--------
Guarantor, whether now existing or hereafter acquired or arising, arising out of
or in connection with the sale or lease of merchandise, goods or commodities or
the rendering of services or arising from any other transaction, however
evidenced, and whether or not earned by performance, all guaranties, indemnities
and security with respect to the foregoing, and all letters of credit relating
thereto, in each case whether now existing or hereafter acquired or arising.
FORM OF GUARANTOR SECURITY AGREEMENT
G-1.
<PAGE>
"Books" means all books, records and other written, electronic or
-----
other documentation in whatever form maintained now or hereafter by or for the
Guarantor in connection with the ownership of the Collateral or evidencing or
containing information relating to the Collateral, including: (i) ledgers; (ii)
records indicating, summarizing, or evidencing the Collateral), business
operations or financial condition; (iii) computer programs and software; (iv)
computer discs, tapes, files, manuals, spreadsheets; (v) computer printouts and
output of whatever kind; (vi) any other computer prepared or electronically
stored, collected or reported information and equipment of any kind; and (vii)
any and all other rights now or hereafter arising out of any contract or
agreement between the Guarantor and any service bureau, computer or data
processing company or other Person charged with preparing or maintaining any of
the Guarantor's books or records or with credit reporting, including with regard
to the Guarantor's Accounts.
"Collateral" has the meaning set forth in Section 2.
----------
"Documents" means any and all documents of title, bills of lading,
---------
dock warrants, dock receipts, warehouse receipts and other documents of the
Guarantor relating to Collateral, whether or not negotiable, and includes all
other documents which purport to be issued by a bailee or agent and purport to
cover goods in any bailee's or agent's possession which are either identified or
are fungible portions of an identified mass, including such documents of title
made available to the Guarantor for the purpose of ultimate sale or exchange of
goods or for the purpose of loading, unloading, storing, shipping,
transshipping, manufacturing, processing or otherwise dealing with goods in a
manner preliminary to their sale or exchange, in each case whether now existing
or hereafter acquired or arising.
"Equipment" means all now existing or hereafter acquired equipment of
---------
the Guarantor in all of its forms, located at the Idaho Facility and the Utah
Facility, and including any and all machinery, furniture, equipment, furnishings
and fixtures in which the Guarantor now or hereafter acquires any right, and all
other goods and tangible personal property (other than Inventory), including
tools, parts and supplies, automobiles, trucks, tractors and other vehicles,
computer and other electronic data processing equipment and other office
equipment, Vendor Intellectual Property, and all additions, substitutions,
replacements, parts, accessories, and accessions to and for the foregoing, now
owned or hereafter acquired, and including any of the foregoing which are or are
to become fixtures on real property.
"Excluded Collateral" means the Collateral set forth on Schedule 1.
------------------- ----------
"Financing Statements" has the meaning set forth in Section 3.
--------------------
"General Intangibles" means all general intangibles of the Guarantor
-------------------
in any way relating to or arising out of or existing in connection with the
Accounts, Inventory and Equipment constituting Collateral, now existing or
hereafter acquired or arising and shall include Vendor Intellectual Property and
exclude Guarantor Intellectual Property.
"Guarantor Documents" has the meaning set forth in the Guaranty.
-------------------
FORM OF GUARANTOR SECURITY AGREEMENT
G-2.
<PAGE>
"Guarantor Intellectual Property" means any Intellectual Property
-------------------------------
owned or held by the Guarantor or in which the Guarantor otherwise has any
interest that allows for transfer or sublicense to third parties, now existing
or hereafter acquired or arising, whether or not relating to or arising out of
or existing in connection with the Equipment.
"Intellectual Property" means the following properties and assets:
---------------------
(i) all patents and patent applications, domestic or foreign, and all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, all licenses relating to any of the foregoing and all income and
royalties with respect to any licenses, all rights arising therefrom and
pertaining thereto (collectively, "Patents"); (ii) all copyrights and
-------
applications for copyright, domestic or foreign, together with the underlying
works of authorship (including titles), and all rights of renewal and extension
of copyright; (iii) all state (including common law), federal and foreign
trademarks, service marks and trade names, and applications for registration of
such trademarks, service marks and trade names, all licenses relating to any of
the foregoing and all income and royalties with respect to any licenses, whether
registered or unregistered and wherever registered, and all rights arising
therefrom and pertaining thereto and all reissues, extensions and renewals
thereof; (iv) all trade secrets, trade dress, trade styles, logos, other source
of business identifiers, mask-works, mask-work registrations, mask-work
applications, software, confidential information, customer lists, license
rights, advertising materials, operating manuals, methods, processes, know-how,
algorithms, formulae, databases, quality control procedures, product, service
and technical specifications, operating, production and quality control manuals,
sales literature, drawings, specifications, blue prints, descriptions,
inventions, name plates and catalogs; and (v) the entire goodwill of or
associated with the businesses now or hereafter conducted by the Guarantor
connected with and symbolized by any of the aforementioned properties and
assets.
"Inventory" means any and all of the Guarantor's inventory in all of
---------
its forms, wherever located, whether now owned or hereafter acquired, and in any
event includes all goods (including goods in transit) which are held for sale,
lease or other disposition, including those held for display or demonstration or
out on lease or consignment or to be furnished under a contract of service, or
which are raw materials, work in process, finished goods or materials used or
consumed in the Guarantor's business, and the resulting product or mass, and all
repossessed, returned, rejected, reclaimed and replevied goods, together with
all parts, components, supplies and other materials used or usable in connection
with the manufacture, production, packing, shipping, advertising, selling or
furnishing of such goods; and all other items hereafter acquired by the
Guarantor by way of substitution, replacement, return, repossession or
otherwise, and all additions and accessions thereto, and any Document
representing or relating to any of the foregoing at any time.
"Proceeds" means whatever is receivable or received from or upon the
--------
sale, lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Collateral or other assets of the Guarantor,
including "proceeds" as defined at UCC Section 9306, any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to or for the account of the
Guarantor from time to time with respect to any of the Collateral, any and all
payments (in any form whatsoever) made or due and payable to the Guarantor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any
FORM OF GUARANTOR SECURITY AGREEMENT
G-3.
<PAGE>
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral or for or on
account of any damage or injury to or conversion of any Collateral by any
Person, any and all other tangible or intangible property received upon the sale
or disposition of Collateral, and all proceeds of proceeds.
"Rights to Payment" means all Accounts and any and all rights and
-----------------
claims to the payment or receipt of money or other forms of consideration of any
kind in, to and under all Documents, General Intangibles and Proceeds.
"Secured Obligations" means the "Guaranteed Obligations" of the
-------------------
Guarantor as defined in the Guaranty.
"UCC" means the Uniform Commercial Code as the same may, from time to
---
time, be in effect in the State of California; provided, however, in the event
-------- -------
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of definitions
related to such provisions.
"Vendor Intellectual Property" means any Intellectual Property owned
----------------------------
by or originating with a vendor from whom Guarantor purchased Equipment, where
such Intellectual Property (i) accompanied the sale of such Equipment to
Guarantor, (ii) which Guarantor utilized or accessed in the operation of such
Equipment, (iii) to which Guarantor was licensed, either expressly or by
implication, and (iv) as to which Vendor placed no restrictions on transfer in
connection with the resale of Equipment.
(c) Terms Defined in UCC. Where applicable and except as otherwise
--------------------
defined herein, terms used in this Agreement shall have the meanings assigned to
them in the UCC.
(d) Interpretation. The rules of interpretation set forth in Section
--------------
1.03 of the Credit Agreement shall be applicable to this Agreement and are
incorporated herein by this reference.
SECTION 2 Security Interest.
-----------------
(a) Grant of Security Interest. As security for the payment and
--------------------------
performance of the Secured Obligations, the Guarantor hereby pledges, assigns,
transfers, hypothecates and sets over to the Agent, for itself and on behalf of
and for the ratable benefit of the Banks, and hereby grants to the Agent, for
itself and on behalf of and for the ratable benefit of the Banks, a security
interest in all of the Guarantor's right, title and interest in, to and under
the following property, wherever located and whether now existing or owned or
hereafter acquired or arising but excluding the Guarantor's right, title and
interest in, to and under the Excluded Collateral (collectively, the
"Collateral"): (i) all Accounts; (ii) all Documents; (iii) all Equipment; (iv)
----------
all
FORM OF GUARANTOR SECURITY AGREEMENT
G-4.
<PAGE>
General Intangibles; (v) all Inventory; (vi) all Books; and (vii) all products
and Proceeds of any and all of the foregoing.
(b) Continuing Security Interest. The Guarantor agrees that this
----------------------------
Agreement shall create a continuing security interest in the Collateral which
shall remain in effect until terminated in accordance with Section 22.
(c) Excluded General Intangibles. Notwithstanding the foregoing
----------------------------
provisions of this Section 2, the grant of a security interest as provided
herein shall not extend to, and the term "Collateral" shall not include, any
General Intangibles of the Guarantor (whether owned or held as licensee or
lessee, or otherwise), to the extent that (i) such General Intangibles are not
assignable or capable of being encumbered as a matter of law or under the terms
of the license, lease or other agreement applicable thereto (but solely to the
extent that any such restriction shall be enforceable under applicable law),
without the consent of the licensor or lessor thereof or other applicable party
thereto and (ii) such consent has not been obtained; provided, however, that the
-------- -------
foregoing grant of security interest shall extend to, and the term "Collateral"
shall include, (A) any General Intangible which is an Account or a proceed of,
or otherwise related to the enforcement or collection of, any Account, or goods
which are the subject of any Account, (B) any and all proceeds of any General
Intangibles which are otherwise excluded to the extent that the assignment or
encumbrance of such proceeds is not so restricted, and (C) upon obtaining the
consent of any such licensor, lessor or other applicable party's consent with
respect to any such otherwise excluded General Intangibles, such General
Intangibles as well as any and all proceeds thereof that might have theretofore
have been excluded from such grant of a security interest and the term
"Collateral".
SECTION 3 Perfection Procedures. The Guarantor shall execute and
---------------------
deliver to the Agent at any time and from time to time after execution of this
Agreement all other or additional financing statements, continuation financing
statements, termination statements, security agreements, chattel mortgages,
assignments, patent, copyright and trademark collateral assignments, fixture
filings, warehouse receipts, documents of title, affidavits, reports, notices,
schedules of account, letters of authority and all other documents and
instruments, in form satisfactory to the Agent (the "Financing Statements"), and
--------------------
take all other action, as the Agent may request, to perfect and continue
perfected, maintain the priority of or provide notice of the Agent's security
interest in the Collateral and to accomplish the purposes of this Agreement.
Without limiting the generality of the foregoing, (i) on or prior to the Closing
Date the Guarantor shall execute and deliver Financing Statements for filing in
the Filing Offices, and (ii) after the Closing Date the Guarantor shall execute
and deliver Financing Statements for filing in the appropriate filing office or
offices in any state identified by the Guarantor in a notice delivered to the
Agent pursuant to Section 5(e).
SECTION 4 Representations and Warranties. In addition to the
------------------------------
representations and warranties of the Guarantor set forth in the Guaranty, which
are incorporated herein by this reference, the Guarantor represents and warrants
to each Bank and the Agent that:
FORM OF GUARANTOR SECURITY AGREEMENT
G-5.
<PAGE>
(a) Location of Chief Executive Office and Collateral. The
-------------------------------------------------
Guarantor's chief executive office and principal place of business is located at
the address set forth in Part 1 of Schedule 1.
----------
(b) Locations of Books. All locations where Books pertaining to the
------------------
Rights to Payment are kept, including all equipment necessary for accessing such
Books and the names and addresses of all service bureaus, computer or data
processing companies and other Persons keeping any Books or collecting Rights to
Payment for the Guarantor, are set forth in Part 2 of Schedule 1.
----------
(c) Trade Names and Trade Styles. All trade names and trade styles
----------------------------
under which the Guarantor presently conducts its business operations are set
forth in Part 3 of Schedule 1.
----------
(d) Ownership of Collateral. The Guarantor is, and, except as
-----------------------
permitted by Section 5(i), will continue to be, the sole and complete owner of
the Collateral (or, in the case of after-acquired Collateral, at the time the
Guarantor acquires rights in such Collateral, will be the sole and complete
owner thereof), free from any Lien other than Permitted Liens.
(e) Enforceability; Priority of Security Interest. (i) This Agreement
---------------------------------------------
creates a security interest which is enforceable against the Collateral in which
the Guarantor now has rights and will create a security interest which is
enforceable against the Collateral in which the Guarantor hereafter acquires
rights at the time the Guarantor acquires any such rights; and (ii) the Agent
has a perfected and first priority security interest in the Collateral covered
by the Financing Statements filed in the Filing Offices and any other Financing
Statements required hereunder, and will have a perfected security interest in
the Collateral, subject only to Permitted Liens, referred to in the Financing
Statements filed in the Filing Offices, and any other Financing Statements
required hereunder, in which the Guarantor hereafter acquires rights at the time
the Guarantor acquires any such rights, in each case securing the payment and
performance of the Secured Obligations, and free from any Lien other than
Permitted Liens.
(f) Rights to Payment.
-----------------
(i) The Rights to Payment represent valid, binding and enforceable
obligations of the account debtors or other Persons obligated thereon,
representing undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto, and are and
will be genuine, free from Liens, and not subject to any adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, discounts, retainages,
holdbacks or conditions precedent of any kind of character, except to the extent
reflected by the Guarantor's reserves for uncollectible Rights to Payment or to
the extent, if any, that such account debtors or other Persons may be entitled
to normal and ordinary course trade discounts, returns, adjustments and
allowances in accordance with Section 5(k) or otherwise occurring in the
ordinary course of business;
FORM OF GUARANTOR SECURITY AGREEMENT
G-6.
<PAGE>
(ii) all Rights to Payment comply in all material respects with all
applicable laws concerning form, content and manner of preparation and
execution, including where applicable any federal or state consumer credit laws;
(iii) the Guarantor has not assigned any of its rights under the
Rights to Payment except as provided in this Agreement or as set forth in the
other Loan Documents; and
(iv) all statements made, all unpaid balances and all other
information in the Books and other documentation relating to the Rights to
Payment are true and correct in all material respects and in all material
respects what they purport to be.
SECTION 5 Covenants. In addition to the covenants of the Guarantor
---------
set forth in the Guaranty, which are incorporated herein by this reference, so
long as any of the Secured Obligations remain unsatisfied or any Bank shall have
any Commitment, the Guarantor agrees that:
(a) Defense of Collateral. The Guarantor will appear in and defend
---------------------
any action, suit or proceeding which may affect to a material extent its title
to, or right or interest in, or the Agent's right or interest in, any material
portion of Collateral.
(b) Preservation of Collateral. The Guarantor will do and perform all
--------------------------
reasonable acts that may be necessary and appropriate to maintain, preserve and
protect any material Collateral.
(c) Compliance with Laws, Etc. The Guarantor will comply with all
-------------------------
laws, regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral, except where the failure to do so could not reasonably be expected
to have a material adverse effect on the Collateral position of the Agents and
the Banks.
(d) Location of Books and Chief Executive Office. The Guarantor will
--------------------------------------------
give at least 30 days' prior written notice to the Agent of (A) any changes in
any such location where Books pertaining to the Rights to Payment are kept,
including any change of name or address of any service bureau, computer or data
processing company or other Person preparing or maintaining Books or collecting
material Rights to Payment for the Guarantor or (B) any change in the location
of the Guarantor's chief executive office or principal place of business.
(e) Location of Collateral. If any Inventory of the Guarantor shall
----------------------
be relocated to, or otherwise be located in, a state of the United States in
which a Financing Statement has not already been filed with respect to such
Inventory, and the aggregate value of such Inventory equals or exceeds
$5,000,000 (as determined by the Guarantor using net book values as determined
in accordance with GAAP), the Company will give the Agent prompt notice thereof
(and in any event not later than one Business Day after becoming aware thereof).
(f) Change in Name, Identity or Structure. The Guarantor will give at
-------------------------------------
least 30 days' prior written notice to the Agent of (i) any change in its name
and (ii) any changes in its
FORM OF GUARANTOR SECURITY AGREEMENT
G-7.
<PAGE>
identity or structure in any manner which might make any Financing Statement
filed hereunder incorrect or misleading.
(g) Maintenance of Records. The Guarantor will keep Books with
----------------------
respect to the Collateral which are accurate in all material respects.
(h) Invoicing of Sales. The Guarantor will invoice all of its sales
------------------
and maintain proof of delivery and customer acceptance of goods in accordance
with past practices.
(i) Liens. The Guarantor will keep the Collateral free of all Liens
-----
except Permitted Liens.
(j) Expenses. The Guarantor will pay all expenses of protecting,
--------
storing, warehousing, insuring, handling and shipping the Collateral.
(k) Rights to Payment. The Guarantor will:
-----------------
(i) with such frequency as the Agent may require upon the occurrence
and during the continuance of an Event of Default or after any acceleration of
the Secured Obligations (but in no event more than once during any calendar
month), furnish to the Agent full and complete reports, in form and substance
reasonably satisfactory to the Agent, with respect to the Accounts, including
information as to concentration, aging, identity of account debtors, letters of
credit securing Accounts, disputed Accounts and other matters, as the Agent
shall reasonably request;
(ii) give only normal discounts, allowances and credits as to
Accounts and other Rights to Payment, in the ordinary course of business,
according to normal trade practices, and enforce all Accounts and other Rights
to Payment, and during the existence of an Event of Default, take all such
action to such end as may from time to time be reasonably requested by the
Agent, except that the Guarantor may grant any extension of the time for payment
or enter into any agreement to make a rebate or otherwise to reduce the amount
owing on or with respect to, or compromise or settle for less than the full
amount thereof, any Account or other Right to Payment, in the ordinary course of
business, according to normal trade practices;
(iii) if any discount, allowance, credit, extension of time for
payment, agreement to make a rebate or otherwise to reduce the amount owing on,
or compromise or settle, an Account or other Right to Payment exists or occurs,
or if, to the knowledge of the Guarantor, any dispute, setoff, claim,
counterclaim or defense exists with respect to an Account or other Right to
Payment, disclose such fact in the Books relating to such Account or other Right
to Payment;
(iv) to the extent required in accordance with its sound business
judgment perform and comply in all material respects with its obligations in
respect of the Accounts and other Rights to Payment;
(v) upon the request of the Agent at any time that Loans are
outstanding (A) upon the occurrence and during the continuance of an Event of
Default, notify all or any designated portion of the account debtors and other
obligors on the Rights to Payment of the security interest hereunder, and (B)
upon the occurrence and during the continuance of an Event of
FORM OF GUARANTOR SECURITY AGREEMENT
G-8.
<PAGE>
Default, notify the account debtors and other obligors on the Rights to Payment
or any designated portion thereof that payment shall be made directly to the
Agent or to such other Person or location as the Agent shall specify; and
(vi) upon the occurrence and during the continuance of any Event of
Default, upon the request of Agent, at any time that Loans are outstanding,
establish such lockbox or similar arrangements for the payment of the Accounts
and other Rights to Payment as the Agent shall require.
(l) Instruments, Etc. Upon the request of the Agent, the Guarantor
----------------
will (i) immediately deliver to the Agent, or an agent designated by it,
appropriately endorsed or accompanied by appropriate instruments of transfer or
assignment, Documents, all letters of credit relating to the Collateral, and all
Rights to Payment at any time evidenced by promissory notes, trade acceptances
or other instruments, (ii) mark all Documents with such legends as the Agent
shall reasonably specify, and (iii) obtain consents from any letter of credit
issuers with respect to the assignment to the Agent of any Letter of Credit
Proceeds.
(m) Inventory. The Guarantor will:
---------
(i) at such times as the Agent shall request, prepare and deliver to
the Agent a report of all Inventory, in form and substance reasonably
satisfactory to the Agent; and
(ii) upon the reasonable request of the Agent, take a physical
listing of the Inventory (including specification of all locations thereof) and
promptly deliver a copy of such physical listing to the Agent.
(n) Notices, Reports and Information. The Guarantor will (i) notify
--------------------------------
the Agent of any other modifications of or additions to the information
contained in Schedule 1; (ii) notify the Agent of any material claim made or
----------
asserted against the Collateral by any Person or other event other than market
changes which could materially adversely affect the value of the Collateral or
the Agent's Lien thereon; (iii) furnish to the Agent such statements and
schedules further identifying and describing the Collateral and such other
reports and other information in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail; and (iv) upon the reasonable
request of the Agent make such demands and requests for information and reports
as the Guarantor is entitled to make in respect of the Collateral.
(o) [reserved]
----------
(p) Insurance. All insurance maintained by the Guarantor, as required
---------
under Section 6.06 of the Credit Agreement, with respect to Collateral shall
name the Agent as loss payee/mortgagee and/or as additional insured, for the
benefit of the Banks, as their interests may appear. Upon request of the Agent
or any Bank, the Guarantor shall furnish the Agent, with sufficient copies for
each Bank, at reasonable intervals (but not more than once per calendar year) a
certificate of a Responsible Officer of the Guarantor (and, if requested by the
Agent, any insurance broker of the Guarantor) setting forth the nature and
extent of all insurance maintained by the Guarantor and its Subsidiaries in
accordance with this Section or any Collateral Documents.
FORM OF GUARANTOR SECURITY AGREEMENT
G-9.
<PAGE>
SECTION 6 Rights to Payment.
-----------------
(a) Collection of Rights to Payment. Until the Agent exercises its
-------------------------------
rights hereunder to collect Rights to Payment, the Guarantor shall endeavor in
the first instance diligently to collect all amounts due or to become due on or
with respect to the Rights to Payment unless in its reasonable business judgment
it decides not to collect a Right to Payment. At the request of the Agent, upon
and after the occurrence and during the continuance of any Event of Default, if
Loans are outstanding, all remittances received by the Guarantor shall be held
in trust for the Agent and, in accordance with the Agent's instructions,
remitted to the Agent or deposited to an account with the Agent in the form
received (with any necessary endorsements or instruments of assignment or
transfer).
SECTION 7 Authorization; Agent Appointed Attorney-in-Fact. The Agent
-----------------------------------------------
shall have the right to, in the name of the Guarantor, or in the name of the
Agent or otherwise, without notice to or assent by the Guarantor, and the
Guarantor hereby constitutes and appoints the Agent (and any of the Agent's
officers or employees or agents designated by the Agent) as the Guarantor's true
and lawful attorney-in-fact, with full power and authority to:
(i) if the Guarantor fails to do so promptly, sign any of the
Financing Statements which must be executed or filed to perfect or continue
perfected, maintain the priority of or provide notice of the Agent's security
interest in the Collateral;
(ii) take possession of and endorse any notes, acceptances, checks,
drafts, money orders or other forms of payment or security and collect any
Proceeds of any Collateral;
(iii) sign and endorse any invoice or bill of lading relating to any of
the Collateral, warehouse or storage receipts, drafts against customers or other
obligors, assignments, notices of assignment, verifications and notices to
customers or other obligors;
(iv) send requests for verification of Rights to Payment to the
customers or other obligors of the Guarantor;
(v) contact, or direct the Guarantor to contact, all account debtors
and other obligors on the Rights to Payment and instruct such account debtors
and other obligors to make all payments directly to the Agent;
(vi) assert, adjust, sue for, compromise or release any claims under
any policies of insurance;
(vii) notify each Person maintaining lockbox or similar arrangements for
the payment of the Rights to Payment to remit all amounts representing
collections on the Rights to Payment directly to the Agent;
(viii) ask, demand, collect, receive and give acquittances and receipts
for any and all Rights to Payment, enforce payment or any other rights in
respect of the Rights to Payment and other Collateral, grant consents, agree to
any amendments, modifications or waivers of the agreements and documents
governing the Rights to Payment and other Collateral, and otherwise
FORM OF GUARANTOR SECURITY AGREEMENT
G-10.
<PAGE>
file any claims, take any action or institute, defend, settle or adjust any
actions, suits or proceedings with respect to the Collateral, as the Agent may
deem necessary or desirable to maintain, preserve and protect the Collateral, to
collect the Collateral or to enforce the rights of the Agent with respect to the
Collateral;
(ix) execute any and all applications, documents, papers and
instruments necessary for the Agent to use the Intellectual Property and grant
or issue any exclusive or non-exclusive license or sublicense with respect to
any Intellectual Property in connection with the exercise of the Agent's rights
and remedies under Section 10;
(x) execute any and all endorsements, assignments or other documents
and instruments necessary to sell, lease, assign, convey or otherwise transfer
title in or dispose of the Collateral; and
(xi) execute any and all such other documents and instruments, and do
any and all acts and things for and on behalf of the Guarantor, which the Agent
may deem necessary or advisable to (A) realize upon the Collateral, and (B)
maintain, protect, and preserve the Collateral and the Agent's security interest
therein and to accomplish the purposes of this Agreement.
The Agent agrees that, except upon and after the occurrence and during the
continuance of an Event of Default and while Loans are outstanding, it shall not
exercise the power of attorney, or any rights granted to the Agent, pursuant to
clauses (ii) through (x) and (xi)(A). The foregoing power of attorney is
coupled with an interest and irrevocable so long as the Banks have any
Commitments or the Secured Obligations have not been paid and performed in full.
The Guarantor hereby ratifies, to the extent permitted by law, all that the
Agent shall lawfully and in good faith do or cause to be done by virtue of and
in compliance with this Section 7.
SECTION 8 Agent Performance of Guarantor Obligations. If the
------------------------------------------
Guarantor fails to do so promptly after notice, the Agent may perform or pay any
obligation which the Guarantor has agreed to perform or pay under or in
connection with this Agreement, and the Guarantor shall reimburse the Agent on
demand for any amounts paid by the Agent pursuant to this Section 8.
SECTION 9 Agent's Duties. Notwithstanding any provision contained in
--------------
this Agreement, the Agent shall have no duty to exercise any of the rights,
privileges or powers afforded to it and shall not be responsible to the
Guarantor or any other Person for any failure to do so or delay in doing so.
Beyond the exercise of reasonable care to assure the safe custody of Collateral
in the Agent's possession and the accounting for moneys actually received by the
Agent hereunder, the Agent shall have no duty or liability to exercise or
preserve any rights, privileges or powers pertaining to the Collateral.
SECTION 10 Remedies.
--------
(a) Remedies. Upon the occurrence and during the continuance of an
--------
Event of Default and acceleration of the Secured Obligations under Section 8.02
of the Credit Agreement, the Agent shall have, in addition to all other rights
and remedies granted to it in this
FORM OF GUARANTOR SECURITY AGREEMENT
G-11.
<PAGE>
Agreement, the Credit Agreement or any other Loan Document, all rights and
remedies of a secured party under the UCC and other applicable laws. Without
limiting the generality of the foregoing, the Guarantor agrees that upon the
occurrence and during the continuance of an Event of Default and acceleration of
the Secured Obligations under Section 8.02 of the Credit Agreement the Agent may
exercise the following rights and remedies, in accordance with the direction or
consent of the Majority Banks:
(i) The Agent may peaceably and without notice enter any premises of
the Guarantor, and using reasonable care, take possession of any Collateral,
remove or dispose of all or part of the Collateral on any premises of the
Guarantor or elsewhere, or, in the case of Equipment, render it nonfunctional,
and otherwise collect, receive, appropriate and realize upon all or any part of
the Collateral, and demand, give receipt for, settle, renew, extend, exchange,
compromise, adjust, or sue for all or any part of the Collateral, as the Agent
may determine.
(ii) The Agent may require the Guarantor to assemble all or any part of
the Collateral and make it available to the Agent, at any place and time
designated by the Agent.
(iii) The Agent may secure the appointment of a receiver of the
Collateral or any part thereof (to the extent and in the manner provided by
applicable law).
(iv) The Agent may sell, resell, lease, use, assign, transfer or
otherwise dispose of any or all of the Collateral in its then condition or
following any commercially reasonable preparation or processing (utilizing in
connection therewith any of the Guarantor's assets, without charge or liability
to the Agent therefor, except that Guarantor Intellectual Property may only be
used as provided in Subsection (b)) at public or private sale, by one or more
contracts, in one or more parcels, at the same or different times, for cash or
credit or for future delivery without assumption of any credit risk, all as the
Agent deems advisable; provided, however, that the Guarantor shall be credited
-------- -------
with the net proceeds of sale only when such proceeds are finally collected by
the Agent. The Agent and each of the Banks shall have the right upon any such
public sale, and, to the extent permitted by law, upon any such private sale, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption, which right or equity of redemption the Guarantor hereby
releases, to the extent permitted by law. The Guarantor hereby agrees that the
sending of notice by ordinary mail, postage prepaid, to the address of the
Guarantor set forth in the Guaranty, of the place and time of any public sale or
of the time after which any private sale or other intended disposition is to be
made, shall be deemed reasonable notice thereof if such notice is sent ten days
prior to the date of such sale or other disposition or the date on or after
which such sale or other disposition may occur, provided that the Agent may
--------
provide the Guarantor shorter notice or no notice, to the extent permitted by
the UCC or other applicable law.
(b) License. Solely for the purpose of enabling the Agent to exercise
-------
its rights and remedies under this Section 10 or otherwise in connection with
the disposition of Inventory in accordance with this Agreement, the Guarantor
hereby grants to the Agent an irrevocable, non-exclusive and assignable license
(exercisable without payment or royalty or other compensation to the Guarantor)
of the Intellectual Property necessary to sell or otherwise dispose
FORM OF GUARANTOR SECURITY AGREEMENT
G-12.
<PAGE>
of Inventory, provided that such license to use such Intellectual Property does
not include the right to manufacture Inventory.
(c) Application of Proceeds. The cash proceeds actually received from
-----------------------
the sale or other disposition or collection of Collateral, and any other amounts
received in respect of the Collateral the application of which is not otherwise
provided for herein, shall be applied as provided in the Credit Agreement. Any
surplus thereof which exists after payment and performance in full of the
Secured Obligations shall be promptly paid over to the Guarantor or otherwise
disposed of in accordance with the UCC or other applicable law. The Guarantor
shall remain liable to the Agent and the Banks for any deficiency which exists
after any sale or other disposition or collection of Collateral.
SECTION 11 Certain Waivers. The Guarantor waives, to the fullest
---------------
extent permitted by law, (i) any right of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any, of
marshalling of the Collateral or other collateral or security for the Secured
Obligations; (ii) any right to require the Agent or the Banks (A) to proceed
against any Person, (B) to exhaust any other collateral or security for any of
the Secured Obligations, (C) to pursue any remedy in the Agent's or any of the
Banks' power, or (D) to make or give any presentments, demands for performance,
notices of nonperformance, protests, notices of protests or notices of dishonor
in connection with any of the Collateral; and (iii) all claims, damages, and
demands against the Agent or the Banks arising out of the repossession,
retention, sale or application of the proceeds of any sale of the Collateral,
other than any resulting from the gross negligence or willful misconduct of such
Person.
SECTION 12 Notices. All notices, requests or other communications
-------
hereunder shall be given in the manner and to the addresses specified in the
Guaranty. All such notices, requests and communications shall, when transmitted
by overnight delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon receipt by the addressee, or if delivered, upon
delivery.
SECTION 13 No Waiver; Cumulative Remedies. No failure to exercise
------------------------------
and no delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
SECTION 14 Costs and Expenses; Indemnification; Other Charges.
--------------------------------------------------
(a) Costs and Expenses. The Guarantor shall:
------------------
(i) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent for all reasonable costs and expenses
incurred by it in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated),
FORM OF GUARANTOR SECURITY AGREEMENT
G-13.
<PAGE>
this Agreement and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby; and
(ii) pay or reimburse the Agent, the Lead Arranger and each Bank for
all costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement during the existence of an Event of Default or
after acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
(b) Indemnification. The Guarantor shall indemnify, defend and hold
---------------
the Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
- -------------------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time be imposed on, incurred by or asserted
against any such Person in favor of any third-party in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or arising out of this
Agreement or relating to the Collateral, whether or not any Indemnified Person
is a party thereto (all of the foregoing, collectively, the "Indemnified
-----------
Liabilities"); provided, that the Guarantor shall have no obligation hereunder
- ----------- --------
to any Indemnified Person with respect to Indemnified Liabilities resulting from
the gross negligence or willful misconduct of such Indemnified Person.
(c) Other Charges. The Guarantor agrees to indemnify the Agent and
-------------
each of the Banks against and hold each of them harmless from any and all
present and future stamp, transfer, documentary and other such taxes, levies,
fees, assessments and other charges made by any jurisdiction by reason of the
execution, delivery, performance and enforcement of this Agreement.
(d) Interest. Any amounts payable to the Agent or any Bank under this
--------
Section 14 or otherwise under this Agreement if not paid upon demand shall bear
interest from the date of such demand until paid in full, at the rate of
interest set forth in Section 2.08(c) of the Credit Agreement.
(e) Survival. The agreements in this Section shall survive payment of
--------
all other Secured Obligations.
SECTION 15 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Guarantor may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agent and the Majority Banks.
FORM OF GUARANTOR SECURITY AGREEMENT
G-14.
<PAGE>
SECTION 16 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN
RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN
CALIFORNIA.
SECTION 17 Entire Agreement; Amendment. This Agreement, together
---------------------------
with the other Loan Documents, embodies the entire agreement and understanding
among the Guarantor, the Banks and the Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof and shall not be
amended except by the written agreement of the parties as provided in the Credit
Agreement.
SECTION 18 Severability. The illegality or unenforceability of any
------------
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
SECTION 19 Counterparts. This Agreement may be executed in any
------------
number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this Agreement may be delivered by any party hereto
or thereto either in the form of an executed original or an executed original
sent by facsimile transmission to be followed promptly by mailing of a hard copy
original, and that receipt by the Agent of a facsimile transmitted document
purportedly bearing the signature of a Bank of or the Guarantor shall bind such
Bank or the Guarantor, respectively, with the same force and effect as the
delivery of a hard copy original. Any failure by the Agent to receive the hard
copy executed original of such document shall not diminish the binding effect of
receipt of the facsimile transmitted executed original of such document of the
party whose hard copy page was not received by the Agent.
SECTION 20 Incorporation of Provisions of the Guaranty. To the
-------------------------------------------
extent the Guaranty contains provisions of general applicability to the
Guarantor Documents, such provisions are incorporated herein by this reference.
SECTION 21 No Inconsistent Requirements. The Guarantor acknowledges
----------------------------
that this Agreement and the other Guarantor Documents may contain covenants and
other terms and provisions variously stated regarding the same or similar
matters, and agrees that all such covenants, terms and provisions are cumulative
and all shall be performed and satisfied in accordance with their respective
terms.
SECTION 22 Termination. Upon the termination of the Commitments of
-----------
the Banks and payment and performance in full of all Secured Obligations, this
Agreement shall terminate and the Agent shall promptly execute and deliver to
the Guarantor such documents and instruments reasonably requested by the
Guarantor as shall be necessary to evidence termination
FORM OF GUARANTOR SECURITY AGREEMENT
G-15.
<PAGE>
of all security interests given by the Guarantor to the Agent hereunder;
provided, however, that the obligations of the Guarantor under Section 14 shall
- -------- -------
survive such termination.
SECTION 23 Amendment and Restatement of Existing Security Agreement.
--------------------------------------------------------
From and after the Closing Date, this Agreement amends and restates the existing
Security Agreement dated as of June 16, 1998 between the Agent and the
Guarantor.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
THE GUARANTOR
-------------
MICRON SEMICONDUCTOR
PRODUCTS, INC.
By __________________________
Title:
THE AGENT
---------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By __________________________
Title:
FORM OF GUARANTOR SECURITY AGREEMENT
G-16.
<PAGE>
SCHEDULE 1
to the Security Agreement
1. LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF
---------------------------------------------------------------------
COLLATERAL
----------
Chief Executive Office and Principal Place of Business:
8000 South Federal Way
Boise, Idaho 83707
2. LOCATIONS OF BOOKS PERTAINING TO RIGHTS TO PAYMENT
--------------------------------------------------
8000 South Federal Way
Boise, Idaho 83707
3. TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS NAMES;
-------------------------------------------------------------------------
ETC.
---
FORM OF GUARANTOR SECURITY AGREEMENT
G-17.
<PAGE>
EXHIBIT H
---------
FORM OF IDAHO DEED OF TRUST
---------------------------
SEE ATTACHMENT HERETO
FORM OF IDAHO DEED OF TRUST
H-1.
<PAGE>
EXHIBIT I
---------
FORM OF UTAH DEED OF TRUST
--------------------------
SEE ATTACHMENT HERETO
FORM OF UTAH DEED OF TRUST
I-1.
<PAGE>
EXHIBIT J
---------
FORM OF OPINION OF COMPANY'S ASSISTANT GENERAL COUNSEL
------------------------------------------------------
SEE ATTACHMENT HERETO.
FORM OF OPINION OF COMPANY'S ASSISTANT GENERAL COUNSEL
J-1.
<PAGE>
EXHIBIT K
---------
FORM OF OPINION OF WILSON SONSINI GOODRICH & ROSATI, PC
-------------------------------------------------------
SEE ATTACHMENT HERETO.
OPINION OF WILSON, SONSINI, GOODRICH & ROSATI
K-1.
<PAGE>
EXHIBIT L
---------
FORM OF OPINION OF HAWLEY, TROXELL, ENNIS & HAWLEY LLP
------------------------------------------------------
SEE ATTACHMENT HERETO.
OPINION OF HAWLEY, TROXELL, ENNIS & HAWLEY
L-1.
<PAGE>
EXHIBIT M
---------
FORM OF OPINION OF PARSONS BEHLE & LATIMER
------------------------------------------
SEE ATTACHMENT HERETO.
OPINION OF PARSONS BEHLE & LATIMER
M-1.
<PAGE>
EXHIBIT N
---------
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
-------------------------------------------
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
--------------
Acceptance") dated as of ____________, is made between __________________ (the
- ----------
"Assignor") and ________________ (the "Assignee").
- --------- --------
RECITALS
--------
WHEREAS, the Assignor is party to that certain Second Amended and
Restated Revolving Credit Agreement dated as of September 1, 1998 (as amended,
amended and restated, modified, supplemented or renewed, the "Credit Agreement")
----------------
among Micron Technology, Inc. (the "Company"), the several financial
-------
institutions from time to time party thereto (including the Assignor, the
"Banks"), and Bank of America National Trust and Savings Association, as agent
-----
for the Banks (the "Agent"). Any terms defined in the Credit Agreement and not
-----
defined in this Assignment and Acceptance are used herein as defined in the
Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Loans (the "Loans") to the Company in an aggregate amount
-----
not to exceed $__________ (the "Commitment");
----------
WHEREAS, [the Assignor has made Loans in the aggregate principal
amount of $__________ to the Company] [no Loans are outstanding under the Credit
Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, [together with a corresponding portion of each of its
outstanding Loans], in an amount equal to $__________ (the "Assigned Amount"),
---------------
on the terms and subject to the conditions set forth herein and the Assignee
wishes to accept assignment of such rights and to assume such obligations from
the Assignor on such terms and subject to such conditions.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
-------------------------
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) ___% (the "Assignee's Percentage
---------------------
Share") of (A) the Commitment [and the Loans] of the Assignor and (B) all
- -----
related rights, benefits, obligations, liabilities and indemnities of the
Assignor under and in connection with the Credit Agreement and the Loan
Documents.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
N-1.
<PAGE>
be obligated to perform all of the obligations of a Bank under the Credit
Agreement, including the requirements concerning confidentiality and the payment
of indemnification, with a Commitment in an amount equal to the Assigned Amount.
The Assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank. It is the intent of the parties hereto that the
Commitment of the Assignor shall, as of the Effective Date, be reduced by an
amount equal to the Assigned Amount and the Assignor shall relinquish its rights
and be released from its obligations under the Credit Agreement to the extent
such obligations have been assumed by the Assignee; provided, however, that the
Assignor shall not relinquish its rights under Sections 10.04 and 10.05 of the
Credit Agreement to the extent such rights relate to the time prior to the
Effective Date.
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $__________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $__________.
2. Payments.
--------
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all
Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 10.08 of the Credit Agreement.
3. Reallocation of Payments. Any interest, fees and other payments
------------------------
accrued to the Effective Date with respect to the Commitment [and Loans] shall
be for the account of the Assignor. Any interest, fees and other payments
accrued on and after the Effective Date with respect to the Assigned Amount
shall be for the account of the Assignee. Each of the Assignor and the Assignee
agrees that it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is entitled pursuant
to the preceding sentence and pay to the other party any such amounts which it
may receive promptly upon receipt. From and after the Effective Date, the Agent
shall make all payments with respect to the Commitment [and the Loans]
(including payments of interest, principal, fees and other amounts) to the
Assignee.
4. Independent Credit Decision. The Assignee (a) acknowledges that it
---------------------------
has received a copy of the Credit Agreement and the Schedules and Exhibits
thereto, together with copies of the most recent financial statements referred
to in Section 6.01 of the Credit Agreement, and such other documents and
information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into this Assignment and Acceptance; and (b)
agrees that it will, independently and without reliance upon the Assignor, the
Agent or any other Bank and based on such documents and information as it shall
deem appropriate at the time,
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
N-2.
<PAGE>
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.
5. Effective Date; Notices.
-----------------------
(a) As between the Assignor and the Assignee, the effective date
for this Assignment and Acceptance shall be _____________ (the "Effective
---------
Date"); provided that the following conditions precedent have been satisfied on
- ----
or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the consent of the Company and the Agent required for an
effective assignment of the Assigned Amount by the Assignor to the
Assignee under Section 10.08 of the Credit Agreement shall have been
duly obtained and shall be in full force and effect as of the
Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to
the Assignor under this Assignment and Acceptance;
(iv) the Assignee shall have complied with Section 10.08 of the
Credit Agreement (if applicable);
(v) the processing fee referred to in Section 2(b) hereof and
in Section 10.08 of the Credit Agreement shall have been paid to the
Agent; and
(vi) the Assignor shall have assigned and the Assignee shall
have assumed a percentage equal to the Assignee's Percentage Share of
the rights and obligations of the Assignor under the Credit Agreement
(if such agreement exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
----------
6. Agent. The Assignee hereby appoints and authorizes the Assignor to
-----
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement. [The Assignee shall assume no duties or
obligations held by the Assignor in its capacity as Agent under the Credit
Agreement.] [INCLUDE ONLY IF ASSIGNOR IS AGENT]
7. Withholding Tax. The Assignee (a) represents and warrants to the
---------------
Bank, the Agent and the Company that under applicable law and treaties no tax
will be required to be withheld by the Bank with respect to any payments to be
made to the Assignee hereunder, (b) agrees to furnish (if it is organized under
the laws of any jurisdiction other than the United States or any State thereof)
to the Agent and the Company prior to the time that the Agent or Company is
required to make any payment of principal, interest or fees hereunder, duplicate
executed originals of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
N-3.
<PAGE>
Form 1001 (wherein the Assignee claims entitlement to the benefits of a tax
treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, and (c) agrees to comply
with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.
8. Representations and Warranties.
------------------------------
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any Lien or other adverse claim; (ii) it is
duly organized and existing and it has the full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company, or the performance or observance by the Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
N-4.
<PAGE>
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.
9. Further Assurances. The Assignor and the Assignee each hereby
------------------
agree to execute and deliver such other instruments, and take such other action,
as either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to the Company or the Agent, which may
be required in connection with the assignment and assumption contemplated
hereby.
10. Miscellaneous.
-------------
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the Assignor and the
Assignee, provided that such provisions are not inconsistent with the Credit
Agreement.]
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
N-5.
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By: _____________________________
Title:
[ASSIGNEE]
By: _____________________________
Title:
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
N-6.
<PAGE>
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
_______________
Bank of America National Trust
and Savings Association, as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Agency Management Services #5596
Micron Technology, Inc.
Mail Stop 157
8000 South Federal Way
Boise, Idaho 83707-0006
Attention: Norman L. Schlachter
Treasurer
Ladies and Gentlemen:
We refer to the Second Amended and Restated Revolving Credit Agreement
dated as of September 1, 1998 (as amended, amended and restated, modified,
supplemented or renewed from time to time the "Credit Agreement") among Micron
----------------
Technology, Inc. (the "Company"), the several financial institutions from time
-------
to time party thereto (including the Assignor, the "Banks"), and Bank of America
-----
National Trust and Savings Association, as agent for the Banks (the "Agent").
-----
Terms defined in the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
--------
"Assignee") of _____% of the right, title and interest of the Assignor in and to
--------
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor [and all
outstanding Loans made by the Assignor]) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance"). Before
-------------------------
giving effect to such assignment the Assignor's Commitment is $ ___________ and
the aggregate amount of its outstanding Loans is $_____________.
2. The Assignee agrees that, upon receiving the consent of the Agent
and, if applicable, the Company to such assignment, the Assignee will be bound
by the terms of the Credit Agreement as fully and to the same extent as if the
Assignee were the Bank originally holding such interest in the Credit Agreement.
NOTICE OF ASSIGNMENT AND ACCEPTANCE
1.
<PAGE>
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: _____________________________________________
Address: ___________________________________________________
___________________________________________________
___________________________________________________
Attention: _________________________________________________
Telephone: (___) __________________________________________
Facsimile: (___) __________________________________________
(B) Payment Instructions:
Account No.: _______________________________________________
At: _____________________________________________________
_____________________________________________________
_____________________________________________________
Reference: _________________________________________________
Attention: _________________________________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By: _________________________________________
Title:
[NAME OF ASSIGNEE]
By: _________________________________________
Title:
NOTICE OF ASSIGNMENT AND ACCEPTANCE
2.
<PAGE>
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
MICRON TECHNOLOGY, INC.
By: ______________________________________
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: _______________________________________
Vice President
NOTICE OF ASSIGNMENT AND ACCEPTANCE
3.
<PAGE>
EXHIBIT 10.136
|========================================|
| CONFIDENTIAL |
| CERTAIN INFORMATION HAS BEEN REDACTED |
| CONFIDENTIAL TREATMENT REQUESTED. |
|========================================|
===============================================================================
SECURITIES PURCHASE AGREEMENT
MICRON TECHNOLOGY, INC.
INTEL CORPORATION
OCTOBER 15, 1998
===============================================================================
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
CONFIDENTIAL
------------
TABLE OF CONTENTS
-----------------
1. DEFINITIONS..............................................................1
1.1 Certain Defined Terms...............................................1
1.2 Index of Other Defined Terms........................................4
2. AGREEMENT TO PURCHASE AND SELL SECURITIES................................5
2.1 Agreement to Purchase and Sell Securities...........................5
2.2 The Closing.........................................................5
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................5
3.1 Organization Good Standing and Qualification........................5
3.2 Capitalization......................................................5
3.3 Due Authorization...................................................6
3.4 Valid Issuance of Securities........................................6
3.5 Compliance with Securities Laws.....................................7
3.6 Governmental Consents...............................................7
3.7 Non-Contravention...................................................7
3.8 Litigation..........................................................8
3.9 Compliance with Law and Charter Documents...........................8
3.10 SEC Documents......................................................8
3.11 Absence of Certain Changes Since Balance Sheet.....................9
3.12 RDRAM Device Specification Modifications..........................10
3.13 Full Disclosure...................................................10
4. REPRESENTATIONS AND WARRANTIES OF INTEL.................................10
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
i
<PAGE>
CONFIDENTIAL
------------
4.1 Investigation; Economic Risk.......................................10
4.2 Purchase for Own Account...........................................10
4.3 Exempt from Registration; Restricted Securities....................10
4.4 Accredited Investor................................................11
4.5 Legends............................................................11
4.6 Organization Good Standing and Qualification.......................11
4.7 Due Authorization..................................................11
4.8 Governmental Consents..............................................12
4.9 Non-Contravention..................................................12
5. AFFIRMATIVE COVENANTS OF THE COMPANY....................................12
5.1 Use of Proceeds....................................................12
5.2 Authorization of Class A Common Stock..............................12
5.3 Reports of Qualified Expenditures..................................12
5.4 Cooperation in HSR Act Filings.....................................12
5.5 Audit..............................................................13
6. CLOSING CONDITIONS......................................................13
6.1 Conditions to Intel's Obligations..................................13
6.2 Conditions to the Company's Obligations............................14
7. CONFIDENTIALITY OBLIGATIONS.............................................15
7.1 Obligations........................................................15
7.2 Certain Definitions................................................15
7.3 Non-Disclosure of Agreements.......................................15
7.4 Public Announcements...............................................16
7.5 Third Party Information............................................16
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
ii
<PAGE>
CONFIDENTIAL
------------
7.6 Other Disclosures..................................................16
8. MISCELLANEOUS...........................................................16
8.1 Governing Law......................................................16
8.2 Survival...........................................................16
8.3 Successors and Assigns.............................................16
8.4 Entire Agreement...................................................16
8.5 Notices............................................................17
8.6 Amendments.........................................................17
8.7 Delays or Omissions................................................17
8.8 Legal Fees.........................................................18
8.9 Titles and Subtitles...............................................18
8.10 Counterparts......................................................18
8.11 Severability......................................................18
8.12 Dispute Resolution................................................18
8.13 No Third Parties Benefited........................................18
8.14 Meaning of Include and Including..................................18
8.15 Fees, Costs and Expenses..........................................18
8.16 Competition.......................................................19
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
iii
<PAGE>
CONFIDENTIAL
------------
SECURITIES PURCHASE AGREEMENT
-----------------------------
This Securities Purchase Agreement (this "Agreement") is entered into as of
---------
October 15, 1998 by and between Micron Technology, Inc., a Delaware corporation
(the "Company" or the "Corporation") and Intel Corporation, a Delaware
------- -----------
Corporation ("Intel").
-----
WHEREAS, Intel is willing, pursuant to the terms and conditions of this
Agreement, to purchase from the Company for five hundred million dollars
($500,000,000) rights which are exercisable for shares of a new class of common
stock convertible into regular common stock of the Company at such time as the
new class of common stock has been created and, until such time, for shares of
regular common stock of the Company;
WHEREAS, at the closing of the transactions contemplated hereby, the
Company and Intel will enter into the Rights Agreement, the Rights and
Restrictions Agreement and the Supply Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
1.1 Certain Defined Terms; Interpretation. The following terms shall have
-------------------------------------
the following respective meanings.
"Affiliate" shall mean, with respect to any Person, any Person directly or
---------
indirectly controlling, controlled by, or under common control with, such other
Person. For purposes of this definition, "control" when used with respect to
---------
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
- ------------- ------------
"Business Day" shall mean any day on which commercial banks are not
------------
authorized or required to close in either Boise, Idaho or San Francisco,
California.
"Capital Expenditures" shall mean the sum of all expenditures paid or, with
--------------------
respect to equipment that is in use, accrued that, in accordance with U.S.
generally accepted accounting principles, should be included in or reflected by
the property, plant or equipment or similar fixed asset account reflected in the
balance sheet of the applicable person.
"Certificate of Amendment" shall mean the Certificate of Amendment of the
------------------------
Certificate of Incorporation of the Company authorizing the Class A Common Stock
and defining the rights, preferences and privileges with respect thereto
substantially in the form attached hereto as Exhibit D.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
1
<PAGE>
CONFIDENTIAL
------------
"Class A Common Stock" shall mean shares of Class A Common Stock of the
--------------------
Company having the preferences and other rights set forth in the Certificate of
Amendment.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder, all as the same shall be
in effect from time to time.
"First Minimum Production Milestone". The First Minimum Production
-----------------------------------
Milestone requires that the Company and its subsidiaries build and have
available to ship (including those actually shipped) an aggregate number of
RDRAM devices in [*] equal to the First Minimum Required Production.
"First Minimum Required Production" shall mean a number of RDRAM units
---------------------------------
equal to the lower of (i) [*] units of RDRAM; (ii) Intel's Percentage Call on
Capacity with respect to the Company's overall output of discrete memory
components (measured in accordance with Section 7.0 of the Supply Agreement),
regardless of the actual production of RDRAM devices and (iii) the number of
units represented by [*]% of the reasonably projected memory requirements for
Intel's RDRAM unique chip set production, net of MTH devices (as defined in the
Supply Agreement).
"First Production Milestone Date" shall mean [*], unless postponed or
--------------------------------
waived in accordance with the provisions of Section 7(f) of the Rights Agreement
or Section 3.f of the Certificate of Amendment, in which case such date shall be
the date established in accordance with such sections, unless waived in its
entirety.
"HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Maximum Adjustment Amount" shall mean $150 million in value.
-------------------------
"Maximum FGI" shall mean [*] RDRAM units.
-----------
"Maximum FGI Date" shall mean [*].
----------------
"Maximum Percentage" shall mean 19.9% of the total number of shares of
------------------
Common Stock outstanding at October 19, 1998.
"Maximum Shares" shall mean 31,620,554 shares of Common Stock
--------------
(appropriately adjusted to reflect the effect of stock splits,
reclassifications, stock dividends, recapitalizations, combinations or similar
events affecting the Common Stock occurring after October 15, 1998).
"Minimum Qualified Expenditures" shall mean [*] dollars ($[*]).
------------------------------
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
2
<PAGE>
CONFIDENTIAL
------------
"Qualified Expenditures" shall mean the sum of all expenditures by the
----------------------
Company and its subsidiaries (including any such expenditures subsequent to May
28, 1998 and prior to October 19, 1998 not to exceed $[*]) and all expenditures
by any joint ventures from the date the Company is or becomes a party (up to a
maximum of $[*] for each of not more than two such joint ventures provided that
the Company controls the output of such joint ventures, but in any event
including KTI Semiconductor Limited and Tech Semiconductor Singapore Pte. Ltd.),
which are Capital Expenditures for the development, creation or expansion of
manufacturing capacity for rdram or other devices using 0.18 or smaller micron
processes and which capacity is located in facilities which are on the Company's
roadmap for conversion to 0.18 micron or smaller processes, or volume
manufacturing capacity for RDRAM devices (including assembly and test of such
devices) (including equipment initially installed for production at lower
density process parameters (e.g., 0.21 micron) which is convertible to 0.18
micron or smaller processes and which is located in facilities which are on the
Company's roadmap for conversion to 0.18 micron or smaller processes) or which
are necessary research and development expenditures for the development of RDRAM
up to a maximum of $[*] which are not otherwise includable as Capital
Expenditures. Expenditures for capitalized leases will constitute Qualified
Expenditures but only for leases of new equipment (payments with respect to
previously leased equipment will not qualify).
"PERSON" shall mean individual, corporation, company, voluntary
------
association, partnership, joint venture, limited liability company, trust,
estate, unincorporated organization, governmental authority or other entity.
"Required Qualified Expenditures" shall mean [*] dollars ($[*]).
-------------------------------
"RDRAM" means an integrated circuit with a principal function of memory
-----
storage which is a dynamic random access memory and which incorporates Rambus'
direct RDRAM interface technology licensed to the Company by Rambus, Inc.
References to numbers of units or devices of RDRAM or Rambus shall mean the
number of RDRAM or Rambus units or devices stated in [*] (regardless of the
actual memory levels of the individual units or devices).
"Rights" shall mean the securities issuable pursuant to the Stock Rights
------
Agreement attached to this Agreement as Exhibit A and having the rights,
preferences, privileges and restrictions defined therein.
"Rights Agreement" shall mean the Stock Rights Agreement attached to this
----------------
Agreement as Exhibit A to be executed and delivered by the Company and Intel at
or prior to the Closing.
"Rights and Restrictions Agreement" shall mean the Securities Rights and
---------------------------------
Restrictions Agreement in the form attached hereto as Exhibit B to be executed
and delivered by the Company and Intel at or prior to the Closing.
"SEC" shall mean the Securities and Exchange Commission.
---
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
3
<PAGE>
CONFIDENTIAL
------------
Second Minimum Production Milestone. The Second Minimum Production
-----------------------------------
Milestone requires that the Company and its subsidiaries build and have
available to ship (including those actually shipped) an aggregate number of
RDRAM devices in [*], equal to the Second Minimum Required Production, unless
modified in accordance with the provisions of Section 7(e) of the rights
Agreement or 3.e of the Certificate of Amendment, in which case such milestone
shall be as so modified.
"Second Minimum Required Production" shall mean a number of RDRAM units
----------------------------------
equal to the lower of (i) [*] units of RDRAM; (ii) Intel's Percentage Call on
Capacity (as defined in the Supply Agreement) with respect to the Company's
overall output of discrete memory components (measured in accordance with
Section 7.0 of the Supply Agreement), regardless of the actual production of
RDRAM devices and (iii) the number of units represented by [*]% of the
reasonably projected memory requirements for Intel's RDRAM unique chip set
production, net of mth devices (as defined in the Supply Agreement), unless
modified in accordance with the provisions of Section 3.e of the Certificate of
Amendment.
"Second Production Milestone Date" shall mean [*], unless postponed or
---------------------------------
waived in accordance with the provisions of Section 7(f) of the Rights Agreement
or Section 3.f of the Certificate of Amendment, in which case such date shall be
the date established in accordance with such sections, unless waived in its
entirety.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder, all as the same shall be in effect
from time to time.
"Supply Agreement" shall mean the Supply Agreement in the form attached to
----------------
this Agreement as Exhibit C to be executed and delivered by the Company and
Intel at or prior to the Closing.
"Volume Production" shall mean the production of [*] per month of RDRAM
-----------------
devices.
1.2 Index of Other Defined Terms. In addition to the terms defined above,
----------------------------
the following terms shall have the respective meanings given thereto in the
sections indicated below:
Defined Term Section
- ------------ -------
"Action" 3.8
------
"Agreement" Preamble
---------
"Audited Financial Statements" 3.10(b)
----------------------------
"Balance Sheet Date" 3.10(b)
------------------
"Closing" 2.2
-------
"Company" Preamble
-------
"Confidential Information" 7.2
------------------------
"Disclosure Letter" 3
-----------------
"Form 10-K" 3.10(a)
---------
"Form 10-Q's" 3.10(a)
-----------
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
4
<PAGE>
CONFIDENTIAL
------------
"GAAP" 3.10(b)
----
"Intel" Preamble
-----
"Material Adverse Effect" 3.1
-----------------------
"SEC Documents" 3.10(a)
-------------
"Transaction Agreements" 7.2
----------------------
2. AGREEMENT TO PURCHASE AND SELL SECURITIES.
-----------------------------------------
2.1 Agreement to Purchase and Sell Securities. The Company hereby agrees
to issue to Intel at the Closing (as defined below) and Intel agrees to purchase
from the Company at the Closing, Rights representing in the aggregate the right
to purchase a number of shares of Class A Common Stock equal to $500 million
divided by $31.625, for an aggregate purchase price of $500 million (the
"Purchase Price").
--------------
2.2 The Closing. The purchase and sale of the Rights shall take place at
-----------
the offices of Gibson, Dunn & Crutcher, 1530 Page Mill Road, Palo Alto,
California 94304, at 10:00 a.m. California time, on October 19, 1998, or at such
other time and place as the Company and Intel mutually agree upon (which time
and place is referred to in this Agreement as the "Closing"). At the Closing,
-------
the Company will deliver to Intel certificates representing the Rights being
purchased, against delivery to the Company by Intel of the consideration set
forth in Section 2.1 by wire transfer of funds to an account designated by the
Company at least two (2) Business Days prior to the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company hereby represents and warrants to Intel that the statements in
this Section 3 are true and correct, except as set forth in the Disclosure
Letter from the Company dated the date hereof (the "Disclosure Letter") or
-----------------
disclosed in the SEC Documents (as defined below):
3.1 Organization Good Standing and Qualification. The Company is a
--------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all corporate power and authority required to
(a) carry on its business as presently conducted, and (b) enter into this
Agreement, the Rights Agreement, the Rights and Restrictions Agreement and the
Supply Agreement, to issue the Rights, and to consummate the transactions
contemplated hereby and thereby. The Company is qualified to do business and is
in good standing in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect. As used in this Agreement, "Material Adverse
----------------
Effect" means a material adverse effect, or a group of such effects which are
- ------
related, on the business, operations, financial condition or results of
operations, of the applicable party and its subsidiaries, taken as a whole.
3.2 Capitalization. The authorized and outstanding capital stock of the
--------------
Company at October 8, 1998, without giving effect to the transactions
contemplated by this Agreement, is as set forth in the Disclosure Letter or the
SEC Documents. All outstanding shares of capital stock have been duly
authorized, and all such issued and outstanding shares have been validly issued
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
5
<PAGE>
CONFIDENTIAL
------------
and are fully paid and nonassessable. The Disclosure Letter or the SEC
Documents include information regarding equity securities reserved for issuance
to officers, directors, employees or independent contractors or affiliates of
the Company under the Company's employee stock option and purchase plans and
upon conversion of convertible securities. Except as set forth in the
Disclosure Letter or the SEC Documents, there are no other equity securities,
options, warrants, calls, rights, commitments or agreements of any character to
which the Company is a party or by which it is bound obligating the Company to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such equity security,
option, warrant, call, right, commitment or agreement.
3.3 Due Authorization. The Company has the requisite corporate power and
-----------------
authority to enter into this Agreement, the Rights Agreement, the Rights and
Restrictions Agreement and the Supply Agreement and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement, the
Rights Agreement, the Rights and Restrictions Agreement and the Supply
Agreement, and performance by the Company of its obligations hereunder and
thereunder, have been duly authorized by all necessary corporate action on the
part of the Company (including its directors and stockholders), except for
stockholder approval of the Certificate of Amendment and the issuance of the
Class A Common Stock pursuant thereto. This Agreement constitutes, and the
Rights Agreement and the Rights and Restrictions Agreement, when executed and
delivered by the parties thereto, will constitute, valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except (a) as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or others laws of general application
relating to or affecting the enforcement of creditors' rights generally and (ii)
the effect of rules of law governing the availability of equitable remedies and
(b) as rights to indemnity or contribution may be limited under federal or state
securities laws or by principles of public policy thereunder.
3.4 Valid Issuance of Securities.
----------------------------
(a) Valid Issuance and Enforceability of Rights. The Rights have been
-------------------------------------------
duly authorized and, when executed in accordance with the provisions of the
Rights Agreement and delivered to and paid for Intel in accordance with the
provisions of this Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, except (a) as may be
limited by (i) applicable bankruptcy, insolvency, reorganization, or other laws
of general application relating to or affecting the enforcement of creditors'
rights generally and (ii) the effect of rules of laws governing the availability
of equitable remedies and (b) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public policy
thereunder.
(b) Valid Issuance of Common Stock. The shares of Common Stock
------------------------------
issuable upon exchange or exercise of the Rights have been duly authorized and
reserved, and when issued upon exchange or exercise of the Rights in accordance
with the terms of the Rights Agreement, will be duly and validly issued, fully
paid and nonassessable. Upon or prior to filing
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
6
<PAGE>
CONFIDENTIAL
------------
of the Certificate of Amendment, the shares of Common Stock issuable upon
conversion of the Class A Common Stock will have been duly authorized and
reserved, and upon conversion of the Class A Common Stock pursuant to the terms
of the Certificate of Amendment, will be duly and validly issued, fully paid and
nonassessable.
(c) Valid Issuance of Class A Common Stock. The shares of Class A
--------------------------------------
Common Stock issuable upon exchange or exercise of the Rights have been duly
authorized by the Board of Directors of the Company. Assuming due authorization
by the stockholders of the Company and the filing by the Company of the
Certificate of Amendment with the Secretary of State of the State of Delaware,
the shares of Class A Common Stock issuable upon exchange or exercise of the
Rights will be duly reserved for issuance by the Company, and when issued upon
exchange or exercise of the Rights in accordance with the terms of the Rights
Agreement, will be duly and validly issued, fully paid and nonassessable.
3.5 Compliance with Securities Laws. Assuming the accuracy of the
-------------------------------
representations made by Intel in Section 4 hereof, the Rights and the shares of
Class A Common Stock or Common Stock issuable upon exercise or exchange of the
Rights will be issued to Intel in compliance with applicable exemptions from (i)
the registration and prospectus delivery requirements of the Securities Act and
(ii) the registration and qualification requirements of all applicable
securities laws of the states of the United States.
3.6 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except: (i) compliance with the HSR Act which may be required
for the exercise of the Rights to acquire Common Stock; (ii) the filing of a
report on Form 8-K by the Company with the SEC following the Closing; (iii) the
filing of such qualifications or filings under the Securities Act and the
regulations thereunder and all applicable state securities laws as may be
required in connection with the transactions contemplated by this Agreement;
(iv) the listing of the Common Stock issuable upon exercise or exchange of the
Rights or conversion of the Class A Common Stock on the New York Stock Exchange;
(v) the filing of the Certificate of Amendment with the Secretary of State of
the State of Delaware; and (vi) as expressly required or contemplated by the
terms of the Rights and Restrictions Agreement. All such qualifications and
filings in connection with the initial issuance of the Rights will have been
made or be effective on the Closing.
3.7 Non-Contravention. The execution, delivery and performance of this
-----------------
Agreement, the Rights Agreement and the Rights and Restrictions Agreement by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby, do not and will not (i) contravene or conflict with the
Certificate of Incorporation or Bylaws of the Company, as amended; (ii)
constitute a violation of any provision of any federal, state, local or foreign
law binding upon or applicable to the Company; or (iii) constitute a default or
require any consent under, give rise to any right of termination, cancellation
or acceleration of, or to a loss of any benefit to which the Company is entitled
under, or result in the creation or imposition of any
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
7
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------------
lien, claim or encumbrance on any assets of the Company under, any contract to
which the Company is a party or any permit, license or similar right relating to
the Company or by which the Company may be bound, except in the case of clause
(ii) and (iii) as, individually or in the aggregate, would not have a Material
Adverse Effect.
3.8 Litigation. There is no action, suit, proceeding, claim, arbitration
----------
or investigation ("Action") pending: (a) against the Company, properties or
------
assets or, to the best of the Company's knowledge, against any officer, director
or employee of the Company in connection with such officer's, director's or
employee's relationship with, or actions taken on behalf of, the Company, which
the Company believes is reasonably likely to have a Material Adverse Effect, or
(b) that seeks to prevent, enjoin, alter or delay the transactions contemplated
by this Agreement. The Company is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality which it believes is reasonably likely to have a
Material Adverse Effect. No Action by the Company is currently pending nor does
the Company intend to initiate any Action which it believes is reasonably likely
to have a Material Adverse Effect.
3.9 Compliance with Law and Charter Documents. The Company is not in
-----------------------------------------
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, both as amended. The Company has complied and is in compliance with all
applicable statutes, laws, and regulations and executive orders of the United
States of America and all states, foreign countries and other governmental
bodies and agencies having jurisdiction over the Company's business or
properties, except for any violations that would not, either individually or in
the aggregate, have a Material Adverse Effect.
3.10 SEC Documents.
-------------
(a) Reports. The Company has furnished or made available to Intel
-------
prior to the date hereof copies of its Annual Report on Form 10-K for the fiscal
year ended August 28, 1997 ("Form 10-K"), its Quarterly Reports on Form 10-Q for
---------
the fiscal quarters ended November 30, 1997, February 28, 1998 and May 28, 1998
(the "Form 10-Q's"), and all other registration statements, reports and proxy
-----------
statements filed by the Company with the SEC on or after October 31, 1997 (the
---
Form 10-K, the Form 10-Q's and such registration statements, reports and proxy
statements are collectively referred to herein as the "SEC Documents"). Each of
-------------
the SEC Documents, as of the respective date thereof (or if amended or
superseded by a filing prior to the closing date of this Agreement, then on the
date of such filing), did not, and each of the registration statements, reports
and proxy statements filed by the Company with the SEC after the date hereof and
prior to the Closing will not, as of the date thereof (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company is
not a party to any material contract, agreement or other arrangement which was
required to have been filed as an exhibit to the SEC Documents that was not so
filed.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
8
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------------
(b) Financial Statements. The SEC Documents include the Company's
--------------------
audited financial statements (the "Audited Financial Statements") for the fiscal
----------------------------
year ended August 31, 1997, and its unaudited financial statements for the nine-
month period ended May 31, 1998 (the "Balance Sheet Date"). Since the Balance
------------------
Sheet Date, the Company has duly filed with the SEC all registration statements
reports and proxy statements required to be filed by it under the Exchange Act
and the Securities Act. The audited and unaudited consolidated financial
statements of the Company included in the SEC Documents filed prior to the date
hereof fairly present, in conformity with generally accepted accounting
principles ("GAAP") (except as permitted by Form 10-Q) applied on a consistent
basis (except as may be indicated in such financial statements or the notes
thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject to normal
year-end audit adjustments in the case of unaudited interim financial
statements).
3.11 Absence of Certain Changes Since Balance Sheet . Since the Balance
-----------------------------------------------
Sheet Date, except as disclosed in or contemplated by the SEC Documents, the
business and operations of the Company have been conducted in the ordinary
course consistent with past practice, and there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution of the assets of the Company with respect to any shares of capital
stock of the Company or any repurchase, redemption or other acquisition by the
Company or any subsidiary of the Company of any outstanding shares of the
Company's capital stock;
(b) any damage, destruction or loss, whether or not covered by
insurance, except for such occurrences that have not resulted, and are not
expected to result, in a Material Adverse Effect;
(c) any waiver by the Company of a valuable right or of a material
debt owed to it, except for such waivers that have not resulted and are not
expected to result, in a Material Adverse Effect;
(d) any material change or amendment to, or any waiver of any material
rights under a material contract or arrangement by which the Company or any of
its assets. or properties is bound or subject, except for changes, amendments or
waivers that are expressly provided for or disclosed in this Agreement or that
have not resulted, and are not expected to result, in a Material Adverse Effect;
(e) any change by the Company in its accounting principles, methods or
practices or in the manner it keeps its accounting books and records, except any
such change required by a change in GAAP; and
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
9
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------------
(f) any other event or condition of any character, except for such
events and conditions that have not resulted, either individually or
collectively, in a Material Adverse Effect.
3.12 RDRAM Device Specification Modifications. As of the date of this
----------------------------------------
Agreement the Company is not aware of any RDRAM device specification
modifications that the Company believes require unreasonable process
modifications.
3.13 Full Disclosure. The information contained in this Agreement, the
---------------
Disclosure Letter and the SEC Documents with respect to the business,
operations, results of operations and financial condition of the Company, and
the transactions contemplated by this Agreement, taken together, are true and
complete in all material respects and do not omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF INTEL.
---------------------------------------------------
Intel represents and warrants to the Company as follows:
4.1 Investigation; Economic Risk. Intel has received or has had full
----------------------------
access to all of the information it considers necessary or appropriate to make
an informed investment decision with respect to the Rights that are convertible
or exercisable into Class A Common Stock or Common Stock to be purchased by
Intel under this Agreement. Intel further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Rights and the Class A Common Stock or Common
Stock into which they are convertible or exercisable and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the investor or to which Intel had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3. Intel understands that the
purchase of the Rights that are exchangeable or exercisable into Class A Common
Stock or Common Stock involves substantial risk. Intel acknowledges that it is
able to fend for itself in the transactions contemplated by this Agreement and
has the ability to bear the economic risks of its investment pursuant to this
Agreement and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this investment in the
Rights and the Class A Common Stock or Common Stock into which they are
convertible or exercisable and protecting its own interests in connection with
this investment.
4.2 Purchase for Own Account. The Rights, Class A Common Stock and Common
------------------------
Stock which Intel may acquire will be acquired for Intel's own account, not as a
nominee or agent, and not with a view to or in connection with the sale or
distribution of any part thereof.
4.3 Exempt from Registration; Restricted Securities. Intel understands
-----------------------------------------------
that the sale of the Rights and the issuance of the Class A Common Stock or
Common Stock upon exercise or exchange thereof will not be registered under the
Securities Act on the ground that the sale
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
10
<PAGE>
CONFIDENTIAL
------------
provided for in this Agreement is exempt from registration under of the
Securities Act, and that the reliance of the Company on such exemption is
predicated in part on Intel's representations set forth in this Agreement. Intel
understands that the Rights and the Class A Common Stock or Common Stock
issuable upon exercise or exchange thereof are restricted securities within the
meaning of Rule 144 under the Act, and must be held indefinitely unless they are
subsequently registered or an exemption from such registration is available.
Intel understands that the Company is under no obligation to register any of the
securities sold hereunder except as provided in the Rights and Restrictions
Agreement.
4.4 Accredited Investor. Intel is an "accredited investor" as that term
-------------------
is defined in Rule 501(a)(8) of Regulation D as promulgated by the SEC under the
Securities Act.
4.5 Legends. Intel agrees that the Rights, Class A Common Stock and the
-------
Common Stock issuable upon exercise or conversion thereof will bear legends and
be subject to the restrictions on transfer as provided in the Rights and
Restrictions Agreement. In addition, Intel agrees that the Company may place
stop transfer orders with its transfer agents with respect to such instruments.
The appropriate portion of the legend shall be removed in accordance with the
provisions of the Rights and Restrictions Agreement and the stop transfer orders
shall be removed promptly upon delivery to the Company of such satisfactory
evidence as reasonably may be required by the Company that such stop orders are
not required to ensure compliance with the Securities Act.
4.6 Organization Good Standing and Qualification. Intel is a corporation
--------------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power and authority required to (a)
carry on its business as presently conducted, and (b) enter into this Agreement,
the Rights Agreement, the Rights and Restrictions Agreement and the Supply
Agreement and to consummate the transactions contemplated hereby and thereby.
4.7 Due Authorization. Intel has the requisite corporate power and
-----------------
authority to enter into this Agreement, the Rights Agreement, the Rights and
Restrictions Agreement and the Supply Agreement and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement, the
Rights Agreement, the Rights and Restrictions Agreement and the Supply
Agreement, and performance by Intel of its obligations hereunder and thereunder,
have been duly authorized by all necessary corporate action on the part of
Intel. This Agreement constitutes, and the Rights Agreement and the Rights and
Restrictions Agreement, when executed and delivered by the parties thereto, will
constitute, valid and legally binding obligations of Intel, enforceable against
the Intel in accordance with their respective terms, except (a) as may be
limited by (i) applicable bankruptcy, insolvency, reorganization or others laws
of general application relating to or affecting the enforcement of creditors'
rights generally and (ii) the effect of rules of law governing the availability
of equitable remedies and (b) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public policy
thereunder.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
11
<PAGE>
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------------
4.8 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of Intel is required
in connection with the consummation of the transactions contemplated by this
Agreement, except: (i) compliance with the HSR Act which may be required for the
exercise of the Rights to acquire Common Stock; and (ii) as expressly required
or contemplated by the terms of the Rights and Restrictions Agreement.
4.9 Non-Contravention. The execution, delivery and performance of this
-----------------
Agreement, the Rights Agreement and the Rights and Restrictions Agreement by
Intel, and the consummation by Intel of the transactions contemplated hereby and
thereby, do not and will not (i) contravene or conflict with the Certificate of
Incorporation or Bylaws of Intel, as amended; (ii) constitute a violation of any
provision of any federal, state, local or foreign law binding upon or applicable
to Intel; or (iii) constitute a default or require any consent under, give rise
to any right of termination, cancellation or acceleration of, or to a loss of
any benefit to which Intel is entitled under, or result in the creation or
imposition of any lien, claim or encumbrance on any assets of Intel under, any
contract to which Intel is a party or any permit, license or similar right
relating to Intel or by which Intel may be bound, except in the case of clause
(ii) and (iii) as, individually or in the aggregate, would not have a Material
Adverse Effect.
5. AFFIRMATIVE COVENANTS OF THE COMPANY.
------------------------------------
The Company covenants to Intel as follows:
5.1 Use of Proceeds. The Company will use the proceeds from the sale of
---------------
the Rights pursuant to this Agreement for Qualified Expenditures.
5.2 Authorization of Class A Common Stock. The Company will use
-------------------------------------
reasonable efforts to obtain stockholder approval of an amendment to its
Certificate of Incorporation at its next annual stockholders meeting and will
promptly thereafter cause a Certificate of Amendment substantially in the form
attached hereto as Exhibit D to be filed with the Delaware Secretary of State of
the State of Delaware.
5.3 Reports of Qualified Expenditures. The Company shall provide to
---------------------------------
Intel, in a mutually acceptable form, on a quarterly basis commencing December
31, 1998, a report of Qualified Expenditures made, sufficient to permit an audit
of such expenditures pursuant to Section 7(m) of the Rights Agreement.
5.4 Cooperation in HSR Act Filings. In the event of a proposed exercise
------------------------------
of Rights to acquire Common Stock or voluntary conversion of the Class A Common
Stock which would require a filing by Intel under the HSR Act, the Company will
cooperate with Intel and use reasonable efforts to comply with any applicable
requirements of the HSR Act; provided, however, that the Company shall not be
under any obligation to comply with any request that it reasonably determines is
unduly burdensome. Any filing fees under the HSR Act shall be paid by Intel.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
12
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------------
5.5 Audit. The Company will maintain relevant records to support all
-----
Qualified Expenditures and Production milestones. Such records will be retained
in accordance with the Company's normal record retention policies. Upon written
request, the Company will make available to Intel documents and other
information that are reasonably necessary to verify the Company's compliance
with the terms of the Transaction Agreements; provided that Intel enters into an
agreement with the Company to maintain in confidence the Company's confidential
information disclosed pursuant to the audit, to the extent that existing
agreements do not cover such information. Intel may also request in writing
that an audit be performed by an independent auditor with respect to the
Qualified Expenditures and Production milestones necessary to verify the Special
Conversion Adjustments. If Intel elects to have such an audit performed, the
Company will make available to such independent auditor, financial, technical
and other information and records relevant to auditing the Qualified
Expenditures and Production milestones in order to verify the Special Conversion
Adjustments that may be reasonably requested by such independent auditor. The
independent auditor selected shall be mutually acceptable to Intel and the
Company and compensated by Intel. Prior to beginning such audit or receiving
such information, the independent auditor will enter into an agreement with the
Company to maintain in confidence the Company's confidential information. The
Company shall cooperate with the independent auditor in responding to requests
for the Company information and records. The independent auditor will promptly
conduct and issue a report to the Company and Intel. If the independent auditor
determines that the Company has failed to comply with any of the terms hereof
being audited, such independent auditor shall only disclose to Intel and the
Company the results of the audit without revealing the Company's confidential
information. If the independent auditor determines that a further Special
Conversion Adjustment is required hereunder, such auditor shall only disclose in
its audit report to the Company and Intel the (i) amount of the additional
Special Conversion Adjustment that is required hereunder; and (ii) a calculation
as to how such amounts were actually determined, if applicable.
6. CLOSING CONDITIONS.
------------------
6.1 Conditions to Intel's Obligations. The obligations of Intel to
---------------------------------
consummate the transactions contemplated by this Agreement at the Closing are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions:
(a) Representations and Warranties True. Each of the
-----------------------------------
representations and warranties of the Company contained in Section 3 will be
true and correct in all material respects on and as of the date hereof and on
and as of the date of the Closing, with the same effect as though such
representations and warranties had been made as of the Closing.
(b) Performance. The Company will have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
13
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------------
(c) Compliance Certificate. The Company will have delivered to the
----------------------
Intel at the Closing a certificate signed on its behalf by its Chief Executive
Officer or Chief Financial Officer certifying that the conditions specified in
Section 6.1(a) and (b) hereof have been fulfilled.
(d) Securities Exemptions. The offer and sale of the Rights to Intel
---------------------
pursuant to this Agreement and the Rights Agreement will be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
(e) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to Intel, and Intel will have received all such counterpart originals and
certified or other copies of such documents as it may reasonably request. Such
documents shall include (but not be limited to) the following:
(i) Certified Charter Documents. A copy of the Certificate of
---------------------------
Incorporation certified as of a recent date by the Secretary of State of
Delaware as a complete and correct copy thereof, and the Bylaws of the Company
(as amended through the date of the Closing), certified by the Secretary of the
Company as true and correct copies thereof as of the Closing.
(ii) Board Resolutions. A copy, certified by the Secretary of
-----------------
the Company, of the resolutions of the Board of Directors of the Company
providing for the approval of the transactions contemplated by this Agreement,
the Rights Agreement, the Rights and Restrictions Agreement and the Supply
Agreement and the issuance of the Rights and the Class A Common Stock or Common
Stock issuable upon exercise or conversion thereof.
(f) Opinion of Company Counsel. Intel will have received an opinion
--------------------------
on behalf of the Company, dated as of the date of the Closing, from counsel to
the Company, in form and substance reasonably satisfactory to Intel.
(g) Other Agreements. The Company will have executed and delivered
----------------
the Rights Agreement, the Rights and Restrictions Agreement and the Supply
Agreement.
6.2 Conditions to the Company's Obligations. The obligations of the
---------------------------------------
Company to consummate the transactions contemplated by this Agreement at the
Closing are subject to the fulfillment or waiver on or before the Closing, of
each of the following conditions:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties of Intel contained in Section 4 will be true and correct in all
material respects on and as of the date hereof and on and as of the date of the
Closing with the same effect as though such representations and warranties had
been made as of the Closing.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
14
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------------
(b) Performance. Intel will have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) Payment of Purchase Price. Intel will have delivered to the
-------------------------
Company the Purchase Price of the Rights as specified in and in accordance with
Section 2.1.
(d) Securities Exemptions. The offer and sale of the Rights to Intel
---------------------
pursuant to this Agreement will be exempt from the registration requirements of
the Securities Act and the registration and/or qualification requirements of all
applicable state securities laws.
(e) Other Agreements. Intel will have executed and delivered the
----------------
Rights Agreement, the Rights and Restrictions Agreement and the Supply
Agreement.
7. CONFIDENTIALITY OBLIGATIONS.
---------------------------
7.1 Obligations. Except to the extent required by law or judicial order
-----------
or except as provided herein, each party to this Agreement will hold any of the
other's Confidential Information (as defined in the next paragraph) in
confidence and will: (i) use the same degree of care to prevent unauthorized
disclosure or use of the Confidential Information that the receiving party uses
with its own information of like nature (but in no event less than reasonable
care), (ii) limit disclosure of the Confidential Information, including any
materials regarding the Confidential Information that the receiving party has
generated, to such of its employees and contractors as have a need to know the
Confidential Information to accomplish the purposes of this Agreement, and (iii)
advise its employees, agents and contractors of the confidential nature of the
Confidential Information and of the receiving party's obligations under this
Agreement and the Corporate Non-Disclosure Agreement #19096.
7.2 Certain Definitions. For purposes of this Agreement, the term
-------------------
"Confidential Information" refers to this Agreement, the Rights Agreement, the
- -------------------------
Supply Agreement and the Rights and Restrictions Agreement (collectively, the
"Transaction Agreements"). Any employee or contractor of the receiving party
- -----------------------
having access to the Confidential Information will be required to sign a non-
disclosure agreement protecting the Confidential Information if not already
bound by such a non-disclosure agreement.
7.3 Non-Disclosure of Agreements. Except to the extent required by law or
----------------------------
judicial order or except as provided herein, neither party shall disclose the
Transaction Agreements or any of their terms without the other's prior written
approval, which approval will not be delayed or unreasonably withheld. Either
party may disclose the Transaction Agreements to the extent required by law or
judicial order, provided that if such disclosure is pursuant to judicial order
or proceedings, the disclosing party will notify the other party promptly before
such disclosure and will cooperate with the other party to seek confidential
treatment with respect to the disclosure if requested by the other party and
provided further that if such disclosure is required pursuant to
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
15
<PAGE>
CONFIDENTIAL
------------
the rules and regulations of any federal, state or local organization, the
parties will cooperate to seek confidential treatment of the Transaction
Agreements to the maximum extent possible under law.
7.4 Public Announcements. Upon execution of this Agreement, the parties
--------------------
will agree on the content of a joint press release announcing the existence of
the transactions contemplated by this Agreement, which press release will be
issued as mutually agreed by the parties.
7.5 Third Party Information. Neither party will be required to disclose
-----------------------
to the other any confidential information of any third party without having
first obtained such third party's prior written consent.
7.6 Other Disclosures. All confidential information exchanged by the
-----------------
parties will be disclosed pursuant to the Intel Corporation/Micron Technology,
Inc. Corporate Non-Disclosure Agreement #19096.
8. MISCELLANEOUS.
-------------
8.1 Governing Law. This Agreement shall be governed in all respects by
-------------
and construed in accordance with the laws of the State of Delaware, without
regard to provisions regarding choice of laws. Jurisdiction shall be in the
courts of the state of domicile of the defending party to the original action.
8.2 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by any party hereto and the
closing of the transactions contemplated hereby, provided that the
representations and warranties set forth herein shall terminate as of the first
anniversary of the date hereof (other than with respect to any claims asserted
prior to such date, as to which they shall survive solely for the purpose of
resolving such claims until the resolution thereof).
8.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. This Agreement and the rights and obligations herein may not be
assigned by Intel without the prior written consent of the Company, except to a
Qualified Subsidiary (as defined in the Rights and Restrictions Agreement). This
Agreement and the rights and obligations herein may not be assigned by the
Company without the prior written consent of Intel.
8.4 Entire Agreement. This Agreement, the Rights Agreement, the Rights
----------------
and Restrictions Agreement and the Supply Agreement, and the agreements,
exhibits and schedules referred to herein and therein constitute the entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof; provided, however, that nothing in this Agreement shall be
deemed to terminate or supersede the provisions of any confidentiality and
nondisclosure agreements executed by the parties hereto prior to the date
hereof, which
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
16
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------------
agreements shall continue in full force and effect until terminated in
accordance with their respective terms.
8.5 Notices. Except as may be otherwise provided herein, all notices,
-------
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be delivered to the other party (a) in person; (b) by
facsimile to the address and number set forth below, when promptly followed up
by another of the delivery methods permitted by this Section 8.5; (c) by U.S.
mail, registered or certified, return receipt requested, postage prepaid and
addressed to the other party as set forth below; or (d) by a national-recognized
overnight delivery service that keeps records of deliveries and attempted
deliveries (such as FedEx), postage prepaid, addressed to the parties as set
forth below with next-business-day delivery guaranteed, provided that the
sending party receives a confirmation of delivery from the delivery service
provider.
To Intel: To the Company:
Intel Corporation Micron Technology, Inc.
2200 Mission College Blvd. 8000 S. Federal Way
Santa Clara, CA 95052 P.O. Box 6
Attn: Treasury Portfolio Manager Boise, Idaho 83707
Attn: Chief Financial Officer
Fax Number: (408) 765-1859 Fax Number: (208) 308-2900
with copies to: with copies to:
Intel Corporation Micron Technology, Inc.
2200 Mission College Blvd. 8000 South Federal Way
Santa Clara, CA 95052 P.O. Box 6
Attn: General Counsel Boise, Idaho 83716
Fax Number: (408) 765-6038 Attn: General Counsel
Fax Number: (208) 308-4509
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 8.5 by giving the other party
written notice of the new address in the manner set forth above.
8.6 Amendments. Any term of this Agreement may be amended only with the
----------
prior written consent of the Company and Intel.
8.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to the Company or to Intel, upon any breach or default
of any party hereto under this Agreement, shall impair any such right, power or
remedy of the Company or Intel, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of any similar breach or
default thereafter occurring. Any waiver, permit, consent or approval of any
kind or character on the part of the Company or Intel of any breach or default
under this Agreement or any waiver on the part of the Company or Intel of any
provisions or conditions of
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
17
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------------
this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or by law or otherwise afforded to the Company or Intel shall be
cumulative and not alternative.
8.8 Legal Fees. In the event of any action at law, suit in equity or
----------
arbitration proceeding in relation to this Agreement or any units or securities
of the Company issued or to be issued, the prevailing party shall be paid by the
other party a reasonable sum for attorney's fees and expenses for such
prevailing party.
8.9 Titles and Subtitles. The titles of the sections and subsections of
--------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.11 Severability. Should any provision of this Agreement be determined
------------
to be illegal or unenforceable, such determination shall not affect the
remaining provisions of this Agreement.
8.12 Dispute Resolution. The parties agree to negotiate in good faith to
------------------
resolve any dispute between them regarding this Agreement. If the negotiations
do not resolve the dispute to the reasonable satisfaction of both parties, then
each party shall nominate one senior officer of the rank of Vice President or
higher as its representative. These representatives shall, within thirty (30)
days of a written request by either party to call such a meeting, meet in person
and alone (except for one assistant for each party) and shall attempt in good
faith to resolve the dispute. If the disputes cannot be resolved by such senior
managers in such meeting, the parties agree that they shall, if requested in
writing by either party, meet within thirty (30) days after such written
notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the one day
mediation, either party may proceed as they see fit. This procedure shall be a
prerequisite before taking any additional action hereunder.
8.13 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the protection and benefit of the parties hereto and their permitted
successors and assigns, and, except as expressly provided herein, no other
Person shall be a direct or indirect beneficiary of or have any direct or
indirect cause of action or claim in connection with this Agreement or any of
the documents executed in connection herewith.
8.14 Meaning of Include and Including. Whenever in this Agreement the word
--------------------------------
"include" or "including" is used. it shall be deemed to mean "include, without
limitation" or "including. without limitation." as the case may be. and the
language following "include" or "including" shall not be deemed to set forth an
exhaustive list.
8.15 Fees, Costs and Expenses. All fees, costs and expenses (including
------------------------
attorney's' fees and expenses) incurred by either party hereto prior to the
Closing in connection with the preparation, negotiation and execution of this
Agreement, the Rights Agreement, the Rights and
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
18
<PAGE>
CONFIDENTIAL
------------
Restrictions Agreement and the Supply Agreement and the consummation of the
transactions contemplated hereby and thereby (including the costs associated
with any filings with, or compliance with any of the requirements of, any
governmental authorities), shall be the sole and exclusive responsibility of
such party.
8.16 Competition. Nothing set forth herein shall be deemed to preclude,
-----------
limit or restrict the Company's or Intel's and their respective Affiliates'
ability to compete with the other.
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
INTEL CORPORATION. MICRON TECHNOLOGY, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
{Signature Page to Securities Purchase Agreement}
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
19
<PAGE>
CONFIDENTIAL
------------
EXHIBIT A
(Rights Agreement)
20
<PAGE>
CONFIDENTIAL
------------
EXHIBIT B
(Rights and Restrictions Agreement)
21
<PAGE>
CONFIDENTIAL
------------
EXHIBIT C
(Supply Agreement)
22
<PAGE>
CONFIDENTIAL
------------
EXHIBIT D
(Form of Certificate of Amendment)
23
<PAGE>
SECURITIES RIGHTS AND RESTRICTIONS AGREEMENT
Between
MICRON TECHNOLOGY, INC.
and
INTEL CORPORATION
DATED AS OF OCTOBER 19, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 - DEFINITIONS..................................................... 1
1.1 Certain Definitions............................................. 1
SECTION 2 - STANDSTILL AND RELATED COVENANTS................................ 5
2.1 Paris Ownership of Milan Securities............................. 5
2.2 Standstill Provisions........................................... 5
2.3 Voting Trust.................................................... 6
2.4 Solicitation of Proxies......................................... 6
2.5 Acts in Concert with Others..................................... 6
2.6 Termination..................................................... 6
SECTION 3 - RESTRICTIONS ON TRANSFER OF SECURITIES;
COMPLIANCE WITH SECURITIES LAWS................................. 7
3.1 Restrictions on Transfer of Voting Securities of Milan.......... 7
3.2 Restrictive Legends............................................. 9
3.3 Procedures for Certain Transfers................................ 10
3.4 Covenant Regarding Exchange Act Filings......................... 10
3.5 Termination..................................................... 11
SECTION 4 - REGISTRATION RIGHTS............................................. 11
4.1 Demand Registration............................................. 11
4.2 Shelf Registration.............................................. 12
4.3 Piggyback Registration.......................................... 13
4.4 Demand and Shelf Registration Procedures, Rights and Obligations 14
4.5 Expenses........................................................ 19
4.6 Indemnification................................................. 20
4.7 Issuances by Milan or Other Holders............................. 22
4.8 Information by Paris............................................ 22
4.9 Market Standoff Agreements...................................... 22
4.10 Termination..................................................... 23
SECTION 5 - BOARD REPRESENTATION............................................ 24
5.1 Board of Directors.............................................. 24
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
5.2 Termination..................................................... 24
SECTION 6 - MISCELLANEOUS................................................... 25
6.1 Governing Law................................................... 25
6.2 Successors and Assigns.......................................... 25
6.3 Entire Agreement; Amendment..................................... 25
6.4 Notices and Dates............................................... 25
6.5 Language Interpretation......................................... 26
6.6 Table of Contents; Titles; Headings............................. 27
6.7 Counterparts.................................................... 27
6.8 Severability.................................................... 27
6.9 Injunctive Relief............................................... 27
6.10 Dispute Resolution.............................................. 27
ii
<PAGE>
SECURITIES RIGHTS AND RESTRICTIONS AGREEMENT
THIS SECURITIES RIGHTS AND RESTRICTIONS AGREEMENT (this "AGREEMENT") is
made as of October 19, 1998, between MICRON TECHNOLOGY, INC., a Delaware
corporation ("MICRON"), and INTEL CORPORATION, a Delaware corporation ("INTEL").
RECITALS
--------
A. Intel has agreed to purchase from Micron, and Micron has agreed to sell
to Intel, Class A Common Stock ("CLASS A COMMON STOCK") or, pending
authorization and creation of the Class A Common Stock, stock rights (the
"RIGHTS") to be issued by the Company pursuant to that certain Stock Rights
Agreement, dated of even date herewith (the "STOCK RIGHTS AGREEMENT"), on the
terms and conditions set forth in that certain Securities Purchase Agreement,
dated October 15, 1998, by and between Micron and Intel (the "SECURITIES
PURCHASE AGREEMENT"). The Rights are exchangeable for Class A Common Stock or
Common Stock (the "COMMON STOCK") of the Company, and the Class A Common Stock
is convertible into Common Stock of the Company.
B. The Securities Purchase Agreement provides for the execution and
delivery of this Agreement at the closing of the transactions contemplated
thereby.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and conditions herein and in the Securities Purchase Agreement, the
parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
-------------------
(a) "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with,
such other Person. For purposes of this definition, "CONTROL" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to
the foregoing. Notwithstanding the above, unless expressly provided to the
contrary herein, the term Affiliate shall exclude officers, directors and any
employee benefit plan or pension plan of a Person.
(b) "BENEFICIAL OWNERSHIP" or "beneficial owner" has the meaning
provided in Rule 13d-3 promulgated under the Exchange Act. References to
ownership of Voting Securities hereunder mean beneficial ownership.
<PAGE>
(c) "CLASS A COMMON STOCK" has the meaning set forth in paragraph A
of the Recitals hereto.
(d) "COMMON STOCK" has the meaning set forth in paragraph A of the
Recitals hereto.
(e) "CHANGE IN CONTROL OF MICRON" shall mean a merger, consolidation
or other business combination or the sale of all or substantially all of the
assets of Micron (other than a transaction pursuant to which the holders of the
voting stock of Micron outstanding immediately prior to such transaction have
the entitlement to exercise, directly or indirectly, fifty percent (50%) or more
of the Total Voting Power of the continuing, surviving entity or transferee
immediately after such transaction).
(f) "DEMAND REGISTRATION STATEMENT" has the meaning set forth in
Section 4.1(a).
(g) "DEMAND REQUEST" has the meaning set forth in Section 4.1(a).
(h) "DEMAND/TRANCHE MANAGING UNDERWRITERS" has the meaning set forth
in Section 4.4(c).
(i) "DEMAND/TRANCHE MARKET CUT-BACK" has the meaning set forth in
Section 4.4(d).
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "GROUP" or "GROUP" shall have the meaning provided in Section
13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder, but shall exclude any institutional underwriter purchasing Voting
Securities of Micron in connection with an underwritten registered offering for
purposes of a distribution of such securities.
(l) "HEDGING TRANSACTIONS" means engaging in short sales and the
purchase and sale of puts and calls and other derivative securities, so long as
Intel retains beneficial ownership of the Shares.
(m) "INDEMNIFIED PARTY" has the meaning set forth in Section 4.6(c).
(n) "INDEMNIFYING PARTY" has the meaning set forth in Section
4.6(c).
(o) "INTEL POOLING TRANSACTION LOCK-UP" has the meaning set forth in
Section 4.9(a).
(p) "INTEL PUBLIC OFFERING LOCK-UP" has the meaning set forth in
Section 4.9(a).
2
<PAGE>
(q) "MICRON PUBLIC OFFERING LOCK-UP" has the meaning set forth in
Section 4.9(b).
(r) "PERSON" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(s) "PIGGYBACK MARKET CUT-BACK" has the meaning set forth in Section
4.3(c).
(t) "PIGGYBACK REGISTRABLE SECURITIES" has the meaning set forth in
Section 4.3(a).
(u) "PIGGYBACK REGISTRATION STATEMENT" has the meaning set forth in
Section 4.3(a).
(v) "PIGGYBACK REQUEST" has the meaning set forth in Section 4.3(a).
(w) "PIGGYBACK UNDERWRITING AGREEMENT" has the meaning set forth in
Section 4.3(b).
(x) "QUALIFIED SUBSIDIARY" shall mean a corporation or other Person
at least 90% of the outstanding Voting Securities of which are owned,
directly or indirectly, by Intel.
(y) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(z) "REGISTRABLE SECURITIES" means (i) the (1) all the shares of
Common Stock of the Company issued or issuable upon exercise or conversion of
the Rights or the Class A Common Stock and (2) any shares of Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, any such securities
described in clause (1) of this subsection (w). Notwithstanding the foregoing,
Registrable Securities shall exclude any Registrable Securities sold by a person
in a transaction in which rights under this Section 4 are not assigned in
accordance with this Agreement or any Registrable Securities sold in a public
offering, whether sold pursuant to Rule 144 promulgated under the Securities
Act, in a registered offering, or otherwise.
(aa) "REGISTRATION EXPENSES" has the meaning set forth in Section
4.5(a).
(bb) "RESTRICTED SECURITIES" has the meaning set forth in Section
3.3(a).
(cc) "RIGHTS" has the meaning set forth in paragraph A of the
recitals hereto.
(dd) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3
<PAGE>
(ee) "SECURITIES PURCHASE AGREEMENT" has the meaning set forth in
paragraph A of the Recitals hereto.
(ff) "SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(gg) "SHARES" means the shares of Common Stock of the Company issued
or issuable upon exercise or conversion of the Rights or the Class A Common
Stock.
(hh) "SHELF REGISTRABLE SECURITIES" has the meaning set forth in
Section 4.2(a).
(ii) "SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 4.2(a).
(jj) "SHELF REQUEST" has the meaning set forth in Section 4.2(a).
(kk) "STOCK RIGHTS AGREEMENT" has the meaning set forth in paragraph
A of the Recitals hereto.
(ll) "SUSPENSION CONDITION" has the meaning set forth in Section
4.4(f).
(mm) "TRANCHE REGISTRABLE SECURITIES" has the meaning set forth in
Section 4.2(b).
(nn) "TRANCHE REQUEST" has the meaning set forth in Section 4.2(b).
(oo) "TRANSACTION RELATED SECURITIES" means (i) Shares, (ii) shares
of Class A Common Stock issued or issuable upon exercise or conversion of the
Rights, (iii) the Rights and (iv) shares of Common Stock and other securities of
the Company issued as (or issuable upon conversion or exercise of any warrant,
right or other security as) a dividend or other distribution with respect to or
in exchange for or in replacement of, or upon conversion or exercise of any such
securities.
(pp) "VOTING SECURITIES" means (i) all securities of Micron,
entitled, in the ordinary course, to vote in the election of directors of Micron
and (ii) for the purposes of this Agreement only, all securities of Micron,
directly or indirectly, convertible into or exchangeable or exercisable for
shares of Common Stock (including the Rights), the Voting Power of which shall
be deemed equal to the number of shares of Common Stock, directly or indirectly,
issuable upon the conversion, exchange or exercise of such securities. Voting
Securities shall not include stockholder rights or other comparable securities
having Voting Power only upon the happening of a trigger event or comparable
contingency and which can only be transferred together with the Voting
Securities to which they attach. References herein to meetings of holders of
Voting Securities shall include meetings of any class or type thereof,
(qq) "VOTING POWER" or "TOTAL VOTING POWER" of Micron (or any other
corporation) refer to the votes or total number of votes which at the time of
calculation may be cast
4
<PAGE>
in the election of directors of Micron (or such corporation) at any meeting of
stockholders of Micron (or such corporation) if all securities entitled to vote
in the election of directors of Micron (or such corporation) were present and
voted at such meeting; provided that for purposes of references herein made to
any Person's "Voting Power" or percentage beneficial ownership of "Total Voting
Power," any rights (other than rights referred to in any rights plan of Micron
(or any such other corporation) or a successor to such rights plan so long as
such rights can only be transferred together with the Voting Securities to which
they attach) of such Person to acquire Voting Securities (whether or not the
exercise of any such right shall be conditioned upon the passage of time or any
other contingency) shall be deemed to have been exercised in full.
(rr) "180-DAY LIMITATION" has the meaning set forth in Section
4.4(a).
All capitalized terms used and not defined herein shall have the respective
meanings assigned to such terms in the Securities Purchase Agreement.
SECTION 2
STANDSTILL AND RELATED COVENANTS
2.1 Intel Ownership of Micron Securities. On the date hereof, and
------------------------------------
without giving effect to the transactions contemplated by the Securities
Purchase Agreement, neither Intel nor any Affiliate of Intel beneficially owns
any Voting Securities of Micron, other than Voting Securities held in equity
index funds or by employee benefit plans or pension plans.
2.2 Standstill Provisions.
---------------------
(a) Intel shall not acquire, directly or indirectly, and shall not
cause or permit any Affiliate of Intel to acquire, directly or indirectly
(through market purchases or otherwise), record or beneficial ownership of any
Voting Securities of Micron representing, when taken together with all
securities owned by such Persons, in excess of a percentage greater than
nineteen and ninety nine hundredths (19.99%) (the "STANDSTILL PERCENTAGE") of
the Total Voting Power of Micron without the prior written consent of Micron's
Board of Directors; provided, however, that the prior written consent of the
Board of Directors of Micron shall not be required for the acquisition of any
Voting Securities of Micron pursuant to the conversion of any of the shares of
Class A Common Stock or the exercise of any of the Rights or resulting from a
stock split, stock dividend or similar recapitalization by Micron. Nothing
contained in this Section 2.2 shall adversely affect any right of Intel to
acquire record or beneficial ownership of Voting Securities of Micron pursuant
to any rights plan instituted by Micron. Ownership of Voting Securities by
employee benefit plans or pension plans shall not be beneficial ownership by
Intel for purposes of this Section 2.2.
(b) Intel and its Affiliates will not be obliged to dispose of any
Voting Securities to the extent that the aggregate percentage of the Total
Voting Power of Micron represented by Voting Securities beneficially owned by
Intel and its Affiliates or which Intel and its Affiliates has a
5
<PAGE>
right to acquire is increased beyond the Standstill Percentage (i) as a result
of a recapitalization of Micron or a repurchase or exchange of securities by
Micron or its Affiliates; (ii) as a result of an equity index transaction,
provided that Intel and its Affiliates shall not vote such shares; (iii) by way
of stock dividends or other distributions or rights or offerings made available
to holders of shares of Voting Securities generally; or (iv) with the prior
written consent of Micron's Board of Directors.
2.3 Voting Trust. Intel shall not, and shall not cause or permit any
------------
Affiliate of Intel to, deposit any Voting Securities of Micron in a voting trust
or, except as otherwise provided herein, subject any Voting Securities of Micron
to any arrangement or agreement with respect to the voting of such Voting
Securities of Micron.
2.4 Solicitation of Proxies. Without the prior written consent of
-----------------------
Micron's Board of Directors, Intel shall not, and shall not cause or permit any
Affiliate of Intel to, directly or indirectly (i) initiate, propose or otherwise
solicit Micron stockholders for the approval of one or more stockholder
proposals with respect to Micron or induce or attempt to induce any other Person
to initiate any stockholder proposal, (ii) make, or in any way participate in,
any "SOLICITATION" of "PROXIES" (as such terms are defined or used in Regulation
14a-1 under the Exchange Act) with respect to any Voting Securities of Micron,
or become a "PARTICIPANT" in any "ELECTION CONTEST" (as such terms are used in
Rule 14a-11 of Regulation 14A under the Exchange Act), with respect to Micron or
(iii) call or seek to have called any meeting of the holders of Voting
Securities of Micron.
2.5 Acts in Concert with Others. Except as contemplated herein, Intel
---------------------------
shall not, and shall not cause or permit any Affiliate of Intel to, participate
in the formation of any Person which owns or seeks to acquire beneficial
ownership of, or otherwise acts in concert in respect of the voting or
disposition of, Voting Securities of Micron. Without limiting the generality of
the foregoing, and except as contemplated herein, Intel shall not, and shall not
cause or permit any Affiliate of Intel to: (i) join a partnership, limited
partnership, syndicate or other group, or otherwise act in concert with any
third person, for the purpose of acquiring, holding, or disposing of Voting
Securities of Micron; (ii) seek election to or seek to place a representative on
the Board of Directors of Micron; (iii) seek the removal of any member of the
Board of Directors of Micron; (iv) otherwise seek control of the management,
Board of Directors or policies of Micron; (v) solicit, propose or seek to effect
any form of business combination transaction with Micron or any Affiliate
thereof, or any restructuring, recapitalization or similar transaction with
respect to Micron or any Affiliate thereof; (vi) solicit, make or propose or
announce an intent to make, any tender offer or exchange offer for any Voting
Securities of Micron; (vii) disclose an intent, purpose, plan or proposal with
respect to Micron or any Voting Securities of Micron inconsistent with the
provisions of this Agreement, including an intent, purpose, plan or proposal
that is conditioned on or would require Micron to waive the benefit of or amend
any provision of this Agreement; or (vii) assist, participate in, or solicit any
effort or attempt by any Person to do or seek to do any of the foregoing. Intel
shall not, and shall not cause or permit any Affiliate of Intel to, make any
recommendation or proposal to any Person to engage in any of the actions covered
by Section 2.4 and this Section 2.5 hereof.
6
<PAGE>
2.6 Termination. The provisions of this Section 2 shall terminate upon
-----------
the earlier to occur of: (i) such time as Intel (together with all Affiliates of
Intel) beneficially owns in the aggregate Voting Securities of Micron
representing less than five percent (5%) of the Total Voting Power of Micron; or
(ii) the closing or other completion of a Change in Control of Micron.
SECTION 3
RESTRICTIONS ON TRANSFER OF
SECURITIES; COMPLIANCE WITH SECURITIES LAWS
3.1 Restrictions on Transfer of Voting Securities of Micron. Intel shall
not, and shall not cause or permit any Affiliate of Intel to, directly or
indirectly, offer to sell, contract to sell, make any short sale of, or
otherwise sell, dispose of, loan, gift, pledge or grant any options or rights
with respect to, any Transaction Related Securities of Micron, now or hereafter
acquired, or with respect to which Intel (or any Affiliate of Intel) has or
hereafter acquires the power of disposition (or enter into any agreement or
understanding with respect to the foregoing), except, in the case of the Shares
and shares of Class A Common Stock, as set forth in the following clauses (a)
through (g), and, in the case of the Rights, as set forth in clause (a) and (b):
(a) to Micron, or any Person or group approved in writing in advance
by Micron's Board of Directors;
(b) to any Qualified Subsidiary of Intel, so long as such subsidiary
agrees in writing (in form reasonably acceptable to counsel for Micron) to hold
such Voting Securities of Micron subject to all the provisions of this
Agreement, and also agrees to transfer such Voting Securities of Micron to Intel
or another Qualified Subsidiary of Intel if it ceases to be a Qualified
Subsidiary of Intel;
(c) pursuant to a public offering of Voting Securities of Micron
registered under the Securities Act; provided, however, that such offering is
structured to distribute such securities in accordance with procedures
reasonably designed to ensure that beneficial ownership of the Voting Securities
of Micron with aggregate Voting Power of more than five percent (5%) of the
Total Voting Power of Micron then in effect shall not be transferred during such
distribution to any single Person or group;
(d) through a sale of Voting Securities of Micron pursuant to Rule
144 under the Securities Act; provided, however, that any such sale (i) complies
with the manner of sale provisions under paragraph (f) of Rule 144 or (ii) is of
securities with Voting Power aggregating less than five percent (5%) of the
Total Voting Power of Micron and is not made knowingly directly or indirectly
to: (A) any Person or group which has theretofore filed a Schedule 13D with the
SEC with respect to any class of "EQUITY SECURITY" (as defined in Rule 13a11-1
under the Exchange Act) of Micron and which, at the time of such sale, continues
to reflect beneficial ownership in excess of five percent (5%) of the Total
Voting Power of Micron; (B) any Person or group known to Intel (without inquiry
7
<PAGE>
or investigation) to beneficially own in excess of five percent (5%) of any
Voting Securities of Micron or to be accumulating stock on behalf of or acting
in concert with any such Person or group or a Person or group contemplated by
clause (A) above; or (C) any Person or group that has announced or commenced an
unsolicited offer for any Voting Securities of Micron or publicly initiated,
proposed or otherwise solicited Micron stockholders for the approval of one or
more stockholder proposals with respect to Micron or publicly made, or in any
way participated in, any "SOLICITATION" of "PROXIES" (as such terms are defined
or used in Regulation 14A under the Exchange Act) with respect to any Voting
Securities of Micron, or become a "PARTICIPANT" in any "ELECTION CONTEST" (as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act);
(e) pursuant to any private sale of Voting Securities of Micron
exempt from the registration requirements under the Securities Act, provided
that no such sale may be made to any Person or group which, after giving effect
to such sale, will beneficially own or have the right to acquire Voting
Securities of Micron with aggregate Voting Power of more than five percent (5%)
of the Total Voting Power of Micron unless such Person or group is an
institutional investor that acquires such Voting Securities solely for
investment, in which case the total number of Voting Securities that may be sold
to such Person or group shall be limited so that such Person or group shall not
own or have the right to acquire more than ten percent (10%) of the Total Voting
Power of Micron after giving effect to the proposed sale; and, provided,
further, that, if such securities are "restricted securities" as defined in Rule
144, any such purchaser (and any transferee of such purchaser) shall agree to
take and hold such securities subject to the provisions and upon the conditions
specified in this Section 3, and it will be a condition precedent to the
effectiveness of any such transfer that Intel shall have delivered to Micron a
written agreement of such purchaser to that effect in form and substance
reasonably satisfactory to Micron (which may contain a representation by such
purchaser as to the beneficial ownership of Voting Securities of Micron, which
may be relied upon by Intel (absent actual knowledge to the contrary) for
purposes of compliance with the applicable requirements of this Section 3.1(e));
(f) in response to an offer to purchase or exchange for cash or
other consideration any Voting Securities, in any case which is not opposed by
the Board of Directors of Micron within the time such Board is required,
pursuant to regulations under the Exchange Act, to advise the stockholders of
Micron of such Board's position with respect to such offer, or, if no such
regulations are applicable, within ten (10) business days of the commencement of
such offer, or pursuant to a merger, consolidation or other business combination
involving Micron approved by the Board of Directors of Micron; or
(g) subject to Micron's prior consent (which shall not be
unreasonably withheld), pursuant to bona fide pledges of such Voting Securities
to institutional lenders (provided that the number of such lenders to which, or
for the benefit of which, such pledges may be made, shall not exceed twenty (20)
in the aggregate), to secure a loan, guarantee, letter of credit facility or
other indebtedness or financial support; provided that each such lender to
which, or for the benefit of which, such pledge is made agrees in writing to
hold such Voting Securities subject to all provisions
8
<PAGE>
of this Agreement, including the limitations on any sale or other disposition of
such Voting Securities.
Nothing in this Section 3.1 shall be construed to prohibit Hedging
Transactions with respect to securities of Micron provided that such
transactions do not result in non-compliance with the foregoing restrictions
insofar such provisions relate to, and are limited in their application to, the
Transaction Related Securities.
3.2 Restrictive Legends.
-------------------
(a) The certificate or certificates representing the (i) the Shares,
(ii) the Rights, (iii) any shares of Class A Common Stock issued or issuable
upon exercise or conversion of the Rights and (iv) any securities issued in
respect of the foregoing as a result of any stock split, stock dividend,
recapitalization, reclassification or similar transaction (collectively, the
"RESTRICTED SECURITIES") shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AS TO THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION.
(b) The certificate or certificates representing the Restricted
Securities also shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER, INCLUDING ANY SALE, PLEDGE OR
OTHER HYPOTHECATION, SET FORTH IN AN AGREEMENT BETWEEN THE
ISSUER AND INTEL CORPORATION, A COPY OF WHICH AGREEMENT MAY
BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY
AT ITS PRINCIPAL EXECUTIVE OFFICES.
(c) The certificate or certificates representing the Rights also
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO PROVISIONS OF THE STOCK RIGHTS AGREEMENT WHICH CONTAINS
CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RIGHTS AND
OBLIGATIONS. COPIES OF THE STOCK RIGHTS AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
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OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY
AT ITS PRINCIPAL EXECUTIVE OFFICES.
(d) The certificate or certificates representing shares of Class A
Common Stock also shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION WHICH
CONTAINS CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RIGHTS AND
OBLIGATIONS. COPIES OF THE CERTIFICATE OF INCORPORATION MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICES.
3.3 Procedures for Certain Transfers.
--------------------------------
(a) The holder of each certificate representing Restricted
Securities, by acceptance thereof, agrees to comply in all respects with the
provisions of this Section 3.
(b) Prior to any proposed transfer of any Restricted Securities
pursuant to Sections 3.1(a), (b), (e) and (g) hereof, Intel shall give written
notice to Micron of its intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied by either: (i) a written opinion of
legal counsel (including in-house counsel), who shall be reasonably satisfactory
to Micron, addressed to Micron and reasonably satisfactory in form and substance
to Micron's counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Securities Act; or
(ii) a "no action" letter from the SEC and a copy of any request by Intel
(together with all supplements or amendments thereto), which shall have been
provided to Micron at or prior to the time of first delivery to the SEC's staff,
to the effect that the transfer of such securities without registration will not
result in a recommendation by the staff of the SEC that action be taken with
respect thereto, whereupon Intel shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by Intel to
Micron.
(c) In connection with any proposed transfer of Restricted
Securities pursuant to Section 3.1(d) hereof, Intel shall comply with all
applicable requirements of Rule 144 under the Securities Act and the reasonable
requirements of Micron's transfer agent with respect to sales of Restricted
Securities pursuant to Rule 144.
(d) Each certificate evidencing the Restricted Securities
transferred as herein provided (other than a transfer pursuant to Section
3.1(c)) shall bear the appropriate restrictive legend set forth (or described)
in Section 3.3(a) above, except that such certificate shall not bear such
restrictive legend if: (i) in the opinion of counsel for Micron, such legend is
not required in order to establish compliance with any provisions of the
Securities Act; (ii) the Restricted Securities have
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been held by the holder for more than two years, and the holder represents to
counsel for Micron that it has not been an "AFFILIATE" (as such term is defined
for purposes of Rule 144) of Micron during the three-month period prior to the
sale and shall not become an affiliate (as such term is defined for purposes of
Rule 144) of Micron without resubmitting the Restricted Securities for
reimposition of the legend; or (iii) the Restricted Securities have been sold
pursuant to Rule 144 and in compliance with Section 3.1(d). In addition, each
certificate evidencing the Restricted Securities transferred pursuant to this
Section 3 (other than transfers pursuant to Sections 3.1(c) and 3.1(d) hereof)
shall bear the legend set forth in Section 3.2(b) above.
3.4 Covenant Regarding Exchange Act Filings. With a view to making
---------------------------------------
available to Intel the benefits of Rule 144 promulgated under the Securities
Act, and any other rules or regulations of the SEC which may at any time permit
Intel to sell any Restricted Securities without registration, until the date of
termination of this Agreement, Micron agrees to use commercially reasonable
efforts to file with the SEC in a timely manner all reports and other documents
required to be filed under the Exchange Act.
3.5 Termination. The provisions of this Section 3 (other than Sections
-----------
3.2 and 3.3) shall terminate upon the later to occur of: (i) the fifth
anniversary date of this Agreement and (ii) such time as Intel (together with
all Affiliates of Intel) beneficially owns in the aggregate Voting Securities of
Micron representing less than five percent (5%) of the Total Voting Power of
Micron or upon the closing or other completion of a Change in Control of Micron.
SECTION 4
REGISTRATION RIGHTS
4.1 Demand Registration.
-------------------
(a) If at any time after March 31, 1999, Micron shall receive from
Intel a written request (a "DEMAND REQUEST") that Micron register on Form S-3
under the Securities Act (or if such form is not available, any registration
statement form then available to Micron) Registrable Securities equal to at
least the lesser of two percent (2%) of the Voting Securities outstanding on the
date of such Demand Request and securities having an aggregate market value of
in excess of $100 million on such date, then Micron shall use commercially
reasonable efforts to cause the Registrable Securities specified in such Demand
Request (THE "DEMAND REGISTRABLE SECURITIES") to be registered as soon as
reasonably practicable so as to permit the offering and sale thereof and, in
connection therewith, shall prepare and file with the SEC as soon as practicable
after receipt of such Demand Request, a registration statement (a "DEMAND
REGISTRATION STATEMENT") to effect such registration; provided, however, that
each such Demand Request shall: (i) specify the number of Demand Registrable
Securities intended to be offered and sold by Intel pursuant thereto (which
number of Demand Registrable Securities shall not be less than the lesser of two
percent (2%) of the Registrable Securities outstanding on the date of such
Demand Request and securities having an aggregate market value of in excess of
$100 million on such date); (ii) express the present intention
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<PAGE>
of Intel to offer or cause the offering of such Demand Registrable Securities
pursuant to such Demand Registration Statement, (iii) describe the nature or
method of distribution of such Demand Registrable Securities pursuant to such
Demand Registration Statement (including, in particular, whether Intel plans to
effect such distribution by means of an underwritten offering or other method);
and (iv) contain the undertaking of Intel to provide all such information and
materials and take all such actions as may be required in order to permit Micron
to comply with all applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations of the SEC thereunder, and to obtain any
desired acceleration of the effective date of such Demand Registration
Statement.
(b) The procedures to be followed by Micron and Intel, and the
respective rights and obligations of Micron and Intel, with respect to the
preparation, filing and effectiveness of Demand Registration Statements and the
distribution of Demand Registrable Securities pursuant to Demand Registration
Statements under this Section 4.1 are set forth in Section 4.4 hereof.
4.2 Shelf Registration.
------------------
(a) If at any time after March 31, 1999, Micron shall receive from
Intel a written request (a "SHELF REQUEST") that Micron register pursuant to
Rule 415(a)(1)(i) under the Securities Act (or any successor rule with similar
effect) a delayed offering of all Registrable Securities held by Intel, then
Micron shall use commercially reasonable efforts to cause the Registrable
Securities specified in such Shelf Request (the "SHELF REGISTRABLE SECURITIES")
to be registered as soon as reasonably practicable so as to permit the sale
thereof and, in connection therewith, shall (i) prepare and file with the SEC as
soon as practicable after receipt of such Shelf Request, a shelf registration
statement on Form S-3 relating to such Shelf Registrable Securities, if such
Form S-3 is available for use by Micron (or any successor form of registration
statement to such Form S-3), to effect such registration (a "SHELF REGISTRATION
STATEMENT"), to enable the distribution of such Shelf Registrable Securities;
provided, however, that each such Shelf Request shall: (i) express the intention
of Intel to offer or cause the offering of such Shelf Registrable Securities
pursuant to such Shelf Registration Statement on a delayed basis in the future;
(ii) describe the nature or method of the proposed offer and sale of such Shelf
Registrable Securities pursuant to such Shelf Registration Statement (including,
in particular, whether Intel plans to effect such distribution by means of an
underwritten offering or other method); and (iii) contain the undertaking of
Intel to provide all such information and materials and take all such actions as
may be required in order to permit Micron to comply with all applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder, and to obtain any desired acceleration of the
effective date of such Shelf Registration Statement. Intel shall not be entitled
to make more than one Shelf Request during any three hundred sixty-five (365)
day period.
(b) It is expressly agreed by the parties that the sole purpose of
Micron filing and maintaining an effective a Shelf Registration Statement for
the delayed offering of Shelf Registrable Securities by Intel is to make the
process of distributing Registrable Securities by Intel more convenient for both
parties by reducing or eliminating the need to file a new Demand Registration
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<PAGE>
Statement each time that Intel decides to sell Registrable Securities. After a
Shelf Registration Statement has been declared effective under the Securities
Act by the SEC, then, upon the written request of Intel (a "TRANCHE REQUEST"),
Micron shall prepare such amendments to such Shelf Registration Statement
(including post-effective amendments), if any, and such amendments or
supplements to the prospectus relating to the Registrable Securities to be
offered thereunder pursuant to such Tranche Request (the "TRANCHE REGISTRABLE
SECURITIES"), as is necessary to facilitate the distribution of such Tranche
Registrable Securities pursuant to such Tranche Request; provided, however, that
such Tranche Request shall: (i) specify the number of Tranche Registrable
Securities intended to be offered and sold by Intel pursuant thereto (which
number of Tranche Registrable Securities shall not be less than the lesser of
two percent (2%) of the Voting Securities outstanding on the date of such
Tranche Request and securities having an aggregate market value of in excess of
$100 million on such date); (ii) express the present intention of Intel to offer
or cause the offering of such Tranche Registrable Securities pursuant to the
Shelf Registration Statement, (iii) describe the nature or method of
distribution of such Tranche Registrable Securities pursuant to the Shelf
Registration Statement (including, in particular, whether Intel plans to effect
such distribution by means of an underwritten offering or other method); and
(iv) contain the undertaking of Intel to provide all such information and
materials and take all such actions as may be required in order to permit Micron
to comply with all applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations of the SEC thereunder.
(c) The procedures to be followed by Micron and Intel, and the
respective rights and obligations of Micron and Intel, with respect to the
preparation, filing and effectiveness of Shelf Registration Statements and the
distribution of Tranche Registrable Securities pursuant to Shelf Registration
Statements under this Section 4.2 are set forth in Section 4.4 hereof.
4.3 Piggyback Registration.
----------------------
(a) If at any time after March 31, 1999, Micron shall determine to
register any of its equity or equity-linked securities (other than registration
statements relating to (i) employee, consultant or distributor compensation or
incentive arrangements (including employee benefit plans), (ii) acquisitions or
any transaction or transactions under Rule 145 under the Securities Act (or any
successor rule with similar effect), (iii) distributions by principal
stockholders, their Affiliates or transferees (unless consented to by such
principal stockholders, Affiliates or transferees), or (iv) pursuant to Rule 415
under the Securities Act), then Micron will promptly give Intel written notice
thereof and include in such Micron-initiated, non-shelf, registration statement
(a "PIGGYBACK REGISTRATION STATEMENT"), and in any underwriting involved
therein, all Registrable Securities (the "PIGGYBACK REGISTRABLE SECURITIES")
specified in a written request made by Intel (a "PIGGYBACK REQUEST") within five
(5) business days after receipt of such written notice from Micron; provided,
however, that nothing in this Section 4.3(a), or any other provision of this
Agreement, shall be construed to limit the absolute right of Micron, for any
reason and in its sole discretion: (i) to delay, suspend or terminate the filing
of any Piggyback Registration Statement; (ii) to delay the effectiveness of any
Piggyback Registration Statement; (iii) to terminate or reduce the number of
Piggyback Registrable Securities to be distributed pursuant to any Piggyback
Registration Statement
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<PAGE>
(including, without limitation, pursuant to Section 4.3(c) hereof); or (iv) to
withdraw such Piggyback Registration Statement.
(b) If the Piggyback Registration Statement of which Micron gives
notice is for an underwritten offering, Micron shall so advise Intel as a part
of the written notice given pursuant to Section 4.3(a). In such event, the right
of Intel to registration pursuant to this Section 4.3 shall be conditioned upon
the agreement of Intel to participate in such underwriting and in the inclusion
of such Piggyback Registrable Securities in the underwriting to the extent
provided herein. Intel shall (together with Micron and any other holders
distributing securities in such Piggyback Registration Statement, if any) enter
into an underwriting agreement (the "PIGGYBACK UNDERWRITING AGREEMENT") in
customary form with the underwriter or underwriters selected for such
underwriting by Micron.
(c) Notwithstanding any other provision of this Agreement, if the
managing underwriters of any underwritten offering pursuant to a Piggyback
Request determine, in their sole discretion that, after including all the shares
to be offered by Micron and all the shares of any other Persons entitled to
registration rights with respect to such Piggyback Registration Statement
(pursuant to other agreements with Micron), marketing factors require a
limitation of the number of Piggyback Registrable Securities to be underwritten,
the managing underwriters of such offering may exclude any and all of the
Piggyback Registrable Securities, provided that such cut-back is made pro rata
with respect to any other securities proposed to be included in such
registration statement pursuant to "piggy-back" registration rights (a
"PIGGYBACK MARKET CUT-BACK"). If Intel disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to Micron and
the managing underwriters. Any Piggyback Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such Piggyback
Registration Statement.
(d) Except to the extent specifically provided in this Section 4.3
hereof, the procedures to be followed by Micron and Intel, and the respective
rights and obligations of Micron and Intel, with respect to the distribution of
any Piggyback Registrable Securities by Intel pursuant to any Piggyback
Registration Statement filed by Micron shall be as set forth in the Piggyback
Underwriting Agreement, or any other agreement or agreements governing the
distribution of such Piggyback Registrable Securities pursuant to such Piggyback
Registration Statement.
4.4 Demand and Shelf Registration Procedures, Rights and Obligations. The
----------------------------------------------------------------
procedures to be followed by Micron and Intel, and the respective rights and
obligations of Micron and Intel, with respect to the preparation, filing and
effectiveness of Demand Registration Statements and Shelf Registration
Statements, respectively, and the distribution of Demand Registrable Securities
and Tranche Registrable Securities, respectively, pursuant thereto, are as
follows:
(a) Intel shall not be entitled to make more than one Demand Request
or Tranche Request during any one hundred eighty (180) day period (the "180-DAY
LIMITATION"); provided, however, that (i) any Demand Request that: (A) does not
result in the corresponding Demand Registration Statement being declared
effective by the SEC; (B) is withdrawn by Intel following the
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<PAGE>
imposition of a stop order by the SEC with respect to the corresponding Demand
Registration Statement; (C) is withdrawn by Intel as a result of the exercise by
Micron of its suspension rights pursuant to Sections 4.4(e) or (f) hereof; or
(D) is withdrawn by Intel as a result of a Demand/Tranche Market Cut-Back (as
defined in Section 4.4(d) hereof); and (ii) any Tranche Request that: (A) is
withdrawn by Intel following the imposition of a stop order by the SEC with
respect to the corresponding Shelf Registration Statement; (B) is withdrawn by
Intel as a result of the exercise by Micron of its suspension rights pursuant to
Sections 4.4(e) or (f) hereof; or (C) s withdrawn by Intel as a result of a
Demand/Tranche Market Cut-Back, shall not count for the purposes of determining
compliance with the 180-Day Limitation. Any Demand Request or Tranche Request
that is withdrawn by Intel for any reason other than as set forth in the
previous sentence shall count for purposes of determining compliance with the
180-Day Limitation. Piggyback Requests shall not count for purposes of
determining compliance with the 180-Day Limitation regardless of whether a
Piggyback Registration Statement is filed, declared effective or withdrawn or
whether any distribution of Piggyback Registrable Securities is effected,
terminated or cut-back (pursuant to Section 4.3(c) hereof, or otherwise). Intel
shall not be entitled to offer or sell any securities pursuant to a Demand
Registration Statement or Shelf Registration Statement unless and until,
following a Demand Request or a Tranche Request, as applicable, Micron has made
all required filings with the SEC with respect to the distribution of
Registrable Securities contemplated by such Demand Request or Tranche Request,
as applicable, such filings have become effective and Micron has notified Intel
of the foregoing and that no Suspension Condition then exists.
(b) Micron shall use commercially reasonable efforts to cause each
Demand Registration Statement and Shelf Registration Statement to be declared
effective promptly and to keep such Demand Registration Statement and Shelf
Registration Statement continuously effective until the earlier to occur of: (i)
the sale or other disposition of the Registrable Securities so registered; (ii)
(X) in the case of a firmly committed, underwritten offering, sixty (60) days
after (A) if pursuant to a Demand Registration Statement, the effective date of
any Demand Registration Statement or (B) if pursuant to a Tranche Request, the
date of the final prospectus used to confirm sales in connection with the
underwritten offering of Tranche Registrable Securities, and (Y) in the case of
all other plans of distribution, (A) if pursuant to a Demand Registration
Statement, fifteen (15) business days after the effective date of such Demand
Registration Statement or (B) if pursuant to a Tranche Request, fifteen (15)
business days after the earlier of the effectiveness of the amendment to the
Shelf Registration Statement or the filing of the amendment or supplement to the
prospectus included in such registration statement required to facilitate such
distribution and the date of the notice required by the last sentence of Section
4.4(a) hereof if no such amendment or supplement is so required; and (iii) the
termination of Intel's registration rights pursuant to Section 4.10 hereof.
Micron shall prepare and file with the SEC such amendments and supplements to
each Demand Registration Statement and Shelf Registration Statement and each
prospectus used in connection therewith as may be necessary to make and to keep
such Demand Registration Statement and Shelf Registration Statement effective
and to comply with the provisions of the Securities Act with respect to the sale
or other disposition of all Registrable Securities proposed to be distributed
pursuant to such Demand Registration Statement and Shelf Registration Statement
until the earlier to occur of: (i) the sale or other disposition of the
Registrable Securities so
15
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registered; (ii) (X) in the case of a firmly committed, underwritten offering,
sixty (60) days after (A) if pursuant to a Demand Registration Statement, the
effective date of any Demand Registration Statement or (B) if pursuant to a
Tranche Request, the date of the final prospectus used to confirm sales in
connection with the underwritten offering of Tranche Registrable Securities, and
(Y) in the case of all other plans of distribution, (A) if pursuant to a Demand
Registration Statement, fifteen (15) business days after the effective date of
such Demand Registration Statement or (B) if pursuant to a Tranche Request,
fifteen (15) business days after the earlier of the effectiveness of the
amendment to the Shelf Registration Statement or the filing of the amendment or
supplement to the prospectus included in such registration statement required to
facilitate such distribution and the date of the notice required by the last
sentence of Section 4.4(a) hereof if no such amendment or supplement is so
required; and (iii) the termination of Intel's registration rights pursuant to
Section 4.10 hereof.
(c) In connection with any underwritten offering pursuant to a
Demand Registration Statement or a Shelf Registration Statement which Intel has
requested be underwritten, Micron, on the one hand, and Intel, on the other
hand, shall each select one investment banking firm to serve as co-manager of
such offering. The co-manager selected by Micron shall be subject to the prior
approval of Intel, which approval shall not be unreasonably withheld, and the
co-manager selected by Intel shall be subject to the prior approval of Micron,
which approval shall not be unreasonably withheld. Each of the co-managers so
selected by Micron and Intel are hereinafter collectively referred to as the
"DEMAND/TRANCHE MANAGING UNDERWRITERS." The Demand/Tranche Underwriter selected
by Intel shall be the lead Demand/Tranche Managing Underwriter, whose
responsibilities shall include running the "books" for any offering. Micron
shall, together with Intel, enter into an underwriting agreement with the
Demand/Tranche Managing Underwriters, which agreement shall contain
representations, warranties, indemnities and agreements then customarily
included by an issuer in underwriting agreements with respect to secondary
distributions under demand registration statements or shelf registration
statements, as the case may be, and shall stipulate that the Demand/Tranche
Managing Underwriters will receive equal commissions and fees and other
remuneration in connection with the distribution of any Demand Registrable
Securities or Tranche Registrable Securities thereunder.
(d) Notwithstanding any other provision of this Agreement, in
connection with any underwritten offering, the number of Demand Registrable
Securities or Registrable Securities proposed to be distributed by Intel
pursuant to any Demand Request or Tranche Request may be limited by the
Demand/Tranche Managing Underwriters if such Demand/Tranche Managing
Underwriters determine that the sale of such Demand Registrable Securities or
Tranche Registrable Securities would significantly and adversely affect the
market price of the Common Stock (a "DEMAND/TRANCHE MARKET CUT-BACK"). If Intel
disapproves of the terms of any proposed underwritten offering under a Demand
Registration Statement or a Shelf Registration Statement (including, without
limitation, any reduction in the number of Demand Registrable Securities or
Tranche Registrable Securities, as the case may be, to be sold by Intel
thereunder pursuant to this Section 4.4(d)), Intel may elect to withdraw
therefrom by written notice to Micron and the Demand/Tranche Managing
Underwriters. Any Demand Registrable Securities excluded or
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withdrawn from such underwriting shall also be withdrawn from any applicable
Demand Registration Statement.
(e) Notwithstanding any other provisions of this Agreement, in the
event that Micron receives a Demand Request, Shelf Request or Tranche Request at
a time when Micron (i) shall have filed, or has a bona fide intention to file, a
registration statement with respect to a proposed public offering of equity or
equity-linked securities or (ii) has commenced, or has a bona fide intention to
commence, a public offering of equity or equity-linked securities pursuant to an
existing effective shelf or other registration statement, then Micron shall be
entitled to suspend, for a period of up to ninety (90) days after the receipt by
Micron of such Demand Request, Shelf Request or Tranche Request, the filing of
any Demand Registration Statement or Shelf Registration Statement or the
implementation of any Tranche Request.
(f) Notwithstanding any other provision of this Agreement, in the
event that Micron determines that: (i) non-public material information regarding
Micron exists, the immediate disclosure of which would be significantly
disadvantageous to Micron; (ii) the prospectus constituting a part of any Demand
Registration Statement or Shelf Registration Statement covering the distribution
of any Demand Registrable Securities or Tranche Securities contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) an offering
of Demand Registrable Securities or Tranche Registrable Securities would
materially interfere with any proposed material acquisition, disposition or
other similar corporate transaction or event involving Micron (each of the
events or conditions referred to in clauses (i), (ii) and (iii) of this sentence
is hereinafter referred to as a "SUSPENSION CONDITION"), then Micron shall have
the right to suspend the filing or effectiveness of any Demand Registration
Statement or Shelf Registration Statement or to suspend any distribution of
Demand Registrable Securities or Tranche Registrable Securities pursuant to any
effective Demand Registration Statement or Shelf Registration Statement for so
long as such Suspension Condition exists. Micron will as promptly as practicable
provide written notice to Intel when a Suspension Condition arises and when it
ceases to exist. Upon receipt of notice from Micron of the existence of any
Suspension Condition, Intel shall forthwith discontinue efforts to: (i) file or
cause any Demand Registration Statement or Shelf Registration Statement to be
declared effective by the SEC (in the event that such Demand Registration
Statement or Shelf Registration Statement has not been filed, or has been filed
but not declared effective, at the time Intel receives notice that a Suspension
Condition has arisen); or (ii) offer or sell Demand Registrable Securities or
Tranche Registrable Securities (in the event that such Demand Registration
Statement or Shelf Registration Statement has been declared effective at the
time Intel receives notice that a Suspension Condition has arisen). In the event
that Intel had previously commenced or was about to commence the distribution of
Demand Registrable Securities or Tranche Registrable Securities pursuant to a
prospectus under an effective Demand Registration Statement or Shelf
Registration Statement, then Micron shall, as promptly as practicable after the
Suspension Condition ceases to exist, make available to Intel (and to each
underwriter, if any, participating in such distribution) an amendment or
supplement to such prospectus. If so directed by Micron, Intel shall deliver to
Micron all copies, other than permanent file copies then in Intel's
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possession, of the most recent prospectus covering such Demand Registrable
Securities or Tranche Registrable Securities at the time of receipt of such
notice.
(g) Notwithstanding any other provision of this Agreement, Micron
shall not be permitted to postpone (i) the filing or effectiveness of any Demand
Registration Statement or Shelf Registration Statement or (ii) the distribution
of any Demand Registrable Securities or Tranche Registrable Securities pursuant
to an effective Demand Registration Statement or an effective Shelf Registration
Statement pursuant to Sections 4.4(e), 4.4(f) or 4.9(a) hereof for an aggregate
of more than one hundred thirty-five (135) days in any one hundred eighty day
(180) day period (including any market standoff periods applicable to Intel
pursuant to Section 4.9(a) hereof); provided, however, that in the event that
any Intel Pooling Transaction Lock-Up (as defined in Section 4.9(a) hereof)
would expire by its terms on a date that would extend beyond the one hundred
thirty-five (135) day limitation, then Micron shall have the right to (i)
postpone the filing or effectiveness of any Demand Registration Statement or
Shelf Registration Statement or (ii) the distribution of any Demand Registrable
Securities or Tranche Registrable Securities pursuant to an effective Demand
Registration Statement or an effective Shelf Registration Statement until such
time as such Intel Pooling Transaction Lock-Up expires.
(h) Micron shall promptly notify Intel of any stop order issued or,
to Micron's knowledge, threatened to be issued by the SEC with respect to any
Demand Registration Statement or Shelf Registration Statement as to which a
Tranche Request is pending, and will use its best efforts to prevent the entry
of such stop order or to remove it if entered at the earliest possible date.
(i) Micron shall furnish to Intel (and any underwriters in
connection with any underwritten offering) such number of copies of any
prospectus (including any preliminary prospectus and any amended or supplemented
prospectus), in conformity with the requirements of the Securities Act, as Intel
(and such underwriters) shall reasonably request in order to effect the offering
and sale of any Demand Registrable Securities or Tranche Registrable Securities
to be offered and sold, but only while Micron shall be required under the
provisions hereof to cause the Demand Registration Statement or Shelf
Registration Statement pursuant to which such Demand Registrable Securities or
Tranche Registrable Securities are intended to be distributed to remain current.
(j) Micron shall use commercially reasonable efforts to register or
qualify the Demand Registrable Securities and Tranche Registrable Securities
covered by each Demand Registration Statement and Shelf Registration Statement,
respectively, under the state securities or "blue sky" laws of such states as
Intel shall reasonably request, maintain any such registration or qualification
current, until the earlier to occur of: (i) the sale or other disposition of the
Registrable Securities so registered; (ii) (X) in the case of a firmly
committed, underwritten offering, sixty (60) days after (A) if pursuant to a
Demand Registration Statement, the effective date of any Demand Registration
Statement or (B) if pursuant to a Tranche Request, the date of the final
prospectus used to confirm sales in connection with the underwritten offering of
Tranche Registrable Securities, and (Y) in the case of all other plans of
distribution, (A) if pursuant to a Demand Registration Statement,
18
<PAGE>
fifteen (15) business days after the effective date of such Demand Registration
Statement or (B) if pursuant to a Tranche Request, fifteen (15) business days
after the earlier of the effectiveness of the amendment to the Shelf
Registration Statement or the filing of the amendment or supplement to the
prospectus included in such registration statement required to facilitate such
distribution and the date of the notice required by the last sentence of Section
4.4(a) hereof if no such amendment or supplement is so required; and (iii) the
termination of Intel's registration rights pursuant to Section 4.10 hereof;
provided, however, that Micron shall not be required to take any action that
would subject it to the general jurisdiction of the courts of any jurisdiction
in which it is not so subject or to qualify as a foreign corporation in any
jurisdiction where Micron is not so qualified.
(k) Micron shall furnish to Intel and to each underwriter engaged in
an underwritten offering of Demand Registrable Securities or Tranche Registrable
Securities, a signed counterpart, addressed to Intel or such underwriter, of (i)
an opinion or opinions of counsel to Micron (with respect to Micron and
securities law compliance by Micron) and (ii) a comfort letter or comfort
letters from Micron's independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as Intel or the managing underwriters may
reasonably request.
(l) Micron shall use commercially reasonable efforts to make
appropriate members of its management reasonably available for due diligence
purposes, "road show" presentations and analyst presentations in connection with
any distributions of Demand Registrable Securities or Tranche Registrable
Securities pursuant to a Demand Registration Statement or a Shelf Registration
Statement.
(m) Micron shall use commercially reasonable efforts to cause all
Demand Registrable Securities and Tranche Registrable Securities to be listed on
each securities exchange on which similar securities of Micron are then listed.
(n) Micron shall make generally available to its securityholders, as
soon as reasonably practicable, an earnings statement covering a period of
twelve (12) months, beginning three months after the effective date of any
Demand Registration Statement relating to the distribution of Demand Registrable
Securities or the date of any final prospectus used to confirm sales in
connection with any offering of Tranche Registrable Securities, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
(o) Micron shall take all such other actions either reasonably
necessary or desirable to permit the Registrable Securities held by Intel to be
registered and disposed of in accordance with the methods of disposition
described herein.
4.5 Expenses.
--------
(a) All of the out-of-pocket costs and expenses incurred by Micron
in connection with any registration pursuant to Sections 4.1 and 4.2 (up to
$100,000 in the case of a Demand Registration Statement, $75,000 in the case of
a Shelf Registration Statement and $50,000 in the
19
<PAGE>
case of any amendments or supplements required in connection with a Tranche
Request, plus, in all instances, the actual amount of any filing fees) shall
(subject to Section 4.7) be borne by Intel; provided that Intel shall not be
required to reimburse Micron for compensation of Micron's officers and
employees, regular audit expenses, and normal corporate costs incurred in
connection with such registration. The costs and expenses of any such
registration shall include, without limitation, the reasonable fees and expenses
of Micron's counsel and its accountants and all other out-of-pocket costs and
expenses of Micron incident to the preparation, printing and filing of the
registration statement and all amendments and supplements thereto and the cost
of furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters, dealers and other
purchasers of the securities so registered, the costs and expenses incurred in
connection with the qualification of such securities so registered under the
securities or "blue sky" laws of various jurisdictions, the fees and expenses of
Micron's transfer agent and all other costs and expenses of complying with the
provisions of this Section 4 with respect to such registration (collectively,
the "REGISTRATION EXPENSES").
(b) Micron shall pay all Registration Expenses incurred by Micron in
connection with any registration statements that are initiated pursuant to
Section 4.3 of this Agreement, other than incremental filing fees associated
with the inclusion of the Registrable Securities in the registration statement.
Intel shall pay all expenses incurred on its behalf with respect to any
registration pursuant to Section 4.3, including, without limitation, any counsel
for Intel and all underwriting discounts and selling commissions with respect to
the Registrable Securities sold by it pursuant to such registration statement.
4.6 Indemnification.
---------------
(a) In the case of any offering registered pursuant to this Section
4, Micron hereby indemnifies and agrees to hold harmless Intel (and its officers
and directors), any underwriter (as defined in the Securities Act) of
Registrable Securities offered by Intel, and each Person, if any, who controls
Intel or any such underwriter within the meaning of Section 15 of the Securities
Act against any losses, claims, damages or liabilities, joint or several, to
which any such Persons may be subject, under the Securities Act or otherwise,
and to reimburse any of such Persons for any legal or other expenses reasonably
incurred by them in connection with investigating any claims or defending
against any actions, insofar as such losses, claims, damages or liabilities
arise out of or are based upon (a) any untrue statement or alleged untrue
statement of a material fact contained in the registration statement under which
such Registrable Securities were registered under the Securities Act pursuant to
this Section 4, the prospectus contained therein (during the period that Micron
is required to keep such prospectus current), or any amendment or supplement
thereto, or the omission or alleged omission to state therein (if so used) a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading or (b) any violation or alleged violation by Micron of the Securities
Act, the Exchange Act, any federal or state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any federal
or state securities law in connection with the offering covered by such
registration statement, except insofar as such losses, claims, damages or
liabilities
20
<PAGE>
arise out of or are (i) based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon information furnished
to Micron in writing by Intel or any underwriter for Intel specifically for use
therein, or (ii) made in any preliminary prospectus, and the prospectus
contained in the registration statement as declared effective or in the form
filed by Micron with the SEC pursuant to Rule 424 under the Securities Act shall
have corrected such statement or omission and a copy of such prospectus shall
not have been sent or otherwise delivered to such Person at or prior to the
confirmation of such sale to such Person.
(b) By requesting registration under this Section 4, Intel agrees,
if Registrable Securities held by Intel are included in the securities as to
which such registration is being effected, and each underwriter shall agree, in
substantially the same manner and to substantially the same extent as set forth
in the preceding paragraph, to indemnify and to hold harmless Micron and its
directors and officers and each Person, if any, who controls Micron within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which any of such Persons may be subject under
the Securities Act or otherwise, and to reimburse any of such Persons for any
legal or other expenses incurred in connection with investigating or defending
against any such losses, claims, damages or liabilities, but only to the extent
it arises out of or is based upon (a) an untrue statement or alleged untrue
statement or omission or alleged omission of a material fact in any registration
statement under which the Registrable Securities were registered under the
Securities Act pursuant to this Section 4, any prospectus contained therein, or
any amendment or supplement thereto, which was based upon and made in conformity
with information furnished to Micron in writing by Intel or such underwriter
expressly for use therein or (b) any violation or alleged violation by Intel of
the Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement.
(c) Each party entitled to indemnification under this Section 4.6
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, provided, that that an Indemnified Party shall have the right to retain
its own counsel, with the fees and expenses to be paid by the Indemnifying
Party, to the extent that representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential conflict of interests between such Indemnified Party and any other
party represented by such counsel in such proceeding], and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 4 unless
such failure resulted in actual material detriment to the Indemnifying Party. No
Indemnifying Party, (i) in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, which consent
21
<PAGE>
shall not be unreasonably withheld, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation, or (ii) shall be liable
for amounts paid in any settlement if such settlement is effected without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act or the Exchange Act in any case in which
either (i) any Person exercising rights under this Agreement, or any controlling
person of any such Person, makes a claim for indemnification pursuant to this
Section 4 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 4 provides for
indemnification in such case, or (ii) contribution under the Securities Act or
the Exchange Act may be required on the part of any such selling Person or any
such controlling Person in circumstances for which indemnification is provided
under this Section 4; then, and in each such case, Micron and such Person will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that such
Person is responsible for the portion represented by the percentage that the
public offering price of its Registrable Securities offered by and sold under
the registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and Micron and other
selling Persons are responsible for the remaining portion; provided, however,
-------- -------
that, in any such case: (A) no such Person will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Person pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
4.7 Issuances by Micron or Other Holders. As to each registration or
------------------------------------
distribution referred to in Sections 4.1 and 4.2, additional shares of the
Common Stock to be sold for the account of Micron or other holders may be
included therein, provided that the inclusion of such securities in such
registration or distribution may be conditioned or restricted if, in the opinion
of the Demand/Tranche Managing Underwriters, marketing factors require a
limitation of the number of shares to be underwritten. The Registration Expenses
incurred by Micron, Intel and any other holders participating in such
registration or distribution shall be borne by Micron, Intel and any other
holders participating in such registration or distribution in proportion to the
aggregate number of shares to be sold by Micron, Intel and such other holders.
4.8 Information by Intel. Intel shall furnish to Micron such
--------------------
information regarding Intel in the distribution of Registrable Securities
proposed by Intel as Micron may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 4.
22
<PAGE>
4.9 Market Standoff Agreements.
--------------------------
(a) In connection with the public offering by Micron of any of its
securities, Intel agrees that, upon the request the underwriters managing any
underwritten offering of Micron's securities, Intel shall agree in writing (the
"INTEL PUBLIC OFFERING LOCK-UP") that neither Intel (nor any Affiliate of Intel)
will, directly or indirectly, offer to sell, contract to sell, make any short
sale of, or otherwise sell, dispose of, loan, gift, pledge or grant any options
or rights with respect to, any securities of Micron (other than those included
in such registration statement, if any) now or hereafter acquired by Intel (or
any Affiliate of Intel) or with respect to which Intel (or any Affiliate of
Intel) has or hereafter acquires the power of disposition without the prior
written consent of Micron and such underwriters for such period of time (not to
exceed fourteen (14) days prior to the date such offering is expected to
commence and ninety (90) days after the date of the final prospectus delivered
to the underwriters for use in confirming sales in such offering) as may be
requested by Micron and the underwriters, except that Intel and its Affiliates
shall be permitted to enter into transactions that have the effect of
maintaining or continuing pre-existing Hedging Transaction positions by
continuing, renewing or replacing any such positions on substantially equivalent
terms; provided, however, that in no event shall Intel (or any Affiliate of
Intel) be required to enter into such an agreement more than once during any
twelve (12) month period. Furthermore, if Intel is an Affiliate of Micron, Intel
agrees that, at the request of Micron, Intel shall agree in writing (the "INTEL
POOLING TRANSACTION LOCK-UP") that, except for transactions that have the effect
of maintaining or continuing pre-existing Hedging Transactions positions which
transactions Micron's independent accountants determine (which determination
shall be conclusive) may be permitted without affecting the accounting of a
proposed business combination as a pooling of interests, neither Intel (nor any
Affiliate of Intel) shall, directly or indirectly, offer to sell, contract to
sell, make any short sale of, or otherwise sell, dispose of, loan, pledge or
grant any options or rights with respect to, any securities of Micron now or
hereafter acquired directly by Intel (or any Affiliate of Intel) or with respect
to which Intel (or any Affiliate of Intel) has or hereafter acquires the power
of disposition without the prior written consent of Micron for such period of
time as shall be necessary for Micron to complete any business combination
transaction in the form of a pooling of interests; provided that Micron's
independent accountants shall have concluded, after reasonable inquiry, that, at
the relevant time with respect to such proposed pooling of interests
transaction, Intel is or was an "affiliate" of Micron for purposes of the
accounting rules governing pooling of interests transactions. Intel agrees that
Micron may instruct its transfer agent to place stop-transfer notations in its
records to enforce the provisions of the Intel Public Offering Lock-Up and the
Intel Pooling Transaction Lock-Up contained in this Section 4.9(a).
(b) In connection with any proposed public offering by Intel of any
Registrable Securities, Micron agrees that, upon the request of Intel or the
underwriters managing any underwritten offering of Intel's securities, Micron
shall agree in writing (the "MICRON PUBLIC OFFERING LOCK-UP") that neither
Micron (nor any Affiliate of Micron) will, directly or indirectly, offer to
sell, contract to sell, make any short sale of, or otherwise sell, dispose of,
loan, gift, pledge or grant any options or rights with respect to, any
securities of Micron (other than those included in such registration statement,
if any, or grants of stock options or issuances of Common Stock upon
23
<PAGE>
the exercise of outstanding stock options under Micron's existing employee
benefit plans) now or hereafter acquired by Micron (or any Affiliate of Micron)
or with respect to which Micron (or any Affiliate of Micron) has or hereafter
acquires the power of disposition without the prior written consent of Intel and
such underwriters for such period of time (not to exceed fourteen (14) days
prior to the date such offering is expected to commence and ninety (90) days)
after the date of the final prospectus delivered to the underwriters for use in
confirming sales in such offering) as may be requested by Intel and the
underwriters; provided, however, that neither Micron (nor any Affiliate of
Micron) shall bound by such Micron Public Offering Lock-Up more than once during
any 180-day period.
4.10 Termination. The provisions of this Section 4 (other than Sections
-----------
4.5 and 4.6) shall terminate upon the earlier to occur of: (i) the fifth
anniversary date of this Agreement, (ii) such time as Intel (and any Affiliates
of Intel) beneficially own in the aggregate less than 5,000,000 shares of Common
Stock (including all Shares issuable upon exercise or conversion of Rights or
Class A Common Stock), and (iii) in the case of Sections 4.1 through 4.4,
Section 4.7 and Section 4.8, such time as Intel may sell all securities of
Micron acquired pursuant to the Securities Purchase Agreement which it which it
continues to own within a ninety (90) day period under Rule 144.
SECTION 5
BOARD REPRESENTATION
5.1 Board of Directors. Upon the written request of Intel, Micron shall
------------------
use reasonable efforts to cause one person designated by Intel and reasonably
acceptable to the Chief Executive Officer of Micron to be elected to the Micron
Board of Directors (either by creating a vacancy on the Board of Directors or
including such Person on the slate at Micron's next annual meeting of
stockholders). For purposes of this Section 6.1, reasonable bases for rejecting
a proposed nominee include, among others, concerns about competence, failure to
have significant and direct experience in or with the semiconductor memory
business, business or personal conflicts (actual or potential), and evidence of
business or personal relationships with existing or former directors or
executive officers, evidencing an inability to function on a congenial basis
with any existing directors. Any nominee who is an employee or officer of Intel
or of any Affiliate of Intel will be an officer of Intel holding the position of
corporate vice president or higher.
5.2 Termination. The provisions of this Section 5 shall terminate on the
-----------
earlier of (i) the fifth anniversary of the date of this Agreement; (ii) at such
time as Intel (together with all Affiliates of Intel) beneficially owns in the
aggregate Transaction Related Securities of Micron representing less than five
percent (5%) of the Total Voting Power of Micron or upon the closing or other
completion of a Change in Control of Micron, or (iii) upon exercise of the
Conversion Adjustment in accordance with Section 4.b.3 of the Certificate of
Amendment or Section 7 of the Stock Rights Agreement (notwithstanding settlement
of any such adjustment with cash).
24
<PAGE>
SECTION 6
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of Delaware as applied to contracts entered into solely
between residents of, and to be performed entirely within, such state.
6.2 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement may not be assigned by a party without the prior
written consent of the other party; provided that, without the consent of
Micron, Intel may assign this Agreement (and the rights and obligations
hereunder) to any Qualified Subsidiary in connection with a transfer of Voting
Securities of Micron to such Affiliate of Intel pursuant to Section 3.1(b), and
without the consent of Intel, Micron may assign all or part of this Agreement
(and the rights and obligations hereunder) to the successor or an assignee of
all or substantially all of Micron's business; provided that, in each case, such
assignee expressly assumes the relevant obligations of this Agreement (by a
written instrument delivered to the other party, in form and substance
reasonably acceptable to it) and, notwithstanding such assignment, the parties
hereto shall each continue to be bound by all of their respective obligations
hereunder. This Agreement is not intended and shall not be construed to create
any rights or remedies in any parties other than Intel and Micron and no Person
shall assert any rights as third party beneficiary hereunder.
6.3 Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
6.4 Notices and Dates.
-----------------
(a) All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be delivered personally (including
by courier) or given by facsimile transmission to the parties at the following
addresses (or to such other address as a party may have specified by notice
given to the other pursuant to this provision) and shall be deemed given when so
received:
if to Micron, to:
Micron, Inc.
8000 South Federal Way
Boise, Idaho 83716-9632
Attention: Roderic W. Lewis, Esq.
25
<PAGE>
General Counsel
Telephone: (208) 368-4517
Facsimile: (208) 368-4540
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: John A. Fore, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
if to Intel, to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attention: Treasury Portfolio Manager
Facsimile: (408) 765-1859
with a copy to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attention: General Counsel
Facsimile: (408) 765-6038
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 6.4 by giving the other party written
notice of the new address in the manner set forth above.
(b) In the event that any date provided for in this Agreement falls
on a Saturday, Sunday or legal holiday, such date shall be deemed extended to
the next business day.
6.5 Language Interpretation. In the interpretation of this Agreement,
-----------------------
unless the context otherwise requires, (a) words importing the singular shall be
deemed to import the plural and vice
26
<PAGE>
versa, (b) words denoting gender shall include all genders, (c) references to
persons shall include corporations or other entities and vice versa, and (d)
references to parties, sections, schedules, paragraphs and exhibits shall mean
the parties, sections, schedules, paragraphs and exhibits of and to this
Agreement, unless otherwise indicated by the context.
6.6 Table of Contents; Titles; Headings. The table of contents and
-----------------------------------
section headings of this Agreement are for reference purposes only and are to be
given no effect in the construction or interpretation of this Agreement. All
references herein to Sections, unless otherwise identified, are to Sections of
this Agreement.
6.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.
6.8 Severability. If any provision of this Agreement or portion thereof
------------
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
6.9 Injunctive Relief. Intel, on the one hand, and Micron, on the other,
-----------------
acknowledge and agree that irreparable damage may occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specific
performance of the terms and provisions hereof in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
remedy to which they may be entitled at law or equity.
6.10 Dispute Resolution. The parties agree to negotiate in good faith to
------------------
resolve any dispute between them regarding this Agreement. If the negotiations
do not resolve the dispute to the reasonable satisfaction of both parties, then
each party shall nominate one senior officer of the rank of Vice President or
higher as its representative. These representatives shall, within thirty (30)
days of a written request by either party to call such a meeting, meet in person
and alone (except for one assistant for each party) and shall attempt in good
faith to resolve the dispute. If the disputes cannot be resolved by such senior
managers in such meeting, the parties agree that they shall, if requested in
writing by either party, meet within thirty (30) days after such written
notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the one day
mediation, either party may begin litigation proceedings. This procedure shall
be a prerequisite before taking any additional action hereunder.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
MICRON TECHNOLOGY, INC.,
a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEL CORPORATION,
a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
[Signature Page to Securities Rights and Restrictions Agreement]
----------------------------------------------------------------
28
<PAGE>
EXHIBIT 10.138
|=====================================|
| CONFIDENTIAL |
| CERTAIN INFORMATION HAS BEEN |
| REDACTED. |
| CONFIDENTIAL TREATMENT REQUIRED. |
|=====================================|
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AS TO THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION. THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE
SUBJECT TO RESTRICTIONS ON TRANSFER, INCLUDING ANY SALE, PLEDGE OR OTHER
HYPOTHECATION, SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND INTEL
CORPORATION, A COPY OF WHICH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS INSTRUMENT TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
STOCK RIGHTS AGREEMENT
----------------------
This STOCK RIGHTS AGREEMENT is dated as of October 19, 1998 (this
"Agreement") and entered into by and between Micron Technology, Inc., a Delaware
- ----------
corporation (the "Company"), and Intel Corporation, a Delaware corporation
-------
("Intel"). All capitalized terms used but not defined herein shall have the
- -------
meanings ascribed to them in the Securities Purchase Agreement (as hereinafter
defined).
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of
October 15, 1998 (the "Securities Purchase Agreement"), by and between the
-----------------------------
Company and Intel, the Company is issuing and selling to Intel, in consideration
of the payment of five hundred million dollars ($500 million), certain stock
rights, which provide Intel the right to acquire, for no additional
consideration, shares of Class A Common Stock or Common Stock of the Company;
WHEREAS, the Company proposes to issue to Intel certain rights (the
"Rights") to purchase up to an aggregate of 15,810,277 shares (subject to
- -------
adjustment) of Class A Common Stock or Common Stock (the shares of Class A
Common Stock, Common Stock and other securities issuable upon exercise of the
Rights being referred to herein as the "Rights Shares"); and
-------------
WHEREAS, the Company and Intel are concurrently entering into a
Securities Rights and Restrictions Agreement, dated as of the date hereof (the
"Rights and Restrictions Agreement"), pursuant to which the Company and Intel
- ----------------------------------
have agreed, among other things, to certain rights and restrictions with respect
to the transfer of the Rights and Rights Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
CONFIDENTIAL
------------
SECTION 1. Rights Certificates. The Company will issue and deliver
-------------------
to Intel a certificate or certificates evidencing the Rights (the "Rights
------
Certificates") pursuant to and in accordance with the terms of the Securities
- ------------
Purchase Agreement. Such certificate or certificates shall be substantially in
the form set forth as Exhibit A attached hereto. Rights Certificates shall be
---------
dated the date of issuance by the Company.
SECTION 2. Execution of Rights Certificates. Rights Certificates
--------------------------------
shall be signed on behalf of the Company by its Chief Executive Officer,
President or a Vice President and attested by its Secretary or an Assistant
Secretary.
SECTION 3. Registration. The Company shall number and register the
------------
Rights Certificates in a register (the "Rights Register") as they are issued.
---------------
The Company may deem and treat the registered holder(s) from time to time of the
Rights Certificates (the "Holders") as the absolute owner(s) thereof
-------
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes and shall not be affected by any notice to the
contrary. The Rights shall be registered initially in such name or names as
Intel shall designate.
SECTION 4. Restrictions on Transfer; Registration of Transfers and
-------------------------------------------------------
Exchanges. Subject to any applicable conditions to transfer contained in the
- ---------
Securities Purchase Agreement or the Rights and Restrictions Agreement, the
Company shall from time to time register the transfer of any outstanding Rights
Certificates in the Rights Register to be maintained by the Company upon
surrender of the Rights Certificates accompanied by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company, duly
executed by the registered holders thereof, the duly appointed legal
representative thereof or a duly authorized attorney. Upon any such
registration of transfer, a new Rights Certificate shall be issued to the
transferee holder(s) and the surrendered Rights Certificate shall be canceled
and disposed of by the Company.
No person or entity holding Rights may transfer, sell, assign, devise
or bequeath any of such holder's interest in his or its Rights, and the Company
shall not register the transfer of such Rights, whether by sale, assignment,
gift, devise, bequest, appointment or otherwise, except to a Permitted
Transferee (as defined below) of such holder. For purposes of this Section 4,
the term "Permitted Transferee" shall mean (i) the Company, (ii) a Qualified
--------------------
Subsidiary(provided that if at any time such Qualified Subsidiary ceases to be a
Qualified Subsidiary such Rights will automatically convert into Common Stock )
or (iii) Intel. Each Right shall automatically be exchanged for shares of
Common Stock at the then effective Exchange Ratio upon the transfer by any
holder of a Right to a person or entity who is not a Permitted Transferee.
Notwithstanding anything to the contrary set forth herein, the transfer agent
shall not be required to register the transfer of such Rights or the Common
Stock into which they are automatically exchanged unless concurrently with such
transfer the certificate representing such Rights to be so transferred shall be
surrendered and exchanged for a certificate representing the applicable number
of shares of Common Stock into which such Rights are automatically exchanged by
virtue of such transfer.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
2
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SECTION 5. Exercise of Rights. Subject to the terms of this
------------------
Agreement, each holder of a Rights Certificate shall have the right, which may
be exercised commencing the date hereof and until 5:00 p.m., California time, on
December 31, 2058 (the "Expiration Date") to receive from the Company the number
---------------
of fully paid and nonassessable Rights Shares (and such other consideration)
which the holder may at the time be entitled to receive on exercise of such
Rights. Any Rights not exercised prior to 5:00 p.m., California time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. The amounts
payable to the Company under the Securities Purchase Agreement shall be the
exercise price of the Rights, and no additional consideration is payable upon
exercise of the Rights.
Rights may be exercised upon surrender to the Company at its office
designated for such purpose (as provided in Section 13 hereof) of the Rights
Certificate or Certificates to be exercised with the exercise notice attached
thereto duly filled in and signed.
Subject to the provisions of Section 8 hereof, upon such surrender of
Rights Certificates in accordance with the terms hereof, the Company shall issue
and cause to be delivered, as promptly as practicable, to or upon the written
order of the holder and in such name or names as such holder may designate a
certificate or certificates for the number of full Rights Shares issuable upon
the exercise of such Rights (and such other consideration as may be deliverable
upon exercise of such Rights) and cash for fractional Rights Shares as provided
in Section 7 hereof. The certificate or certificates for such Rights Shares
shall be deemed to have been issued and the person so named therein shall be
deemed to have become a holder of record of such Rights Shares as of the date of
the surrender of such Rights, irrespective of the date of delivery of such
certificate or certificates for Rights Shares (the "Exercise Date").
-------------
Each Rights Certificate shall be exercisable, at the election of the
holder thereof, either in full or from time to time in part. In the event that
a Rights Certificate is exercised in respect of fewer than all of the Rights
Shares issuable on such exercise at any time prior to the date of expiration of
the Rights, a new certificate evidencing the remaining Rights will be issued and
delivered pursuant to the provisions of this Section 5 and Section 2 hereof.
All Rights Certificates surrendered upon exercise of Rights shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the holders during normal business hours at its office.
Notwithstanding the above, Rights may not be exercised for Common
Stock unless and until the holder shall submit to the Company either evidence of
compliance with the filing requirements of the HSR Act or a certificate of an
officer of the holder to the effect that the acquisition of Common Stock upon
exercise of the Rights does not require any filing under the HSR Act.
In the event that a Qualified Subsidiary that is a holder of Rights
ceases at any time to be a Qualified Subsidiary, the Rights so held shall
represent only the right to receive the
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
3
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------------
Common Stock in to which they are exchangeable, and the Company shall deliver
the shares of Common Stock issuable upon exchange thereof upon (i) surrender of
the Rights Certificates to the Company, (ii) if required, the holder furnishing
appropriate endorsements and transfer documents, and (iii) if required by
Section 8, payment of all transfer and similar taxes if the shares of Common
Stock are not being issued to the holder.
SECTION 6. Automatic Exchange of Rights.
----------------------------
Upon creation of the Class A Common Stock and approval of the issuance
of the shares of Class A Common Stock by the Board of Directors of the Company,
and without any further action by the Company or Intel, the Rights shall become
exchangeable for and shall only represent the right to receive shares of Class A
Common Stock at the Exchange Ratio (as defined below) then in effect. The
Company shall provide written notice to Intel when the conditions set forth in
the previous sentence have been satisfied (the date of such notice is
hereinafter referred to as the "Exchange Date"). On the Exchange Date, the
-------------
Rights shall represent only the right to receive the Class A Common Stock into
which they are exchangeable, and the Company shall deliver the shares of Class A
Common Stock issuable upon exchange thereof upon (i) surrender of the Rights
Certificates to the Company, (ii) if required, the holder furnishing appropriate
endorsements and transfer documents, and (iii) if required by Section 8, payment
of all transfer or similar taxes, if the shares being issued are not being
issued to the holder or a Qualified Subsidiary.
SECTION 7. Number of Rights; Adjustments to Rights; Dividends;
---------------------------------------------------
Fractional Rights Shares.
- ------------------------
(a) Exchange Ratio. Each Right represents the right to receive one share
--------------
of Class A Common Stock or Common Stock, as adjusted in the manner provided
below ("Exchange Ratio").
--------------
(b) Fractional Shares. No fractional shares of Class A Common Stock or
-----------------
Common Stock shall be issued upon conversion or exercise of Rights. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Company shall pay cash equal to such fraction multiplied by the then fair market
value of one share of Common Stock, as determined in good faith by the Board of
Directors. The Company shall, as soon as practicable thereafter, cause its
transfer agent to issue and deliver at such office to such holder of Rights
Certificates or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Class A Common Stock or Common Stock,
as the case may be, to which such holder or such holder's nominee shall be
entitled as aforesaid, together with cash in lieu of any fraction of a share.
The person or persons entitled to receive the shares of Class A Common Stock or
Common Stock issuable upon exchange or exercise of Rights shall be treated for
all purposes as the record holder or holders of such shares of Class A Common
Stock or Common Stock on the Exercise Date or the Exchange Date, as the case may
be.
(c) Adjustment for Stock Splits, etc. In case of any subdivision (by
--------------------------------
stock split, stock dividend or otherwise) of the Common Stock or any combination
of the Class A Common
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
4
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Stock (by reverse stock split or otherwise), the Exchange Ratio shall be
proportionately increased, and conversely in the case of combination of the
Common Stock (by reverse stock split or otherwise) or any subdivision of the
Class A Common Stock (by stock split, stock dividend or otherwise), the Exchange
Ratio shall be proportionately decreased, with such adjustment to the Exchange
Ratio to be effective immediately after the opening of business on the day
following the day which such subdivision or combination, as the case may be,
becomes effective. In case of any reorganization, reclassification or change of
shares of the Class A Common Stock or Common Stock (other than a change in par
value or from par value to no par value as a result of a subdivision or
combination), or in the case of any consolidation of the Company with one or
more corporations or a merger of the Company with another corporation (other
than a consolidation or merger in which the Company is the resulting or
surviving corporation and which does not result in any reclassification or
change of outstanding shares of Class A Common Stock or Common Stock), provision
shall be made so that each holder of a Right shall have the right at any time
thereafter as nearly as practicable, so long as the exercise or exchange rights
hereunder with respect thereto would exist had such event not occurred, to
exercise or exchange such Right into the kind and amount of shares of stock and
other securities and properties (including cash) receivable upon such
reorganization, reclassification, change, consolidation or merger by a holder of
the number of shares of Class A Common Stock or Common Stock into which the
Rights might have been converted immediately prior to such reorganization,
reclassification, change, consolidation or merger. In the event of such a
reorganization, reclassification, change, consolidation or merger, effective
provision shall be made in the certificate of incorporation of the resulting or
surviving corporation or otherwise for the protection of the exercise or
exchange rights of the holders of Rights that shall be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property (including cash) deliverable upon exercise or exchange of the Rights
that might have been issued immediately prior to such event.
(d) Dividends. In the event that the Company declares a dividend or other
---------
distribution in respect of its Common Stock (other than a dividend payable in
shares of Common Stock), the holders of Rights hereunder shall be entitled to
receive such dividend or distribution as if the Rights had been exercised or
converted immediately prior to the record date for such dividend or
distribution.
(e) Special Conversion Adjustments. The number of shares of Class A Common
------------------------------
Stock or Common Stock receivable upon exercise or exchange of a Right shall be
adjusted in the event that the Company fails to achieve any one or more of the
Qualified Expenditures Milestone, the First Minimum Production Milestone or the
Second Minimum Production Milestone on the applicable milestone dates in the
manner described below. On or prior to twenty five (25) days after an applicable
milestone date, the Company shall deliver to Intel a certificate of an executive
officer of the Company certifying whether the applicable milestone has been
achieved, and if such milestone has not been achieved, such additional data
(including, but not limited to the amount of Qualified Expenditures made and
actual RDRAM production during the applicable period) required to calculate the
appropriate conversion adjustment. Upon receipt of such certificate with the
required information, Intel shall have thirty (30) days in which
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
5
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CONFIDENTIAL
------------
to notify the Company in writing of its irrevocable election to exercise a
Special Conversion Adjustment. If Intel has not provided an irrevocable written
notice electing to exercise a Special Conversion Adjustment within the such
period, then no there shall be no Special Conversion Adjustment with respect to
the applicable milestone. Except as specifically provided herein, the failure to
exercise a Special Conversion Adjustment with respect to one milestone shall not
impair Intel's ability to exercise a Special Conversion Adjustment with respect
to the failure to achieve a different milestone.
(f) Postponement of Milestone Dates; Modification of Milestones. (i) In
-----------------------------------------------------------
the event that the Company's ability to achieve the Qualified Expenditure
Milestone by the Qualified Expenditures Milestone Date is significantly impaired
by events or circumstances outside of its control, such as Force Majeure or
limited availability of required equipment or materials, the milestone date will
be appropriately postponed.
(ii) In the event that (A) the Company fails to achieve either the First
Minimum Production Milestone or the Second Minimum Production Milestone as a
result of [*], the First Minimum Production Milestone or the Second Minimum
Production Milestone shall be either postponed or waived, respectively, as
appropriate. In addition, if on the Maximum FGI Date, the RDRAM device finished
goods inventory of the Company and its subsidiaries exceeds the Maximum FGI, the
Second Minimum Production Milestone will be modified, as appropriate.
(iii) In the event of the occurrence of any of the foregoing events or
circumstances, as a result of which either a milestone date or milestone is to
be postponed, waived or modified, no Special Conversion Adjustment shall occur
as a result of the failure to achieve the applicable milestone by the applicable
milestone date, unless and until the Company and Intel shall have agreed upon
the appropriate postponement, waiver or modification. Notwithstanding the
above, upon such agreement, the Special Conversion Adjustment shall be applied
as of the agreed upon date, notwithstanding that such agreement is reached after
such date. If no agreement can be reached, the dispute will be settled in
accordance with Section 8.12 of the Securities Purchase Agreement.
(g) Failure to Achieve Qualified Expenditures Milestone. Subject to the
---------------------------------------------------
provisions hereof;
(i) If the Company fails to make at least the Minimum Qualified
Expenditures on or prior to the Qualified Expenditures Milestone Date, the
Exchange Ratio shall be adjusted by multiplying the current Exchange Ratio by a
fraction, the numerator of which shall be the Initial Purchase Price and the
denominator of which shall be the greater of (i) the average closing sales price
on the New York Stock Exchange for the Common Stock during the 20 trading day
period ending two trading days prior to the Qualified Expenditures Milestone
Date, or (ii) 50% of the Initial Purchase Price.
(ii) If the Company makes Qualified Expenditures of more than the
Minimum Qualified Expenditures but less than the Required Qualified Expenditures
on or prior to the
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
6
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------------
Qualified Expenditures Milestone Date, the Exchange Ratio shall be increased.
The amount of the increase in the Exchange Ratio (expressed as a decimal) shall
be determined by first (w) dividing the Initial Purchase Price by the greater of
(i) the average closing sales price on the New York Stock Exchange for the
Common Stock during the 20 trading day period ending two trading days prior to
the applicable milestone date, or (ii) 50% of the Initial Purchase Price, then
(x) subtracting 1.0 from the result, then (y) multiplying this result by a
fraction, the numerator of which shall be (A) the Required Qualified
Expenditures minus (B) the amount of Qualified Expenditures and the denominator
of which shall be the Required Qualified Expenditures, and (z) dividing the
result by 2. The new Exchange Ratio shall then be the result of the above
calculation plus the prior Exchange Ratio.
(h) Failure to Achieve First Minimum Production Milestone. Subject to the
-----------------------------------------------------
provisions hereof, if the Company fails to achieve the First Minimum Production
Milestones the increase in the Exchange Ratio (expressed as a decimal) shall be
determined by first (w) dividing the Initial Purchase Price by the greater of
(i) the average closing sales price on the New York Stock Exchange for the
Common Stock during the 20 trading day period ending two trading days prior to
the applicable milestone date, or (ii) 50% of the Initial Purchase Price, then
(x) subtracting 1.0 from the result, then (y) multiplying this result by a
fraction, the numerator of which shall be the First Minimum Required Production
for the quarter minus the actual RDRAM production achieved during the quarter
and the denominator of which shall be the First Minimum Required Production for
the quarter, and (z) dividing the result by 2. The new Exchange Ratio shall then
be the result of the above calculation plus the prior Exchange Ratio.
(i) Failure to Achieve Second Minimum Production Milestone. Subject to the
------------------------------------------------------
provisions hereof, if the Company fails to achieve the Second Minimum Production
Milestone the increase in the Exchange Ratio (expressed as a decimal) shall be
determined by first (w) dividing the Initial Purchase Price by greater of (A)
the average closing sales price on the New York Stock Exchange for the Common
Stock during the 20 trading day period ending two trading days prior to the
applicable milestone date, or (ii) 50% of the Initial Purchase Price, then (x)
subtracting 1.0 from the result, then (y) multiplying this result by a fraction,
the numerator of which shall be the Second Minimum Required Production for the
quarter minus the actual RDRAM production achieved during the quarter and the
denominator of which shall be the Second Minimum Required Production for the
quarter and (z) dividing the result by 2. The new Exchange Ratio shall then be
the result of the above calculation plus the prior Exchange Ratio.
(j) Multiple Special Conversion Adjustments. If more than one Special
---------------------------------------
Conversion Adjustment occurs, subsequent Special Conversion Adjustments shall be
calculated as provided herein, but only the number of additional shares in
excess of the number issuable using the initial Exchange Ratio (appropriately
adjusted for stock splits, reclassifications, stock dividends,
recapitalizations, combinations, or other similar events affecting the Common
Stock after October 15, 1998) shall be issuable in respect of such subsequent
Special Conversion Adjustment upon exercise of the Rights.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
7
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CONFIDENTIAL
------------
(k) Cash Option. In lieu of all or a portion of a Special Conversion
-----------
Adjustment, the Company may elect to make a cash payment in respect of all or a
portion of the dollar amount of the Special Conversion Adjustment (such election
to be made within five (5) business days of Intel's Special Conversion
Adjustment election, and such amount shall be paid within five (5) business days
of the Company's election). The dollar amount in respect of any Special
Conversion Adjustment to be paid in cash shall be calculated by multiplying the
additional shares issuable to Intel upon exercise of the Rights following the
Special Conversion Adjustment by the average closing sales price on the New York
Stock Exchange for the Common Stock during the 20 trading day period ending two
trading days prior to the applicable milestone date.
(l) Limitations on Special Conversion Adjustments. Anything in Sections 7
---------------------------------------------
(h) and (j) to the contrary notwithstanding, no Special Conversion Adjustment
will be made for failure to achieve the First Minimum Production Milestone or
Second Minimum Production Milestone if a Special Conversion Adjustment election
pursuant to Section 7(g)(i) above is made by Intel. In addition, anything in
Section 3(e) through 3(j) notwithstanding, Special Conversion Adjustments will
be limited, and not given effect, to the extent required to ensure (1) that the
value of additional shares of Common Stock and other securities or property and
any related payments (including payments in lieu of adjustments pursuant to
Section 7(k) hereof) issued or issuable or payable as a result of such
adjustments does not exceed the Maximum Adjustment Amount (with the value of
such additional shares, securities and property measured as of the milestone
date with respect to the applicable Special Conversion Adjustments resulting in
such additional shares, securities or property and any related payments, which,
in the case of the Common Stock, shall be based on the average closing sales
price on the New York Stock Exchange for the Common Stock during the 20 trading
day period ending two trading days prior to the milestone date corresponding to
such Special Conversion Adjustment); and (2) the aggregate conversion price
adjustments and any related payments does not exceed the lesser of (i) the
Maximum Percentage or (ii) the Maximum Shares.
(m) Audit. The Company will maintain relevant records to support all
-----
Qualified Expenditures and Production milestones. Such records will be retained
in accordance with the Company's normal record retention policies. Upon written
request, the Company will make available to Intel documents and other
information that are reasonably necessary to verify the Company's compliance
with the terms of this Agreement; provided that Intel enters into an agreement
with the Company to maintain in confidence the Company's confidential
information disclosed pursuant to the audit, to the extent that existing
agreements do not cover such information. Intel may also request in writing
that an audit be performed by an independent auditor with respect to the
Qualified Expenditures and Production milestones necessary to verify the Special
Conversion Adjustments. If Intel elects to have such an audit performed, the
Company will make available to such independent auditor, financial, technical
and other information and records relevant to auditing the Qualified
Expenditures and Production milestones in order to verify the Special Conversion
Adjustments that may be reasonably requested by such independent auditor. The
independent auditor selected shall be mutually acceptable to Intel and the
Company and compensated by Intel. Prior to beginning such audit or receiving
such information, the independent auditor will enter into an agreement with the
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
8
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------------
Company to maintain in confidence the Company's confidential information. The
Company shall cooperate with the independent auditor in responding to requests
for the Company information and records. The independent auditor will promptly
conduct and issue a report to the Company and Intel. If the independent auditor
determines that the Company has failed to comply with any of the terms hereof
being audited, such independent auditor shall only disclose to Intel and the
Company the results of the audit without revealing the Company's confidential
information. If the independent auditor determines that a further Special
Conversion Adjustment is required hereunder, such auditor shall only disclose in
its audit report to the Company and Intel the (i) amount of the additional
Special Conversion Adjustment that is required hereunder; and (ii) a calculation
as to how such amounts were actually determined, if applicable.
(n) Rights Certificates Following Adjustments. Irrespective of any
-----------------------------------------
adjustments in the number or kind of shares issuable upon the exercise or
conversion of the Rights, Rights theretofore or thereafter issued may continue
to express the same number and kind of shares as are stated in the Rights
Certificate initially issuable pursuant to this Agreement.
SECTION 8. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes and other governmental charges (excluding all foreign, federal or
state income, franchise, property, estate, inheritance, gift or similar taxes)
in connection with the issuance or delivery of the Rights hereunder, as well as
all such taxes attributable to the initial issuance or delivery of Rights Shares
upon the exercise or exchange of Rights. The Company shall not, however, be
required to pay any tax that may be payable in respect of any subsequent
transfer of the Rights or any transfer involved in the issuance and delivery of
Rights Shares in a name other than that in which the Rights to which such
issuance relates were registered, and, if any such tax would otherwise be
payable by the Company, no such issuance or delivery shall be made unless and
until the person requesting such issuance has paid to the Company the amount of
any such tax, or it is established to the reasonable satisfaction of the Company
that any such tax has been paid.
SECTION 9. No Redemption. The Rights shall not be redeemable.
-------------
SECTION 10. Mutilated or Missing Rights Certificates. If a mutilated
----------------------------------------
Rights Certificate is surrendered to the Company, or if the holder of a Rights
Certificate claims and submits an affidavit or other evidence satisfactory to
the Company to the effect that the Rights Certificate has been lost, destroyed
or wrongfully taken, the Company shall issue a replacement Rights Certificate.
If required by the Company, such holder must provide an indemnity bond, or other
form of indemnity, sufficient in the judgment of the Company to protect the
Company from any loss which it may suffer if a Rights Certificate is replaced.
If Intel or any other institutional holder (or nominee thereof) is the owner of
any such lost, stolen or destroyed Rights Certificate, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of the Rights Certificate at the time of such
loss, theft or destruction shall be accepted as satisfactory evidence thereof,
and no further indemnity shall be required as a condition to the execution and
delivery of a new Rights Certificate other than the unsecured written agreement
of such owner to indemnify the Company from any loss which it may suffer if a
Rights Certificate is replaced.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
9
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SECTION 11. Reservation of Rights Shares. The Company shall at all
----------------------------
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Class A Common Stock (when authorized
for issuance in the Company's Certificate of Incorporation) and Common Stock,
for the purpose of enabling it to satisfy any obligation to issue Rights Shares
upon exercise or exchange of Rights, the maximum number of shares of Class A
Common Stock or Common Stock which may then be deliverable upon the exercise or
exchange of all outstanding Rights. To the extent that the Rights Shares are
listed on any national securities exchange, the Company shall use commercially
reasonable efforts to cause all such securities issued or reserved for issuance
to be listed on such exchange upon official notice of issuance.
The Company or, if appointed, the transfer agent for the Common Stock
and each transfer agent for any shares of the Company's capital stock issuable
upon the exercise or exchange of any of the Rights (collectively, the "Transfer
--------
Agent") will be irrevocably authorized and directed at all times to reserve such
- -----
number of authorized shares as shall be required for such purpose. The Company
shall keep a copy of this Agreement on file with any such Transfer Agent. The
Company will supply any such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available all other
consideration that may be deliverable upon exercise or exchange of the Rights.
The Company will furnish any such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each holder
pursuant to Section 12 or Section 13 hereof.
The Company covenants that all Rights Shares and other capital stock
issued upon exercise of Rights will, upon issuance thereof, be validly
authorized and issued, fully paid, nonassessable, free of preemptive rights and
free, subject to Section 8 hereof, from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 12. Notices to Rights Holders. Upon any event affecting the
-------------------------
number of shares of Class A Common Stock or Common Stock receivable upon
exercise or exchange of Rights, the Company shall promptly thereafter give to
each of the holders at its address appearing on the Rights Register written
notice of such events and the effect thereof on the Rights and the Rights Shares
in accordance with the provisions of this Section 12. Where appropriate, such
notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 12. The Company shall also
provide notice to the holders of Rights of record dates or events with respect
to which notice is given to other stockholders of the Company. Such notice
shall be given at the same time as notice is given to other stockholders. The
failure to give the notice required by this Section 12 or any defect therein
shall not affect the legality or validity of any distribution, right, option,
rights, consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up or the vote on any action.
Nothing contained in this Agreement or in any Rights Certificate shall
be construed as conferring upon the holders (prior to the exercise or exchange
of such Rights) the right to vote, to consent or to receive notice as a
stockholder in respect of the meetings of stockholders or the election of
Directors of the Company or any other matter, or any rights
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
10
<PAGE>
CONFIDENTIAL
------------
whatsoever as stockholders of the Company; provided, however, that nothing in
the foregoing provision is intended to detract from any rights explicitly
granted to any holder hereunder.
SECTION 13. Notices to the Company and Rights Holders. Except as may
be otherwise provided herein, all notices, requests, waivers and other
communications made pursuant to this Agreement shall be in writing and shall be
delivered to the other party (a) in person; (b) by facsimile to the address and
number set below, when promptly followed up by another of the delivery methods
permitted by this Section 13; (c) by U.S. mail, registered or certified, return
receipt requested, postage prepaid and addressed to the other party as set forth
below; or (d) by a national-recognized overnight delivery service that keeps
records of deliveries and attempted deliveries (such as FedEx), postage prepaid,
addressed to the parties as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery service provider.
To Intel: To the Company:
Intel Corporation Micron Technology, Inc.
2200 Mission College Blvd. 8000 S. Federal Way
Santa Clara, CA 95052 P.O. Box 6
Attn: Treasury Portfolio Manager Boise, Idaho 83716
Attn: General Counsel
Fax Number: (408) 765-1859 Fax Number: (208) 308-4509
with copies to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-6038
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13 by giving the other party
written notice of the new address in the manner set forth above.
SECTION 14. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 15. Termination. This Agreement shall terminate on the
-----------
Exchange Date, other than with respect to resolution of any audit performed
pursuant to Section 7(m) of this Agreement relating to a milestone date
occurring prior to the Exchange Date and the finalization of any related Special
Conversion Adjustment, and the exchange of Rights Certificates for Rights
Shares.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
11
<PAGE>
CONFIDENTIAL
------------
SECTION 16. Governing Law. This Agreement shall be governed in all
-------------
respects by and construed in accordance with the laws of the State of Delaware
without regard to provisions regarding choice of laws.
SECTION 17. Benefits of This Agreement; No Impairment. Nothing in
-----------------------------------------
this Agreement shall be construed to give to any person or corporation other
than the Company and the holders any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company and the holders. The Company shall not take any action
which would have the effect of materially impairing the rights, privileges and
preferences of the holders of the Rights set forth herein.
SECTION 18. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 19. Amendments and Waivers. No provision of this Agreement
----------------------
may be amended or waived except by an instrument in writing signed by the party
sought to be bound; provided, that any amendment or waiver sought from the
holders of any provision of this Agreement which affects holders generally shall
be given by holders of at least a majority of the Rights outstanding (or, in the
case of amendments or waivers affecting holders of Rights Shares generally, by
holders of at least a majority of the Rights and Rights Shares, taken as one
class, with each Right and each Rights Share representing the right to one
vote). Any amendment or waiver so given shall be binding on all holders. No
failure or delay by any party in exercising any right or remedy hereunder shall
operate as a waiver thereof, and a waiver of a particular right or remedy on one
occasion shall not be deemed a waiver of any other right or remedy or a waiver
of the same right or remedy on any subsequent occasion.
SECTION 20. Legal Fees. In the event of any action at law, suit in
----------
equity or arbitration proceeding in relation to this Agreement or any units or
securities of the Company issued or to be issued, the prevailing party, shall be
paid by the other party a reasonable sum for attorney's fees and expenses for
such prevailing party.
SECTION 21. Dispute Resolution. The parties agree to negotiate in
------------------
good faith to resolve any dispute between them regarding this Agreement. If the
negotiations do not resolve the dispute to the reasonable satisfaction of both
parties, then each party shall nominate one senior officer of the rank of Vice
President or higher as its representative. These representatives shall, within
thirty (30) days of a written request by either party to call such a meeting,
meet in person and alone (except for one assistant for each party) and shall
attempt in good faith to resolve the dispute. If the disputes cannot be resolved
by such senior managers in such meeting, the parties agree that they shall, if
requested in writing by either party, meet within thirty (30) days after such
written notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the one day
mediation, either party may begin litigation proceedings. This procedure shall
be a prerequisite before taking any additional action hereunder.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
12
<PAGE>
CONFIDENTIAL
------------
SECTION 22. Certain Definitions.
-------------------
For purposes of this Agreement the following terms shall have the meanings
set forth below.
Capital Expenditures. Capital Expenditures shall mean the sum of all
--------------------
expenditures paid or, with respect to equipment that is in use, accrued that, in
accordance with U.S. generally accepted accounting principles, should be
included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the applicable person.
First Minimum Production Milestone. The First Minimum Production Milestone
----------------------------------
shall have the meaning ascribed to such term in the Securities Purchase
Agreement.
First Minimum Required Production. First Minimum Required Production shall
----------------------------------
have the meaning ascribed to such term in the Securities Purchase Agreement.
First Production Milestone Date. The First Production Milestone Date shall
-------------------------------
have the meaning ascribed to such term in the Securities Purchase Agreement.
Force Majeure. Force Majeure shall mean an act of God, fire, flood,
-------------
accident, riot war, government intervention, embargoes, strikes, labor
difficulties, equipment failure, late delivery of supplies, supplier shortages
or other difficulties which are beyond the reasonable control and without the
fault or negligence of a party whose performance has been affected.
Initial Purchase Price. Initial Purchase Price shall mean $31.625,
----------------------
appropriately adjusted to reflect the effect of any stock splits,
reclassifications, stock dividends, recapitalizations, combinations or other
similar events affecting the Common Stock occurring after October 19, 1998.
Maximum Adjustment Amount. Maximum Adjustment Amount shall have the
-------------------------
meaning ascribed to such term in the Securities Purchase Agreement.
Maximum FGI. Maximum FGI shall have the meaning ascribed to such term in
-----------
the Securities Purchase Agreement.
Maximum FGI Date. Maximum FGI Date shall have the meaning ascribed to such
----------------
term in the Securities Purchase Agreement.
Maximum Percentage. Maximum Percentage shall have the meaning ascribed to
------------------
such term in the Securities Purchase Agreement.
Maximum Shares. Maximum Shares shall have the meaning ascribed to such
--------------
term in the Securities Purchase Agreement.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
13
<PAGE>
CONFIDENTIAL
------------
Minimum Qualified Expenditures. Minimum Qualified Expenditures shall have
------------------------------
the meaning ascribed to such term in the Securities Purchase Agreement.
Qualified Expenditures. Qualified Expenditures shall have the meaning
----------------------
ascribed to such term in the Securities Purchase Agreement.
Qualified Expenditures Milestone. The Qualified Expenditures Milestone
--------------------------------
means the expenditure of at least the Required Qualified Expenditures on or
before the Qualified Expenditures Milestone Date.
Qualified Expenditures Milestone Date. The Qualified Expenditures
-------------------------------------
Milestone Date shall have the meaning ascribed to such term in the Securities
Purchase Agreement.
Percentage Call on Capacity. Percentage Call on Capacity shall have the
---------------------------
meaning ascribed to such term in the Supply Agreement.
Qualified Subsidiary. Qualified Subsidiary shall have the meaning ascribed
--------------------
to such term in the Securities Rights and Restrictions Agreement.
Rambus. Rambus means Rambus, Inc. , a Delaware corporation, and any
------
successor to all or substantially all of Rambus Corporation's business (by
acquisition or otherwise).
RDRAM. RDRAM shall have the meaning ascribed to such term in the
-----
Securities Purchase Agreement.
Required Qualified Expenditures. Required Qualified Expenditures shall
-------------------------------
have the meaning ascribed to such term in the Securities Purchase Agreement.
Rights. Rights shall have the meaning ascribed to such term in the Stock
------
Rights Agreement.
Second Minimum Production Milestone. The Second Minimum Production
-----------------------------------
Milestone shall have the meaning ascribed to such term in the Securities
Purchase Agreement.
Second Minimum Required Production. Second Minimum Required Production
----------------------------------
shall have the meaning ascribed to such term in the Securities Purchase
Agreement.
Second Production Milestone Date. The Second Production Milestone Date
--------------------------------
shall have the meaning ascribed to such term in the Securities Purchase
Agreement.
Securities Purchase Agreement. Securities Purchase Agreement shall mean
-----------------------------
that certain Securities Purchase Agreement, dated October 15, 1998, as amended
from time to time, by and between the Corporation and Intel Corporation.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
14
<PAGE>
CONFIDENTIAL
------------
Securities Rights and Restrictions Agreement. Securities Rights and
--------------------------------------------
Restrictions Agreement shall mean that certain Securities Rights and
Restrictions Agreement, dated as of October 19, 1998, as amended from time to
time, by and between the Corporation and Intel Corporation.
Special Conversion Adjustment. A Special Conversion Adjustment shall mean
-----------------------------
an adjustment to the number of shares of Common Stock receivable upon conversion
of Class A Common Stock, as provided in Section 7 hereof.
Supply Agreement. Supply Agreement shall mean that certain Supply
----------------
Agreement, dated as of October 19, 1998, as amended from time to time, by and
between the Corporation and Intel Corporation.
Volume Production. Volume Production shall have the meaning ascribed to
-----------------
such term in the Securities Purchase Agreement.
SECTION 23. Conversion Adjustment Examples. For purposes of
------------------------------
clarity of the Conversion Adjustment provisions of this Agreement, the parties
have attached to this Agreement as Exhibit B several illustrative examples of
the manner in which the Conversion Adjustment provisions of this Agreement will
be applied to the specific examples presented.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
INTEL CORPORATION MICRON TECHNOLOGY, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
{Signature Page to Stock Rights Agreement}
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
15
<PAGE>
CONFIDENTIAL
------------
EXHIBIT A
[Form of Rights Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AS TO THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION. THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE
SUBJECT TO RESTRICTIONS ON TRANSFER, INCLUDING ANY SALE, PLEDGE OR OTHER
HYPOTHECATION, SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND INTEL
CORPORATION, A COPY OF WHICH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS INSTRUMENT TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
No. __ ______ Rights
RIGHTS CERTIFICATE
MICRON TECHNOLOGY, INC.
This Rights Certificate certifies that ___________________, or
registered assigns, is the registered holder of the number of Rights (the
"Rights") set forth above to receive Class A Common Stock, $.10 par value per
- -------
share (the "Class A Common Stock") or Common Stock, $.10 par value per share
--------------------
(the "Common Stock"), of Micron Technology, Inc., a Delaware corporation (the
------------
"Company"). Each Right entitles the holder upon exercise or exchange to receive
- --------
from the Company one fully paid and nonassessable share (subject to adjustment
as provided in the Rights Agreement referred to below) of either Class A Common
Stock or Common Stock (a "Rights Share"), upon surrender of this Rights
------------
Certificate at the office of the Company designated for such purpose, but only
subject to the conditions set forth herein and in the Rights Agreement referred
to below. The number of Rights Shares issuable upon exercise or exchange of the
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
16
<PAGE>
CONFIDENTIAL
------------
Rights are subject to adjustment upon the occurrence of certain events, as set
forth in the Rights Agreement. The Rights are exercisable or exchangeable at
any time prior to 5:00 p.m., California time, on December 31, 2058.
The Rights evidenced by this Rights Certificate are part of a duly
authorized issue of Rights, and are issued or to be issued pursuant to a Rights
Agreement dated as of October 19, 1998 (the "Rights Agreement"), duly executed
----------------
and delivered by the Company, which Rights Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
-------
"holder" meaning the registered holders or registered holder) of the Rights.
- -------
Capitalized terms used herein and not defined shall have the meanings ascribed
to them in the Rights Agreement. A copy of the Rights Agreement may be obtained
by the holder hereof upon written request to the Company.
The holder of Rights evidenced by this Rights Certificate may exercise
or exchange such Rights under and pursuant to the terms and conditions of the
Rights Agreement by surrendering this Rights Certificate, with the form of
notice of exercise properly completed and executed at the office of the Company
designated for such purpose. Notwithstanding the above, Rights may not be
exercised or exchanged for Common Stock unless and until the holder shall submit
to the Company either evidence of compliance with the filing requirements of the
HSR Act or a certificate of an officer of the holder to the effect that the
acquisition of Common Stock upon exercise of the Rights does not require any
filing under the HSR Act.
If upon any exercise of Rights evidenced hereby the number of Rights
exercised shall be less than the total number of Rights evidenced hereby, the
Company shall issue to the holder hereof or its registered assignee a new Rights
Certificate evidencing the number of Rights not exercised.
The Rights Agreement provides for automatic exchange of the Rights
represented hereby into Class A Common Stock of the Company upon the occurrence
of certain events as specified in the Rights Agreement.
The Rights Agreement provides that upon the occurrence of certain
events the number of Rights Shares issuable upon exercise or exchange of the
Rights set forth on the face hereof may, subject to certain conditions, be
adjusted.
The holder hereof will have certain registration rights and other
rights and obligations with respect to the Rights Shares as provided in the
Securities Rights and Restrictions Agreement, dated as of October 19, 1998, by
and between the Company and the persons party thereto (the "Rights and
----------
Restrictions Agreement"). Copies of the Rights and Restrictions Agreement may
- ----------------------
be obtained by the holder hereof upon written request to the Company.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
17
<PAGE>
CONFIDENTIAL
------------
Rights Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by a legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Rights Agreement, but without payment of any service
charge, for another Rights Certificate or Rights Certificates of like tenor and
evidencing in the aggregate a like number of Rights.
Subject to the terms and conditions of the Rights Agreement, upon due
presentation for registration of transfer of this Rights Certificate at the
office of the Company, a new Rights Certificate or Rights Certificates of like
tenor and evidencing in the aggregate a like number of Rights shall be issued to
the transferee(s) in exchange for this Rights Certificate, subject to the
limitations provided in the Agreement, without charge except for any tax or
other governmental charge imposed in connection therewith.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Rights Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holder hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Rights nor this Rights Certificate entitles any holder hereof to any
rights of a stockholder of the Company, except as specifically provided in the
Rights Agreement with respect to dividends and distributions to stockholders.
IN WITNESS WHEREOF, Micron Technology, Inc. has caused this Rights
Certificate to be signed by its Chairman of the Board, Chief Executive Officer,
President or a Vice President and by its Secretary or an Assistant Secretary and
has caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: October ____, 1998
MICRON TECHNOLOGY, INC.
By: ______________________________
Name: ______________________________
Title: ______________________________
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
18
<PAGE>
CONFIDENTIAL
------------
FORM OF NOTICE OF EXERCISE OR EXCHANGE
[To Be Executed Upon Exercise or Exchange of Rights]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Rights Certificate, to:
(Check Applicable Box)
[_] receive ___________ shares of Class A Common Stock in accordance
with the terms hereof.
[_] receive ___________ shares of Common Stock in accordance with the
terms hereof. Evidence of compliance with or exemption from the
requirements of the HSR Act must be provided.
The undersigned requests that a certificate for such shares be
registered in the name of _______________, whose address is
_______________________________ and that such shares be delivered to
__________________, whose address is _______________________________ .
If said number of shares is less than all of the shares of Class A
Common Stock or Common Stock receivable hereunder, the undersigned requests that
a new Rights Certificate representing the remaining balance of such shares be
registered in the name of ________________________, whose address is
_______________________________, and that such Rights Certificate be delivered
to _____________________, whose address is _______________________________.
Signature(s): ________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Rights Certificate in every particular,
without alteration or enlargement or any
change whatever. If the Rights are held
of record by two or more joint owners, all
such owners must sign.
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
CONFIDENTIAL
------------
Dated: _____________________
2
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
CONFIDENTIAL
------------
FORM OF ASSIGNMENT
[To be signed only upon assignment of Rights Certificate]
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
transfers unto _______________ whose address is
_________________________________ and whose social security number or other
identifying number is _________________________, the within Rights Certificate,
together with all right, title and interest therein and to the Rights
represented thereby, and does hereby irrevocably constitute and appoint
__________, attorney, to transfer said Rights Certificate on the books of the
within-named Company, with full power of substitution in the premises.
Signature(s): ________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Rights Certificate in every particular,
without alteration or enlargement or any
change whatever. If the Rights are held
of record by two or more joint owners, all
such owners must sign.
Dated: _____________________
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
CONFIDENTIAL
------------
EXHIBIT B
[Special Conversion Adjustment Illustrative Examples]
The following are illustrative examples of the manner in which the Special
Conversion Adjustments will be applied.
[*]
2
[*] CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATEMNT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT 21.1
MICRON TECHNOLOGY, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE (OR JURISDICTION) IN
NAME WHICH INCORPORATED
- ------------------------------------------------------------------------------ --------------------------
<S> <C>
Bear Technology Company, L.L.C................................................ Delaware
Maximum Video Systems, Inc.................................................... Arizona
Micron Communications, Inc.................................................... Idaho
Micron Electronics, Inc....................................................... Minnesota
MEI California, Inc......................................................... California
Micron Commercial Systems, Inc.............................................. Delaware
Micron Electronics (H.K.) Limited........................................... Hong Kong
Micron Electronics Japan K.K................................................ Japan
Micron Government Systems, Inc.............................................. Delaware
Micron Electronics Overseas Trading, Inc.................................... Barbados
Micron PC, Inc.............................................................. Delaware
Micron Services, Inc........................................................ Delaware
Micron Europe Limited......................................................... United Kingdom
Micron International Sales, Inc............................................... Barbados
Micron Semiconductor Asia Pte. Ltd............................................ Singapore
Micron Semiconductor Asia Pacific Pte. Ltd.................................... Singapore
Micron Semiconductor Asia Pacific, Inc........................................ Idaho
Micron Semiconductor (Deutschland) GmbH....................................... Germany
Micron Semiconductor Products, Inc............................................ Idaho
Micron Technology Asia Pacific, Inc........................................... Idaho
Micron Technology Italia S.r.l................................................ Italy
Micron Technology Japan, K.K.................................................. Japan
Micron Technology Services, Inc............................................... Idaho
Micron Technology Texas, LLC.................................................. Idaho
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 as amended (File No. 333-18441) and Forms S-8 (File Nos.
33-3686, 33-16832, 33-27078, 33-38665, 33-38926, 33-65050, 33-52653, 33-57887,
333-07283, 333-17073, 333-50353 and 333-65449) of Micron Technology, Inc. and
subsidiaries of our report dated September 28, 1998 except the Subsequent Events
Note which is as of October 19, 1998 appearing on page 51 of this Form 10-K.
PricewaterhouseCoopers LLP
Boise, Idaho
October 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> AUG-28-1997 SEP-3-1998
<PERIOD-START> AUG-29-1996 SEP-4-1997
<PERIOD-END> AUG-28-1997 SEP-3-1998
<CASH> 620 559
<SECURITIES> 368 91
<RECEIVABLES> 497 506
<ALLOWANCES> 38 17
<INVENTORY> 454 291
<CURRENT-ASSETS> 1,972 1,499
<PP&E> 3,951 4,672
<DEPRECIATION> 1,190 1,641
<TOTAL-ASSETS> 4,851 4,688
<CURRENT-LIABILITIES> 750 740
<BONDS> 0 0
0 0
0 0
<COMMON> 21 21
<OTHER-SE> 2,862 2,672
<TOTAL-LIABILITY-AND-EQUITY> 4,851 4,688
<SALES> 3,516 3,012
<TOTAL-REVENUES> 3,516 3,012
<CGS> 2,539 2,732
<TOTAL-COSTS> 3,113 3,506
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1) 0
<INCOME-PRETAX> 599 (353)
<INCOME-TAX> 267 (119)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 332 (234)
<EPS-PRIMARY> 1.58 (1.10)
<EPS-DILUTED> 1.55 (1.10)
</TABLE>
