<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
- --
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 23, 1996.
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 2-33228-40
----------
SOLECTRON CORPORATION
(Exact Name of Registrant as specified in its Charter)
California 94-2447045
(State or other jurisdiction (IRS Employer Identification
of Incorporation or Organization) Number)
777 GIBRALTAR DRIVE, MILPITAS, CALIFORNIA 95035
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (408) 957-8500
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At March 31, 1996, 50,374,060 shares of Common Stock of the Registrant were
outstanding.
<PAGE>
SOLECTRON CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
at February 29, 1996 and August 31, 1995.................................... 3
Consolidated Statements of Income
for the three months and six months ended February 29, 1996 and
the three months and six months ended February 28, 1995..................... 4
Consolidated Statements of Cash Flows
for the six months ended February 29, 1996 and February 28,
1995........................................................................ 5
Notes to Interim Consolidated Financial Statements.......................... 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................... 8 - 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 15
Item 2. Changes in Securities.................................................. 15
Item 3. Defaults Upon Senior Securities........................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.................... 15 - 16
Item 5. Other Information...................................................... 16
Item 6. Exhibits and Reports on Form 8-K....................................... 16
Signatures............................................................. 17
</TABLE>
2
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
1996 1995
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 309,170 $ 148,602
Accounts receivable, net 288,417 254,898
Inventories 349,572 298,809
Prepaid expenses and other current assets 28,964 24,049
------------- -------------
Total current assets 976,123 726,358
Net property and equipment 236,957 203,609
Other assets 15,475 10,888
------------- -------------
Total assets $ 1,228,555 $ 940,855
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 2,762 $ 4,366
Current portion of long-term debt
and capital lease obligations 995 4,796
Accounts payable 302,832 310,680
Accrued employee compensation 34,730 28,705
Accrued expenses 4,535 15,264
Other current liabilities 12,040 6,944
------------- -------------
Total current liabilities 357,894 370,755
Long-term debt and capital lease obligations 258,131 30,043
Other long-term liabilities 8,142 1,916
------------- -------------
Total liabilities 624,167 402,714
Shareholders' equity:
Common stock 341,010 329,265
Retained earnings 261,318 206,321
Cumulative translation adjustment 2,060 2,555
------------- -------------
Total shareholders' equity 604,388 538,141
------------- -------------
Total liabilities and shareholders' equity $ 1,228,555 $ 940,855
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
----------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 657,176 $ 471,266 $ 1,347,800 $ 977,944
Cost of sales 591,815 424,897 1,216,093 886,132
------------- ------------- ------------- -------------
Gross profit 65,361 46,369 131,707 91,812
Operating expenses:
Selling, general & administrative 21,380 16,806 45,421 32,337
Research & development 2,037 1,144 3,539 2,335
------------- ------------- ------------- -------------
Operating income 41,944 28,419 82,747 57,140
Interest income 1,125 1,673 2,571 3,215
Interest expense (1,176) (2,768) (1,990) (5,465)
------------- ------------- ------------- -------------
Income before income taxes 41,893 27,324 83,328 54,890
Income taxes 14,243 9,290 28,331 18,662
------------- ------------- ------------- -------------
Net income $ 27,650 $ 18,034 $ 54,997 $ 36,228
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per share:
Primary $ 0.54 $ 0.43 $ 1.07 $ 0.86
------------- ------------- ------------- -------------
Fully diluted $ 0.52 $ 0.38 $ 1.03 $ 0.76
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in computation:
Primary 51,530 42,218 51,280 42,237
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Fully diluted 53,848 51,767 53,730 51,786
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
-------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 54,997 $ 36,228
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 38,662 27,430
Interest accretion on zero-coupon subordinated notes 1,110 4,737
Additions to allowance for doubtful accounts 682 307
Other (116) (274)
Changes in operating assets and liabilities:
Accounts receivable (34,257) (27,414)
Inventories (50,590) (12,223)
Prepaid expenses and other current assets (4,930) 3,510
Accounts payable (7,975) (22,935)
Accrued expenses and other liabilities 4,392 (7,866)
-------------- ------------
Net cash provided by operating activities 1,975 1,500
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments 412,972 (43,022)
Sales of short-term investments (363,617) 61,219
Capital expenditures (71,109) (32,161)
-------------- ------------
Net cash used in investing activities (21,754) (13,964)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt - 4,454
Net Proceeds from long-term issuance of debt 224,292 -
Repayments of long-term debt and capital lease
obligations (2,309) (2,052)
Net proceeds from sale of common stock 7,192 2,624
-------------- ------------
Net cash provided by financing activities 229,175 5,026
-------------- ------------
Effect of exchange rate changes on cash and cash equivalents 448 1,520
-------------- ------------
Net (decrease) increase in cash and cash equivalents 209,844 (5,918)
Cash and cash equivalents at beginning of period 89,959 67,906
-------------- ------------
Cash and cash equivalents at end of period $ 299,803 $ 61,988
-------------- ------------
-------------- ------------
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period:
Interest $ 209 $ 341
-------------- ------------
-------------- ------------
Income taxes $ 32,584 $ 17,686
-------------- ------------
-------------- ------------
Non-cash investing and financing activities:
Issuance of common stock upon conversion of long-term debt $ 4,838 $ 32
-------------- ------------
-------------- ------------
Tax benefit associated with exercise of stock options $ 759,940 $ 444,230
-------------- ------------
-------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated balance sheets as of February 29, 1996
(unaudited) and August 31, 1995, the unaudited consolidated statements of income
for the three-month and six-month periods ended February 29, 1996 and February
28, 1995, and the unaudited consolidated statements of cash flows for the six
months ended February 29, 1996 and February 28, 1995 have been prepared on
substantially the same basis as the annual consolidated financial statements.
Management believes the financial statements reflect all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial position, operating results and cash flows for the periods presented.
The results of operations for the three-month and six-month periods ended
February 29, 1996 are not necessarily indicative of results to be expected for
the entire year. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended August 31, 1995 included in the Company's Annual Report to
Shareholders.
For clarity of presentation, the Company has indicated its second quarter
as ending on February 29 and its fiscal year as ending on August 31, whereas in
fact, the Company's fiscal periods end on the last Friday of the respective
month.
NOTE 2 - INVENTORIES
<TABLE>
<CAPTION>
Inventories consisted of (in thousands):
FEBRUARY 29, AUGUST 31,
1996 1995
---------------------------------
<S> <S> <S>
Raw materials $258,387 $206,221
Work-in-process 91,185 92,588
-------- --------
$349,572 $298,809
-------- --------
-------- --------
</TABLE>
NOTE 3 - NET INCOME PER SHARE
Primary net income per share is computed using the weighted average number
of common and dilutive common stock equivalent shares outstanding. Fully
diluted net income per share includes the dilutive effect from the assumed
conversion of the Company's outstanding convertible subordinated notes.
NOTE 4 - COMMITMENTS
The Company leases various facilities under operating lease agreements.
These leases expire at various dates through the year 2000. Substantially all
leases require the Company to pay property taxes, insurance, and normal
maintenance costs. All of the Company's leases have fixed minimum lease
payments except the lease for certain facilities in California. Payments under
this lease are periodically adjusted based on LIBOR rates. This lease provides
the Company with the option at the end of the lease of either acquiring the
property at its original cost or arranging for the property to be acquired. The
Company is contingently liable under a first loss clause for a decline in the
market value of the property up to $44.2 million in the event that the Company
does not purchase the property at the end of the five-
6
<PAGE>
year lease term. The Company must also maintain compliance with financial
covenants similar to its credit facilities. Future minimum lease payments
related to lease obligations are $9.4 million, $8.0 million, $7.0 million, $5.5
million and $1.6 million in each of the years in the five year period ending
August 31, 2000.
NOTE 5 - CONVERTIBLE DEBT
Towards the end of the second quarter, the Company consummated a private
placement of $230 million aggregate principal amount of 6% convertible
subordinated notes due 2006 (the convertible notes). The notes are convertible
into common stock at a conversion price of $67.61 per share.
NOTE 6 - SUBSEQUENT EVENTS
Subsequent to the end of the second quarter, the Company consummated a
private placement of $150 million aggregate principal amount of 7-3/8% senior
notes due 2006.
On March 18, 1996, Solectron completed its acquisition of Fine Pitch
Technology, Inc., a provider of prototype services. The purchase price
was approximately $14 million in common stock and common stock options.
This transaction will be accounted for under the pooling of interests method.
On March 31, 1996, the Company completed its purchase of Texas Instruments
Incorporated's custom manufacturing services (CMS) business. This business,
headquartered in Austin, Texas, was acquired for approximately $115 million,
subject to post closing adjustments. Under the terms of the agreement,
Solectron purchased the CMS business in Austin, Texas and certain assets of the
CMS business in Kuala Lumpur, Malaysia. The Company plans to transition the
CMS business in Kuala Lumpur to Solectron's Penang, Malaysia operations over
the course of the next 12 months. This acquisition will be accounted for
under the purchase method of accounting.
7
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE FACTORS SET FORTH UNDER "TRENDS AND
UNCERTAINTIES" BELOW.
GENERAL
Solectron's net sales are derived from sales to electronics system original
equipment manufacturers. The majority of the Company's customers compete in the
telecommunications, computer peripherals, workstation and personal computer
segments of the electronics industry. The Company uses advanced manufacturing
technologies in assembly and manufacturing management of complex printed circuit
boards and electronics systems. A discussion of some of the potential
fluctuations in the Company's operating results is discussed under "Trends and
Uncertainties" below.
As of April 1, 1996 the Company had manufacturing operations in eleven
locations, five of which are overseas. On March 18, 1996, the Company acquired
Fine Pitch Technology, Inc., a provider of prototype services. This operation
is not expected to yield substantial sales in the near future, however the
Company believes this additional capability will allow it to better serve the
needs of design teams who require immediate availability of highly complex
circuit board prototypes. On March 31, 1996 Solectron completed its purchase of
Texas Instruments Incorporated's custom manufacturing services (CMS) business
(the TI Transaction). Under the terms of the agreement, Solectron purchased
TI's CMS business in Austin, Texas and certain assets at TI's Kuala Lumpur,
Malaysia location. The business in Kuala Lumpur is planned to be transitioned
to Solectron's Penang, Malaysia operations over the next twelve months.
RESULTS OF OPERATIONS
The electronics industry is subject to rapid technological change, product
obsolescence and price competition. These and other factors affecting the
electronics industry, or any of the Company's major customers in particular,
could have a material adverse effect on the Company's results of operations.
See "Trends and Uncertainties -Potential Fluctuations in Operating Results"
and "Competition" below for a further discussion of potential
fluctuations in operating results.
The following table sets forth, for the three-months and six-months ended
February 29, 1996 and February 28, 1995, certain items as a percentage of net
sales. The table and the discussion below should be read in conjunction with
the consolidated financial statements and notes thereto that appear elsewhere in
this report.
8
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 90.1 90.2 90.2 90.6
------------ ------------ ----------- ------------
Gross profit 9.9 9.8 9.8 9.4
Operating expenses:
Selling, general and administrative 3.2 3.6 3.4 3.3
------------ ------------ ----------- ------------
Research and development 0.3 0.2 0.3 0.3
Operating income 6.4 6.0 6.1 5.8
Interest expense (income) , net 0.0 0.2 (0.1) 0.2
------------ ------------ ----------- ------------
Income before income taxes 6.4 5.8 6.2 5.6
Income taxes 2.2 2.0 2.1 1.9
------------ ------------ ----------- ------------
Net income 4.2 % 3.8 % 4.1 % 3.7 %
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>
Net sales for the three months and six months ended February 29, 1996
increased 39.4% and 37.8%, respectively, over the comparable periods in the
prior fiscal year. The increases in net sales were primarily due to
increased orders from existing customers, particularly in the
telecommunications segment, and the addition of new customers. Beginning in
the second quarter of fiscal 1996, and continuing into the third quarter of
fiscal 1996, the Company experienced a decline in sales to customers in the
personal computer and peripheral segments. The decline in sales in the
second quarter was somewhat offset by increases in sales to customers in
other market segments. However, should this decline in sales continue or
intensify, the Company's results of operations could be adversely affected.
The Company's largest customer during the first half of fiscal 1996 was
Hewlett-Packard Corporation (HP). Net sales to HP during both the three months
and six months periods ended February 29, 1996 accounted for 11% of
consolidated net sales, compared to less than 10% for both the second quarter
and the first half of fiscal 1995. For the six-months ended February 28,
1995, International Business Machines Corporation (IBM) represented the
Company's largest customer with sales accounting for 23% of consolidated net
sales. For the six-months ended February 29, 1996, sales to IBM were less
than 10% of consolidated net sales. The decrease in sales to IBM as a
percentage of consolidated net sales is in part due to a decrease in sales to
IBM in absolute dollar amounts at the Company's Bordeaux, France site. The
Company had a manufacturing services agreement with IBM at its Bordeaux, France
facility which expired on December 31, 1995. There can be no assurances that
the Company will continue to do business with IBM. Net sales to the
Company's top ten customers during the first half of fiscal 1996 accounted
for 69% of consolidated net sales, compared to 71% in the first half of
fiscal 1995. See "Trend and Uncertainties - Customer Concentration;
Dependence on the Electronics Industry".
Net sales at the Company's foreign locations contributed 33% of
consolidated net sales in the first half of fiscal 1996, compared to 40% in the
first half of fiscal 1995. This is primarily due to the Company's domestic
sites growing at an overall faster rate than its foreign sites. However, these
rates can fluctuate significantly over time. Net sales at the Company's foreign
locations for the second quarter of fiscal 1996 were 30% compared to 36%
during the second quarter of fiscal 1995. See "Trends and Uncertainties"
below for a further discussion of potential fluctuations in operating results.
See "Trends and Uncertainties - International Operations" for further
discussion.
The Company's operations in Milpitas, California contributed a substantial
portion of the Company's net sales and operating income during the first half of
fiscal 1996 and 1995. The results of this operation are expected to continue as
a significant factor in the overall financial results of the Company. Any
material change to the customer base, product mix, efficiency or other
attributes of this site could have a material adverse effect on the Company's
results of operations.
9
<PAGE>
The Company believes that its ability to continue to achieve growth will
depend upon growth in sales to existing customers for their current and future
product generations, successful marketing to new customers and future geographic
expansion. Customer contracts can be canceled and volume levels can be changed
or delayed. The timely replacement of delayed, canceled or reduced orders with
new business cannot be assured. In addition, there can be no assurance that any
of the Company's current customers will continue to utilize the Company's
services. Because of these factors, there can be no assurance that the
Company's historical revenue growth rate will continue. See "Trends and
Uncertainties" below for a discussion of certain factors affecting the
management of growth, geographic expansion and potential fluctuations in sales
and results of operations.
Gross margins for the three-months and six-months ended February 1996 have
improved over those of 1995. While the Company continues to pursue process
improvements in its Scotland operations, decreased demand in the information
processing and personal computer segments and continued production
inefficiencies during the first and second quarters of fiscal 1996 have
resulted in lower sales and negative margins for that site. Offsetting this
were improvements in revenues and gross margins at the Company's Charlotte,
North Carolina site compared to the first two quarters of fiscal 1995. In
addition, the Company's Bordeaux, France site has also experienced
improvement in gross margins. The Company foresees that its Dunfermline,
Scotland site will continue to experience poor sales and operating margins at
least through the remainder of the fiscal year.
Increases in turnkey business, additional costs associated with new
projects, and price erosion within the electronics industry could adversely
affect the Company's gross margin. Additionally, changes in product mix could
cause the Company's gross margin to fluctuate. While the Company believes
the availability of raw materials is adequate to meet the Company's current
revenue projections through the remainder of fiscal 1996, component
availability is still subject to lead time and other constraints which may
limit the Company's revenue growth. Because of these factors and others
discussed under "Trends and Uncertainties" below, there can be no assurance
that the Company's gross margin will not fluctuate or decrease in future
periods.
Selling, general and administrative (SG&A) expenses increased in absolute
amounts during the second quarter and first half of fiscal 1996 relative to the
comparable periods of fiscal 1995. The increases during these periods are due
primarily to growth in infrastructure such as personnel and related departmental
expenses at all manufacturing locations to support the increased size and
complexity of the Company's business. SG&A expenses as a percentage of net
sales have remained relatively consistent from the first half of fiscal 1996
compared to the comparable period of fiscal 1995. The Company anticipates SG&A
expenses will continue to increase in the future in terms of absolute dollars as
the Company continues to build the infrastructure necessary to support its
current and prospective business.
The Company's research and development activities are focused primarily on
refinement of prototype engineering, the development of concurrent engineering,
fine pitch interconnection technologies (which include ball-grid array, tape-
automated bonding, multichip modules, and other direct chip attachment
technologies), reliability test technology (mechanical deflection system and
accelerate thermal cycling test), no-clean soldering processes, fluxless
soldering process, and lead free soldering process. R&D expenses did not change
significantly in the second quarter or first half of fiscal 1996 compared to the
same periods in 1995 and are not expected to change significantly in the
foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $618 million as of February 29, 1996. This included
the proceeds from the completion of the Company's private placement of $230
million aggregate principle amount of its 6% convertible subordinated notes due
2006 completed towards the end of the second quarter of fiscal 1996. Early in
the third quarter of fiscal 1996, the Company also completed the private
placement of $150 million
10
<PAGE>
aggregate principle amount of its 7-3/8 senior notes due 2006 in a
separate transaction (collectively the "notes"). Approximately $115 million of
the proceeds from these offerings was used to complete the TI Transaction in
March 1996. The remainder will be used to finance the working capital of the
Company. Interest expense on the notes is expected to be approximately $25
million annually and will be offset in part by interest earned on undeployed
cash. The Company believes the proceeds from these offerings, cash generated
from operations together with the Company's available credit will provide
adequate working capital for the foreseeable future.
Inventory levels fluctuate directly with the volume of the Company's
manufacturing. Changes or significant fluctuations in product market demands
can cause fluctuations in inventory levels which results in changes in
inventory turns and liquidity. Historically, the Company has been able to
manage its inventory levels with regard to these fluctuations. However,
should permanent decreases in volume or material changes fluctuations in
product demand occur simultaneously, the Company could experience an increase
in inventory resulting in slower turns and reduced liquidity.
During the first and second quarters of fiscal 1996, the Company invested
approximately $71 million in new equipment, primarily in surface mount assembly
and test equipment to meet current and expected production levels. For the
remainder of fiscal 1996, capital expenditures at existing facilities and the
CMS site in Austin, Texas are expected to be in the range of $45 to $60 million,
however, the CMS acquisition is so recent that actual expenditures may differ
significantly as the Company is still evaluating the capital requirements of
this site.
In addition to the Company's working capital as of February 29, 1996, the
Company has available a $100 million unsecured domestic revolving credit
facility and $27 million in available foreign credit facilities. Beginning in
September 1997, the Company will be required to pledge approximately $52 million
of cash or marketable securities as collateral for its obligation under the
terms of the Company's operating lease for its facilities in Milpitas,
California.
The Company called all of the Company's remaining Liquid Yield Option Notes
due 2012 (the "LYONs") for redemption on May 6, 1996. The aggregate original
issue price and accrued original issue discount of the outstanding LYONs is
approximately $26.5 million. This approximates the maximum amount the Company
would be required to pay out upon redemption of the remaining notes assuming
all holders of LYONs chose not to convert their notes to common shares. So long
as the market price of the Company's common stock is at least $16.00 per share,
a holder of LYONs who converts will receive common stock with a market value
greater than the amount of cash the holder would be entitled to receive upon
redemption.
TRENDS AND UNCERTAINTIES
Customer Concentration; Dependence on the Electronics Industry
A small number of customers are currently responsible for a significant
portion of the Company's net sales. In the three and six month periods ended
February 29, 1996 and in the fiscal years 1995, 1994, and 1993 the Company's ten
largest customers accounted for over 65% of consolidated net sales. The Company
is dependent upon continued revenues from its top ten customers. Any material
delay, cancellation or reduction of orders from these or other customers could
have a material adverse effect on the Company's results of operations. The
Company's largest customer during the first half of fiscal 1996,
Hewlett-Packard Corporation (HP), accounted for 11% of consolidated net
sales, compared to less than 10% in the first half of fiscal 1995. For the
six months ended February 28, 1995, International Business Machines (IBM)
represented the Company's largest customer with sales accounting for 23% of
consolidated net sales. For the six months ended February 29, 1996, sales
to IBM were less than 10% of consolidated net sales. The Company had a
11
<PAGE>
manufacturing services agreement with IBM at its Bordeaux, France facility which
expired on December 31, 1995. There can be no assurances that the Company will
continue to do business with IBM.
The percentage of the Company's sales to its major customers may fluctuate
from period to period. Significant reductions in sales to any of these
customers would have a materially adverse effect on the Company's results of
operations. The Company has no firm long-term volume purchase commitments from
its customers, and over the past few years has experienced reduced lead-times in
customer orders. In addition, customer contracts can be canceled and volume
levels can be changed or delayed. The timely replacement of canceled, delayed
or reduced contracts with new business cannot be assured. These risks are
exacerbated because a majority of the Company's sales are to customers in the
electronics industry, which is subject to rapid technological change and product
obsolescence. The factors affecting the electronics industry in general, or any
of the Company's major customers in particular, could have a material adverse
effect on the Company's results of operations.
Management of Growth; Geographic Expansion
The Company has experienced substantial growth over the last four fiscal
years, with net sales increasing from $265.4 million in fiscal 1991 to $2.1
billion in fiscal year 1995. In recent years, the Company has acquired
facilities in six locations, including the Company's recent purchase of the
custom manufacturing services business of Texas Instruments Incorporated
located in Austin, Texas. There can be no assurances that the Company's
historical revenue growth will continue or that the Company will successfully
manage the integration of the CMS business or any other business it may acquire
in the future. As the Company manages its existing operations and expands
geographically, it may experience certain inefficiencies as it integrates new
operations and manages geographically dispersed operations. In addition, the
Company's results of operations could be adversely affected if its new
facilities do not achieve growth sufficient to offset increased expenditures
associated with geographic expansion. Should the Company increase its
expenditures in anticipation of a future level of sales which does not
materialize, its profitability would be adversely affected. On occasion,
customers may require rapid increases in production which can place an excessive
burden on the Company's resources.
TI Transaction
The TI Transaction entails a number of risks, including successfully
managing the transition of customers from TI to Solectron, managing the
transition of employees at the Austin site from TI to Solectron, integrating
purchasing operations and information systems and managing a larger and more
geographically disparate business. In the TI Transaction, the Company
acquired manufacturing assets, accounts receivable, and inventory, assumed
associated liabilities, hired employees, leased space in Austin, Texas, and
purchased certain fixed assets from TI's facility in Kuala Lumpur, Malaysia.
Neither TI nor the customers of the CMS business have guaranteed any future
volume of business in the TI Transaction. The CMS business will increase the
Company's expenses and working capital requirements, and place burdens on the
Company's management resources. As a result, the success of the acquisition is
dependent upon the Company's ability to successfully manage the integration
of the CMS operations and retain the customers of the CMS business. In the
event the Company is unsuccessful in these efforts, the Company's results of
operations could be materially adversely affected.
International Operations
As a result of its foreign sales and facilities, the Company's operations
are subject to risks of doing business abroad, including but not limited to,
fluctuations in the value of currency, export duties, changes to import and
export regulations (including quotas), 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. In addition, the Company
currently benefits from a tax holiday in its Penang, Malaysia site which expires
in
12
<PAGE>
January, 1997, subject to certain extensions. If the tax holiday is not
extended, the Company's effective income tax rate will increase.
Availability of Components
A substantial portion of the Company's net sales are derived from turnkey
manufacturing in which the Company provides both materials procurement and
assembly. In turnkey manufacturing, the Company typically bears the risk of
component price increases, which could adversely affect the Company's gross
profit margins. At various times there have been shortages of components in the
electronics industry. If significant shortages of components should occur, the
Company may be forced to delay manufacturing and shipments, which could have a
materially adverse effect on the Company's results of operations.
Potential Fluctuations in Operating Results
The Company's operating results are affected by a number of factors,
including the mix of turnkey and consignment projects, capacity utilization,
price competition, the degree of automation that can be used in the assembly
process, the efficiencies that can be achieved by the Company in managing
inventories and fixed assets, the timing of orders from major customers,
fluctuations in demand for customer products, the timing of expenditures in
anticipation of increased sales, customer product delivery requirements and
increased costs and shortages of components or labor. The Company's turnkey
manufacturing, which typically results in higher net sales and gross profits but
lower gross profit margins than assembly and testing services, represents a
substantial percentage of net sales. All of these factors can cause
fluctuations in the Company's operating results.
Competition
The electronics assembly and manufacturing industry is comprised of a large
number of companies, several of which have achieved substantial market share.
The Company also faces competition from current and prospective customers which
evaluate Solectron's capabilities against the merits of manufacturing products
internally. Solectron competes with different companies depending on the type
of service or geographic area. Certain of the Company's competitors have
broader geographic breadth. They also may have greater manufacturing,
financial, research and development and marketing resources than the Company.
The Company believes that the primary basis of competition in its targeted
markets is manufacturing technology, quality, responsiveness, the provision of
value-added services and price. To be competitive, the Company must provide
technologically advanced manufacturing services, high product quality levels,
flexible delivery schedules, and reliable delivery of finished products on a
timely and price competitive basis. The Company currently may be at a
competitive disadvantage as to price when compared to manufactures with lower
cost structures, particularly with respect to manufacturers with established
facilities where labor costs are lower.
Intellectual Property Protection
The Company's ability to compete may be affected by its ability to protect
its proprietary information. The Company obtained a limited number of U.S.
patents in 1995 related to the process and equipment used in its surface mount
technology. The Company believes these patents are valuable. However, there
can be no assurance that these patents will provide meaningful protection for
the Company's manufacturing process and equipment innovations.
There can be no assurances that third parties will not assert infringement
claims against the Company or its customers in the future. In the event a third
party does assert an infringement claim, the Company may be required to expend
significant resources to develop a non-infringing manufacturing process or to
obtain licenses to the manufacturing process which is the subject of litigation.
There can be no assurance that the Company would be successful in such
development or that any such licenses would
13
<PAGE>
be available on commercially acceptable terms, if at all. In addition, such
litigation could be lengthy and costly and could have a material adverse effect
on the Company's financial condition regardless of the outcome of such
litigation.
Environmental Compliance
The Company is subject to a variety of environmental regulations relating
to the use, storage, discharge and disposal of hazardous chemicals used during
its manufacturing process. Any failure by the Company to comply with present
and future regulations could subject it to future liabilities or the suspension
of production. In addition, such regulations could restrict the Company's
ability to expand its facilities or could require the Company to acquire costly
equipment or to incur other significant expenses to comply with environmental
regulations.
Dependence on Key Personnel and Skilled Employees
The Company's continued success depends to a large extent upon the efforts
and abilities of key managerial and technical employees. The loss of services
of certain key personnel could have a material adverse effect on the Company.
The Company's business also depends upon its ability to continue to attract and
retain senior managers and skilled employees. Failure to do so could adversely
affect the Company's operations.
Possible Volatility of Market Price of Common Stock
The trading price of the common stock is subject to significant
fluctuations in response to variations in quarterly operating results, general
conditions in the electronics industry and other factors. In addition, the
stock market is subject to price and volume fluctuations which affect the market
price for many high technology companies in particular, and which often are
unrelated to operating performance.
14
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
None
Item 3: Defaults upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
a) The Company held its Annual Meeting of Shareholders on January
17, 1996.
b) At the meeting, the following proposals received the votes listed
below:
i) Election of Directors:
Charles A. Dickinson Votes For: 40,336,598
Votes Withheld: 69,064
Dr. Koichi Nishimura Votes For: 40,341,613
Votes Withheld: 64,049
Dr. Winston H. Chen Votes For: 40,342,558
Votes Withheld: 63,104
Richard A. D'Amore Votes For: 40,325,031
Votes Withheld: 80,631
Dr. Kenneth E. Haughton Votes For: 40,338,958
Votes Withheld: 66,704
Dr. Paul R. Low Votes For: 40,324,358
Votes Withheld: 81,304
W. Ferrell Sanders Votes For: 40,340,358
Votes Withheld: 65,304
Osamu Yamada Votes For: 40,322,106
Votes Withheld: 83,556
15
<PAGE>
ii) Ratification of the appointment of Votes For: 40,341,018
KPMG Peat Marwick LLP as Votes Against: 42,501
independent accountants of the Abstentions: 22,143
Company for the fiscal year ending
August 31, 1996.
Item 5: Other Information
The Company has called for redemption on May 6, 1996 all of the
Company's Liquid Yield Option Notes due 2012 (the "LYONs").
The aggregate principal amount at maturity of the outstanding
LYONs is approximately $79.8 million and the aggregate original
issue price and accrued original issue discount of the
outstanding LYONs is approximately $26.5 million.
Prior to 5:00 p.m., New York time, on May 6, 1996, holders may
convert their LYONs into shares of the Company's Common Stock at
a rate of 20.792 shares of the Company's Common Stock per $1,000
principal amount at maturity of LYONs.
Alternatively holders may have their LYONs redeemed at a total
redemption price of $332.65 per $1,000 principal amount at
maturity. Such redemption price reflects the original issue
price of the LYONs of $252.57 per $1,000 principal amount at
maturity plus the accrued original issue discount equal to $80.08
per $1,000 principal amount at maturity (calculated at a rate of
7% from the issue date to the redemption date). Any LYONs not
converted on or before 5:00 p.m., New York time, on May 6, 1996,
will be automatically redeemed on May 6, 1996, after which
original issue discount will cease to accrue and the right to
convert the LYONs will terminate.
So long as the market price of the Common Stock is at least
$16.00 per share, a holder of the LYONs who converts will receive
Common Stock with a market value greater than the amount of cash
the holder would be entitled to receive upon redemption. On
April 4, 1996, the last reported sale price of the Common Stock
on the New York Stock Exchange was $46.00 per share.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
2.1* Asset purchase agreement dated as of January
29, 1996, as amended and restated as of March
29, 1996, by and among Solectron Texas, L.P.,
the Registrant and Texas Instruments,
Incorporated.
11.1 Statement re: Computation of Net Income per
Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On February 7, 1996 the Company filed a current report
on form 8-K announcing the Company had signed an asset
purchase agreement with Texas Instruments Incorporated.
In the same filing, the Company incorporated by
reference it's news release announcing its convertible
debt offering.
On March 15, 1996 the Company filed a current report on
form 8-K announcing its senior debt offering.
*Confidential treatment requested for portions of exhibit. Confidential
portions have been omitted and filed separately with the Securities and
Exchange Commission.
16
<PAGE>
SOLECTRON CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOLECTRON CORPORATION
(Registrant)
Date: June 5, 1996 By: /s/Susan S. Wang
----------------- -----------------------------
Susan S. Wang
Senior Vice President, Chief
Financial Officer and
Secretary (Principal Financial
and Accounting Officer)
17
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
SOLECTRON TEXAS, L.P.,
SOLECTRON CORPORATION
AND
TEXAS INSTRUMENTS INCORPORATED*
*Confidential treatment requested for portions of exhibit. Confidential
portions have been omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - PURCHASE AND CONSIDERATION. . . . . . . . . . . . . . . . . . . . 8
Section 2.1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . 8
Section 2.2 Assets and Business Not to be Transferred. . . . . . . . . . 9
Section 2.3 Assumption of Liabilities and Obligations. . . . . . . . . .10
Section 2.4 Retained Liabilities.. . . . . . . . . . . . . . . . . . . .10
Section 2.5 Consideration. . . . . . . . . . . . . . . . . . . . . . . .10
Section 2.6 Adjustment of Purchase Price.. . . . . . . . . . . . . . . .11
Section 2.7 Purchase Price Allocation. . . . . . . . . . . . . . . . . .11
Section 2.8 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.9 Nonassignable Contracts and Permits. . . . . . . . . . . . .12
ARTICLE 3 - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.2 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.3 Buyer's Additional Deliveries. . . . . . . . . . . . . . . .13
Section 3.4 Seller's Deliveries. . . . . . . . . . . . . . . . . . . . .13
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . .15
Section 4.1 Organization of Seller . . . . . . . . . . . . . . . . . . .15
Section 4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . .15
Section 4.3 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 4.4 Condition of Assets. . . . . . . . . . . . . . . . . . . . .16
Section 4.5 Governmental Permits . . . . . . . . . . . . . . . . . . . .16
Section 4.6 Title to Tangible Property . . . . . . . . . . . . . . . . .17
Section 4.7 Intellectual Property. . . . . . . . . . . . . . . . . . . .17
Section 4.8 Employees. . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 4.9 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 4.10 No Violation, Litigation or Regulatory Action . . . . . . .18
Section 4.11 Environmental Matters . . . . . . . . . . . . . . . . . . .19
Section 4.12 Financial Data. . . . . . . . . . . . . . . . . . . . . . .20
Section 4.13 Statement of Assets and Liabilities; Financial Statements .20
Section 4.14 No Finder . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.15 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.16 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . .20
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . .20
Section 5.1 Organization of Buyer. . . . . . . . . . . . . . . . . . . .21
Section 5.2 Authority of Buyer and Solectron . . . . . . . . . . . . . .21
Section 5.3 No Finder. . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 5.4 Cash Consideration . . . . . . . . . . . . . . . . . . . . .21
ARTICLE 6 - ACTION PRIOR TO THE CLOSING DATE. . . . . . . . . . . . . . . . .22
Section 6.1 Investigation of the Operations by Buyer . . . . . . . . . .22
Section 6.2 Preserve Accuracy of Representations and Warranties. . . . .22
Section 6.3 Governmental Approvals . . . . . . . . . . . . . . . . . . .22
Section 6.4 Update to Disclosure . . . . . . . . . . . . . . . . . . . .23
Section 6.5 Operations Prior to the Closing . . . . . . . . . . . . . .23
Section 6.6 Notification by Seller of Certain Matters. . . . . . . . . .24
Section 6.7 Confidentiality. . . . . . . . . . . . . . . . . . . . . . .24
Section 6.8 HSR Act Approvals. . . . . . . . . . . . . . . . . . . . . .24
Section 6.9 Preparation of Financials. . . . . . . . . . . . . . . . . .25
ARTICLE 7 - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . .25
Section 7.1 Employment Matters . . . . . . . . . . . . . . . . . . . . .25
Section 7.2 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 7.3 Confidential Treatment . . . . . . . . . . . . . . . . . . .30
Section 7.4 Covenant Not to Compete. . . . . . . . . . . . . . . . . . .30
Section 7.5 Malaysia Operations. . . . . . . . . . . . . . . . . . . . .31
Section 7.6 Transition Support Payments. . . . . . . . . . . . . . . . .31
Section 7.7 Intellectual Property Matters. . . . . . . . . . . . . . . .31
Section 7.8 [***************************]. . . . . . . . . . . . . . . .32
Section 7.9 Manufacturing Services . . . . . . . . . . . . . . . . . . .33
Section 7.10 Product Warranty. . . . . . . . . . . . . . . . . . . . . .33
Section 7.11 Intellectual Property License . . . . . . . . . . . . . . .33
Section 7.12 Technology Sharing . . . . . . . . . . . . . . . . . . . .33
Section 7.13 Material Adverse Change. . . . . . . . . . . . . . . . . .34
ARTICLE 8 - CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. . . . . . . . . . .34
Section 8.1 No Misrepresentation or Breach of Covenants and Warranties .34
Section 8.2 No Restraint or Litigation . . . . . . . . . . . . . . . . .34
Section 8.3 Necessary Governmental Approvals . . . . . . . . . . . . . .34
Section 8.4 Necessary Consents . . . . . . . . . . . . . . . . . . . . .34
Section 8.5 Employees. . . . . . . . . . . . . . . . . . . . . . . . . .35
* Confidential Treatment Requested
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER . . . . . . . . . .35
Section 9.1 No Misrepresentation or Breach of Covenants and Warranties .35
Section 9.2 No Restraint or Litigation . . . . . . . . . . . . . . . . .35
Section 9.3 Necessary Governmental Approvals . . . . . . . . . . . . . .35
ARTICLE 10 - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .35
Section 10.1 Indemnification by Seller. . . . . . . . . . . . . . . . .35
Section 10.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . .36
Section 10.3 Notice of Claims. . . . . . . . . . . . . . . . . . . . . .36
Section 10.4 Exclusivity of Remedy . . . . . . . . . . . . . . . . . . .37
Section 10.5 Third Person Claims . . . . . . . . . . . . . . . . . . . .37
Section 10.6 Environmental Indemnification By Seller . . . . . . . . . .37
Section 10.7 Environmental Indemnification By Buyer. . . . . . . . . . .39
Section 10.8 Limitation of Indemnification . . . . . . . . . . . . . . .41
ARTICLE 11 - TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . .41
Section 11.2 Notice of Termination . . . . . . . . . . . . . . . . . . .41
Section 11.3 Effect of Termination . . . . . . . . . . . . . . . . . . .42
ARTICLE 12 - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . .42
Section 12.1 Survival of Obligations . . . . . . . . . . . . . . . . . .42
Section 12.2 Names, Trademarks, Etc. . . . . . . . . . . . . . . . . . .42
Section 12.3 No Public Announcements . . . . . . . . . . . . . . . . . .42
Section 12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 12.5 Successors and Assigns. . . . . . . . . . . . . . . . . . .44
Section 12.6 Access to Records After Closing Date. . . . . . . . . . . .44
Section 12.7 Entire Agreements, Amendments . . . . . . . . . . . . . . .44
Section 12.8 Interpretation. . . . . . . . . . . . . . . . . . . . . . .44
Section 12.9 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . .45
Section 12.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . .45
Section 12.11 Partial Invalidity . . . . . . . . . . . . . . . . . . . .45
Section 12.12 Execution in Counterparts. . . . . . . . . . . . . . . . .45
Section 12.13 Further Assurances . . . . . . . . . . . . . . . . . . . .45
Section 12.14 Governing Law. . . . . . . . . . . . . . . . . . . . . . .46
Section 12.15 Dispute Resolution . . . . . . . . . . . . . . . . . . . .46
Section 12.16 Solectron Guaranty . . . . . . . . . . . . . . . . . . . .46
-iii-
<PAGE>
INDEX TO SCHEDULES
Schedule Description
2.1(a) Capital Assets
2.1(b) Third Party and Seller Commercial Software
2.1(c) Transferred Agreements (including all written and oral
leases)
2.1(d) Transferred Permits
4 Disclosure Letter
4.8(a) Seller's Employee Benefit Plans
4.8(c) Regular Personnel Employment Salaries
4.9 Seller's Contracts Relating to Operations
4.16 Certain Officers and Employees of Seller
7.1(m) Other Personnel
7.8 Certain Third Party Licensees
8.4 Necessary Consents
8.5 Key Employees
-iv-
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
A Interim Financial Statement of Assets and Liabilities
-v-
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of January 29,
1996, as amended and restated as of March 29, 1996, by and among Solectron
Texas, L.P., a Delaware limited partnership ("Buyer"), Solectron Corporation, a
California corporation ("Solectron"), and Texas Instruments Incorporated, a
Delaware corporation ("Seller").
RECITALS:
A. Seller desires to sell the operations of its custom manufacturing
services business in Austin, Texas (the "Austin Operations") and to sell certain
assets of its custom manufacturing services site in Kuala Lumpur, Malaysia (the
"Malaysia Operations" and, together with the Austin Operations, the
"Operations"), and Buyer desires to purchase the Operations in accordance with
terms of this Agreement.
B. Seller, Buyer and Solectron desire that this Agreement constitute an
important step in the continuing business relationship between Seller, Buyer and
Solectron with regards to custom manufacturing services solutions and other
manufacturing services and supply arrangements.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, representations, warranties, conditions and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"ADDITIONAL AGREEMENTS" means all agreements, instruments and documents
being or to be executed and delivered by Buyer and Seller under this Agreement
or in connection herewith, including, but not limited to the Aversa Operations
Framework Agreement, Confidentiality Agreement, Instrument of Assignment and
Assumption, Lease Agreement, Master Services Agreement, System License and
System Conversion Agreement, [*********************] Agreement, Malaysia Asset
Purchase Agreement and the Malaysia Subcontract Agreement.
* Confidential Treatment Requested
<PAGE>
"AFFILIATE" means any entity which controls, is controlled by, or is under
common control with, Seller or Buyer, as the case may be. An entity shall be
deemed to be in control of another entity only if, and for so long as, it owns
or controls more than fifty percent (50%) of the shares of the subject entity
entitled to vote in the election of directors (or, in the case of an entity that
is not a corporation, for the election of the corresponding managing authority).
"ASSUMED LIABILITIES" has the meaning specified in Section 2.3 hereof.
"AVERSA OPERATIONS" means the Seller's custom manufacturing services
business in Aversa, Italy.
"AVERSA OPERATIONS FRAMEWORK AGREEMENT" means the agreement between
Solectron, and Seller on terms and conditions reasonably determined by the
parties in good faith as soon as practicable following the execution of this
Agreement, including provisions for Seller and Solectron to cooperate through
December 31, 1998 to maintain a certain volume of business with the intent of
providing employment for the workforce associated with two Fuji manufacturing
lines currently in operation at the Aversa Operations.
"BUYER" has the meaning specified in the first paragraph of this Agreement.
"BUYER ENVIRONMENTAL LIABILITIES" shall have the meaning set forth in
Section 10.7 hereof.
"BUYER GROUP MEMBER" means Buyer and its Affiliates.
"CLAIM NOTICE" has the meaning specified in Section 10.3 hereof.
"CLOSING" has the meaning specified in Section 3.1 hereof.
"CLOSING DATE" has the meaning specified in Section 3.1 hereof.
"CLOSING DATE PAYMENT" has the meaning specified in Section 3.2 hereof.
"COBRA" has the meaning specified in Section 7.1(f)(3) hereof.
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"COMPONENTS" means component parts, raw materials, supplies and other
materials which are of a type generally quantified in the bills of materials and
which are required for the production and test of printed circuit board
assemblies.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement effective
March 15, 1995 between Seller and Solectron.
2
<PAGE>
"COURT ORDER" means any judgment, order, award or decree of any foreign,
federal, state, local or other court or tribunal, or any Governmental Body and
any award in any arbitration proceeding.
"DISCLOSURE LETTER" has the meaning specified in Section 4 hereof.
"DISPOSAL FACILITY" means all transporters, locations, landfills, disposal
sites, storage sites, treatment facilities, recyclers and incinerators to which
Hazardous Materials generated at the Seller Property in connection with a
Remediation Activity have been transferred or transported for storage, treatment
or disposal.
"ENCUMBRANCE" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect in
title, covenant or other restrictions of any kind.
"ENVIRONMENTAL LAWS" shall mean all Requirements of Laws which relate to
any Hazardous Material or the use, handling, transportation, production, spill,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, release,
threatened release, migration, emission, sale, or storage of, or the exposure of
any Person to, a Hazardous Material.
"ENVIRONMENTAL PERMIT" means any approval, permit, license, clearance,
transfer approval, condition or consent of any applicable Governmental Body or
other person reasonably necessary for the conduct of any Hazardous Material
Activity of the Austin Operations as presently conducted under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" has the meaning specified in Section 2.2 hereof.
"EXPENSES" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder, including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursement of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals.
"FINAL FSAL" has the meaning specified in Section 2.6(a) hereof.
"FINANCIAL STATEMENTS" has the meaning specified in Section 6.9 hereof.
"GAAP" means generally accepted accounting principles.
"GOVERNMENTAL BODY" means any foreign, federal, state, county, local,
district, public authority, public agency, or any other political subdivision,
public corporation, or governmental or regulatory authority whether foreign or
domestic.
3
<PAGE>
"GOVERNMENTAL PERMITS" has the meaning specified in Section 4.5 hereof.
"HAZARDOUS MATERIAL" shall mean any material or substance that is
prohibited or regulated by any Requirement of Law or that is designated by any
applicable Governmental Body to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment.
"HAZARDOUS MATERIAL ACTIVITY" means the transportation, transfer,
recycling, storage, use, treatment, manufacture, investigation, removal,
remediation, release, exposure of others to, sale or distribution of, any
Hazardous Material or any equipment or product containing a Hazardous Material.
"INDEMNIFIED PARTY" means a Person indemnified in Section 10.3 hereof.
"INDEMNITOR" means a Person providing indemnification in Section 10.3
hereof.
"INSTRUMENT OF ASSIGNMENT AND ASSUMPTION" means an instrument of assignment
and assumption conveying the Purchased Assets to Buyer and effecting the
assumption by Buyer of the Assumed Liabilities.
"INTELLECTUAL PROPERTY" means (a) inventions, whether or not patentable,
whether or not reduced to practice, or whether or not yet made the subject of a
pending patent application or applications; (b) ideas and conceptions of
potentially patentable subject matter, including without limitation, any patent
disclosures, whether or not reduced to practice and whether or not yet made the
subject of a pending patent application or applications; (c) all national
(including the U.S.) and multinational statutory invention registrations,
patents, patent registrations and patent applications (in the U.S. or any
foreign country, and including all reissues, divisions, continuations,
continuations-in-part, extension and reexaminations) and all rights therein
provided by law, multinational treaties or conventions and all improvements to
the inventions disclosed in each such registration, patent or application
(collectively "Patents"); (d) trademarks, service marks, trade dress, logos,
trade names and corporate names, including all of the goodwill associated
therewith, whether or not registered, including all common law rights, and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United States
of America, and the trademark offices of other nations throughout the world, and
all rights therein provided by multinational treaties or conventions
(collectively "Trademarks"); (e) copyrights, whether or not registered, and
registrations and applications for registration thereof, and all rights therein
provided by law, multinational treaties or conventions (collectively
"Copyrights"); (f) mask works or registrations of mask works; (g) trade secrets
and confidential, technical information (including ideas, formulas,
compositions, inventions, and conceptions of inventions whether patentable or
unpatentable and whether or not reduced to practice) (collectively "Trade
Secrets"); (h) technology (including know-how and show-how), manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data and
copyrightable works, whether secret or confidential or not; (i) copies and all
tangible embodiments of all of the foregoing, in whatever form or medium; (j)
all rights to obtain and rights to apply for
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patents, and to register trademarks and copyrights; and (k) all rights to sue
for and recover and retain damages, costs or attorneys' fees for present and
past infringement of any of the intellectual property rights hereinabove set
out.
"INTERIM FSAL" has the meaning specified in Section 2.6(a) hereof.
"INVENTORY" means all raw materials, supplies, Components, work-in-process,
finished goods and other materials of the Austin Operations as of the Closing
Date.
"IRS" means the Internal Revenue Service of the United States of America.
"KNOWLEDGE" has the meaning set forth in Section 4.16 hereof.
"LEASE AGREEMENT" means the lease agreement between Buyer and Seller
providing for the lease by Seller to Buyer of the site of the Austin Operations
on terms and conditions reasonably determined by the parties in good faith as
soon as practicable following the execution of this Agreement.
"LOSSES" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"MALAYSIA OPERATIONS" means the Seller's custom manufacturing services
business in Kuala Lumpur, Malaysia.
"MALAYSIA ASSET PURCHASE AGREEMENT" means the asset purchase agreement
between Solectron Technology Sdn. Bhd. and Texas Instruments Electronic Systems
Sdn. Bhd. relating to the purchase by Solectron Technology Sdn. Bhd. of certain
assets and the assumption of certain liabilities of the Malaysia Operations on
terms and conditions reasonably determined by the parties in good faith as soon
as practicable following the execution of this Agreement.
"MALAYSIA SUBCONTRACT AGREEMENT" means the subcontract agreement between
Solectron Technology Sdn. Bhd. and Texas Instruments Electronic Systems Sdn.
Bhd. pursuant to which the Malaysia Operations shall perform as a subcontractor
to Solectron, subject to the terms of the Malaysia Asset Purchase Agreement.
"MANUFACTURING PROCESS PATENTS" has the meaning set forth in Section 7.7(a)
hereof.
"MANUFACTURING SERVICES FRAMEWORK AGREEMENT" means the manufacturing
services framework agreement between Seller and Solectron on terms and
conditions reasonably determined by the parties in good faith as soon as
practicable following the execution of this Agreement
"MASTER SERVICES AGREEMENT" means the Master Services Agreement between
Seller and Solectron relating to certain services to be provided after the
Closing Date among the parties.
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"NEW REGULAR PERSONNEL" means Regular Personnel and Other Personnel who
become Buyer's regular personnel at the Closing Date or upon return from an
authorized paid or FMLA leave of absence, in accordance with the terms of this
Agreement.
"OPERATIONS" has the meaning specified in the Recitals to this Agreement.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. Sections 651
ET SEQ., any amendment thereto, any successor statute, and any regulations
promulgated thereunder.
"OTHER PERSONNEL" has the meaning set forth in Section 7.1(m) hereof.
"PERMITTED ENCUMBRANCES" means (a) liens for taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable and (c) other liens or imperfections on property which are not
material in amount or do not materially detract from the value of or materially
impair the existing use of the property affected by such lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Body.
"PURCHASE PRICE" has the meaning specified in Section 2.5 hereto.
"PURCHASED ASSETS" has the meaning specified in Section 2.1 hereto.
"REGULAR PERSONNEL" means all employees of the Seller engaged in the Austin
Operations on a full-time basis on the Closing Date, including employees on a
paid leave of absence and employees on a leave of absence pursuant to the
provisions of the Family & Medical Leave Act ("FMLA"), but excluding
(i) employees who are currently on unpaid leave of absence other than FMLA
leave, (ii) employees who are no longer physically able to perform the full
range of essential requirements of their position, and (iii) employees who have
indicated their intention not to become New Regular Personnel. Employees
engaged in the Malaysia Operations and part-time employees and independent
contractors engaged in the Austin Operations are not Regular Personnel for the
purposes of this Agreement.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Hazardous
Material in, on, under or through the Seller Property or the air, soil, surface
water, ground water or improvements thereof.
"REMEDIATION ACTIVITY" means any reporting, investigation,
characterization, feasibility study, health assessment, risk assessment,
remediation, treatment, recycling, removal, transport, monitoring, maintenance
or any other activity incident to the Release, threatened Release,
investigation, remediation or removal of a Hazardous Material existing on Seller
Property or the air, soil, ground water, surface water, or improvements thereof.
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"REQUIREMENT OF LAWS" means any applicable foreign, federal, state and
local laws, statutes, regulations, rules, codes, ordinances, judgments,
injunctions, decrees, orders, permits, approvals, treaties, enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"RETAINED INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 2.2(g).
"SELLER" has the meaning specified in the first paragraph of this
Agreement.
"SELLER ENVIRONMENTAL LIABILITIES" shall have the meaning set forth in
Section 10.6 hereof.
"SELLER GROUP MEMBER" means Seller and its Affiliates.
"SELLER PROPERTY" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by Seller and used in the Austin Operations.
"[**********************] AGREEMENT" means the [**********************]
agreement between Buyer and Seller on terms and conditions reasonably determined
by the parties in good faith as soon as practicable following the execution of
this Agreement.
"SUCCESSOR" means any (i) direct or indirect successor (by purchase of any
asset(s), purchase of any stock, purchase of a partnership interest, merger,
acquisition, reorganization, or otherwise) of a principal, (ii) any partner of
the principal, (iii) any lender of the principal, (iv) any assignee, mortgagee,
transferee, purchaser, encumbrancer, lessee, sublessee, successor, or
foreclosure sale purchaser of any right, title or interest in the assets of the
principal, or any portion thereof, and (v) any direct or indirect successor to
any of the foregoing.
"SYSTEM LICENSE AND SYSTEM CONVERSION AGREEMENT" means the system license
and system conversion agreement between the Buyer and Seller on terms and
conditions reasonably defined by the parties in good faith as soon as
practicable after the execution of this Agreement.
"TAX" means any federal, state, local or foreign net income, alternative or
add-on minimum, gross income, gross receipts, property, sales, use, transfer,
gains, license, excise, employment, payroll, withholding or minimum tax, or any
other tax, custom, duty, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any Governmental Body.
"TAX RETURN" means any return, report or similar statement required to be
filed with respect to any Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.
"TRANSFERRED AGREEMENTS" has the meaning set forth in Section 2.1(c)
hereof.
* Confidential Treatment Requested
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"TRANSFERRED PERMITS" has the meaning specified in Section 4.5 hereof.
"TRANSFER TAXES" has the meaning specified in Section 2.8 hereof.
ARTICLE 2
PURCHASE AND CONSIDERATION
Section 2.1 PURCHASE AND SALE. On the terms and subject to the conditions
of this Agreement, Seller agrees to sell, transfer, convey, assign and deliver
to Buyer on the Closing Date, and Buyer agrees to buy and acquire from Seller,
all the assets and properties, wherever located, described below (collectively,
the "Purchased Assets"):
(a) all capital assets of the Austin Operations listed on
Schedule 2.1(a);
(b) all third party and Seller commercial computer software of the
Austin Operations listed on Schedule 2.1(b) hereto;
(c) the agreements listed on Schedule 2.1(c) hereto; including all
rights and incidents of interest of Seller thereto as of the Closing Date, and
all contracts, leases and other agreements entered into by Seller in the
ordinary course of business of the Austin Operations, and consistent with past
practices, between the date of this Agreement and the Closing Date, with
Schedule 2.1(c) to be updated as of the Closing Date to reflect such changes
(the "Transferred Agreements");
(d) the Transferred Permits listed on Schedule 2.1(d) hereto;
(e) Trade Secrets, Copyrights, non-patented technology and
manufacturing processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data and
copyrightable works that, in each case, are currently used by Seller exclusively
in the Austin Operations;
(f) all information, books and records of Seller (including computer
spreadsheets) related to the Purchased Assets, including without limitation all
repair records and operation manuals, and reasonably required by Seller for the
operation of the Austin Operations and which do not pertain primarily to areas
of the Seller's business other than the Austin Operations;
(g) those expensed assets used solely to support the Austin
Operations and tangible personal property used solely in connection with the
Austin Operations, including without limitation supplies, tools, office
equipment, furnishings and furniture dedicated to any Regular Employee of the
Austin Operations, such as personal computers, notebook computers, printers,
copiers, telecopier machines, cellular telephones and calculators used by each
of them;
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(h) certain assets of the Malaysia Operations as set forth in the
Malaysia Asset Purchase Agreement.
(i) all Inventory of the Austin Operations as of the Closing Date;
and
(j) all accounts receivable of the Austin Operations as of the
Closing Date.
With respect to the unscheduled, expensed assets set forth in Section
2.1(g) above, prior to the Closing Date, Seller shall permit Buyer: (i) to tag,
with Seller's reasonable agreement, any such unscheduled assets to indicate that
they shall be transferred to Buyer on the Closing Date; and (ii) to permit Buyer
to remove such tagged assets as promptly as possible after Closing.
With respect to Schedule 2.1(a), Seller shall provide to Buyer a final
schedule at or prior to delivery of the Final FSAL.
Section 2.2 ASSETS AND BUSINESS NOT TO BE TRANSFERRED. Seller shall
retain and Buyer shall not acquire the following assets, properties and business
of Seller, which together shall constitute the Excluded Assets:
(a) All cash, bank deposits and cash equivalents;
(b) The words and name "Texas Instruments Incorporated" and "TI" or
Seller's monogram, trade names, trademarks, service marks or logos to the extent
the same incorporate the name "Texas Instruments Incorporated" or any variation
or combinations thereof;
(c) All promissory notes as of the Closing Date;
(d) All owned real property, options to acquire real property, real
estate leases and leasehold improvements;
(e) Seller's interest in and to all telephone, telex and telephone
facsimile numbers and other directory listings;
(f) All contracts of insurance;
(g) All Intellectual Property of Seller other than the intellectual
property expressly identified in Section 2.1(e) hereof (the "Retained
Intellectual Property");
(h) Except as provided in the Aversa Operations Framework Agreement,
all assets and properties of Seller located at and used in connection with the
Aversa Operations;
(i) Seller's corporate seal, minute books, charger documents,
corporate stock record books and such other books and records as pertain to the
organization, existence or share capitalization of Seller and duplicate copies
of such records as are necessary to enable Seller to file its
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tax returns and reports as well as any other records or materials relating to
Seller generally and not involving or relating to the Purchased Assets or the
operation of the Operations; and
(j) Assets of the Malaysia Operations except as set forth in the
Malaysia Asset Purchase Agreement.
Section 2.3 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. Subject to the
terms and conditions contained herein, on the Closing Date, Buyer shall assume
and agree thereafter to pay, perform and otherwise discharge as and when the
same shall become due and payable and hold Seller harmless with respect to only
the obligations and liabilities of Seller set forth below (hereinafter referred
to collectively as the "Assumed Liabilities"):
(a) liabilities and obligations arising from product warranty claims
in respect of sales of products by the Operations prior to the Closing, but
excluding warranty claims that in the aggregate exceed the normal warranty
experience (as hereinafter defined) of the Operations;
(b) liabilities and obligations of Seller under the Transferred
Agreements, other than payables (including late fees or penalties, if any) due
under such Transferred Agreements and any monetary obligations pertaining to a
breach of a Transferred Agreement prior to the Closing and subject to Section
2.9;
(c) balance sheet liabilities as reflected on the Final FSAL (as
hereinafter defined).
For purposes of the foregoing paragraph (a), "normal warranty experience"
of the Operations shall mean one-half of one percent (0.5%) of aggregate net
revenues. Buyer's actual product warranty experience shall be determined by
dividing (i) the aggregate net revenues derived from all products of the
Operations sold by Seller prior to the Closing and returned as defective during
the three-month period following the Closing (but excluding all product recalls)
by (ii) the aggregate net revenues of the Operations for the three-month period
preceding the Closing.
Other than as set forth above, Buyer shall assume no liabilities from
Seller whether known or unknown, absolute or contingent, accrued or unaccrued or
due or to come due. Nothing set forth in any third party consents or similar
documents, including, but not limited to, any express assumption of obligations
by Buyer in such consents or documents, shall impact Seller's obligation to
indemnify Buyer with respect to any liabilities which are not Assumed
Liabilities.
Section 2.4 RETAINED LIABILITIES. All debts, liabilities and obligations
arising from the Operations prior to the Closing Date other than the Assumed
Liabilities shall continue after the Closing Date to be the debts, liabilities
and obligations of Seller (collectively, the "Retained Liabilities").
Section 2.5 CONSIDERATION. The consideration for the transfer of the
Purchased Assets relating to the Austin Operations (the "Austin Operations
Purchase Price") shall be the sum of (a) the net book value of the Austin
Operations as reflected on the Final FSAL and (b) [***********]. The
* Confidential Treatment Requested
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consideration for the transfer of the Purchased Assets relating to the Malaysia
Operations (the "Malaysia Operations Purchase Price") shall be the net book
value of the Malaysia Operations as set forth on the Final FSAL (as hereinafter
defined). The Austin Operations Purchase Price, together with the Malaysia
Operations Purchase Price, are referred to herein collectively as the "Purchase
Price."
For the purposes of this Section 2.5, the term "net book value" shall mean
the total assets of the Operations as reflected on the Final FSAL less the total
liabilities as reflected on the Final FSAL.
Section 2.6 ADJUSTMENT OF PURCHASE PRICE.
(a) Within forty-five (45) days of Closing, Seller will prepare and
deliver to Buyer a Final Financial Statement of Assets and Liabilities ("Final
FSAL") extracted from books and records of the Operations reflecting the assets
and liabilities of the Operations as of the Closing Date. The Final FSAL shall
be true, complete and accurate and prepared in a manner consistent with the
Interim Financial Statement of Assets and Liabilities attached hereto as
Exhibit A (the "Interim FSAL") and in accordance with Seller's accounting
policies and practices which are in compliance with GAAP as consistently
applied, and will fairly represent, as of the Closing Date, the Purchased Assets
and the Assumed Liabilities.
(b) In the event the Purchase Price exceeds the Closing Date Payment,
the Buyer shall, not later than five days following delivery to Buyer of the
Final FSAL, deliver to Seller cash in an amount equal to such difference by wire
transfer of immediately available funds to the bank account designated by
Seller. In the event the Closing Date Payment exceeds the Purchase Price, the
Seller shall, not later than five days following delivery to Buyer of the Final
FSAL, deliver to Buyer cash in an amount equal to such difference by wire
transfer of immediately available funds to the bank account designated by Buyer.
Section 2.7 PURCHASE PRICE ALLOCATION. Buyer and Seller agree to consult
with each other with respect to the allocation of the Purchase Price and the
amount of the Assumed Liabilities to the Purchased Assets; provided, however,
that nothing in this Section 2.7 shall be deemed to obligate either Buyer or
Seller to agree on such allocation. Buyer and Seller agree to allocate the
Purchase Price between the Austin Operations and the Malaysia Operations.
Section 2.8 TRANSFER TAXES. All taxes, sales, use, value-added, gross
receipts, excise, registration, stamp duty, transfer or other similar taxes or
governmental fees ("Transfer Taxes") imposed or levied by reason of, in
connection with or attributable to this Agreement and the transactions
contemplated hereby shall be shared equally by Seller and Buyer. The parties
shall cooperate with each other to the extent reasonably requested and legally
permitted to minimize any Transfer Taxes.
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Section 2.9 NONASSIGNABLE CONTRACTS AND PERMITS.
(a) NONASSIGNABILITY. To the extent that any contract to be
assigned pursuant to the terms of Section 2.1(c) is not capable of being
assigned without the consent, approval or waiver of a third person or entity
(including without limitation a governmental or regulatory authority), or if
such assignment or attempted assignment would constitute a breach thereof (each
a "Nonassignable Contract"), or to the extent that the assignment of any such
contract is not practicable because it also relates to an area of Seller's
business other than the Operations (each a "Nonexclusive Contract"), nothing in
this Agreement will constitute an assignment or require the assignment thereof
except to the extent provided in this Section 2.9.
(b) SELLER TO USE REASONABLE EFFORTS. Notwithstanding anything
contained in this Agreement to the contrary, Seller will not be obligated to
assign to Buyer any of its rights and obligations in and to any of the
Nonassignable Contracts without first having obtained all consents, approvals
and waivers necessary for such assignment; provided, however, that Seller shall
use its reasonable efforts to obtain all such consents, approvals and waivers
prior to the Closing and, if the Closing occurs, will use reasonable efforts
after the Closing Date to obtain all such consents, approvals and waivers.
Buyer will cooperate with Seller in Seller's efforts to obtain all required
consents, approvals and waivers. Seller will not be required to incur any
liability or pay any consideration therefor in connection therewith. As to the
Nonexclusive Contracts, Seller shall use reasonable efforts to effect an
assignment of rights with respect to the parts of such Nonexclusive Contract
that relate exclusively to the Operations (if practicable) or, alternatively, to
enter into new agreements with respect to the parts of each Nonexclusive
Contract that relate exclusively to the Operations.
ARTICLE 3
CLOSING
Section 3.1 THE CLOSING. The transactions contemplated by this Agreement
shall be consummated (the "Closing") at the offices of Wilson, Sonsini,
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, at 11:59
p.m., local time, on March 31, 1996, or such other place, time and date as the
parties shall agree in writing. The time and date on which the Closing is
actually held is sometimes referred to herein as the "Closing Date."
Section 3.2 PAYMENT.
(a) CLOSING DATE PAYMENTS. Subject to fulfillment or waiver of
the conditions set forth in Article 8 below, on March 29, 1996, Buyer shall pay
Seller $120,000,000 (the "Closing Date Payment"), less an amount equal to 5 1/2%
per annum of the Closing Date Payment from and including March 29, 1996 to and
including March 31, 1996, by wire transfer of immediately available funds to the
bank account designated by Seller. The Closing Date Payment shall be applied to
the payment of the Purchase Price effective as of the Closing Date.
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Section 3.3 BUYER'S ADDITIONAL DELIVERIES. Subject to fulfillment or
waiver of the conditions set forth in Article 8, at Closing Buyer shall deliver
to Seller all of the following:
(a) Certificate of the secretary or an assistant secretary of
Buyer, dated March 29, 1996, in form and substance reasonably satisfactory to
Seller, as to the resolutions of the Board of Directors of Buyer authorizing the
execution and performance of this Agreement by Buyer and the contemplated
transactions;
(b) Certificate of the secretary or an assistant secretary of
Solectron, dated March 29, 1996, in form and substance reasonably satisfactory
to Seller, as to the resolutions of the Board of Directors of Solectron
authorizing the execution and performance of this Agreement by Solectron and the
contemplated transactions;
(c) The Instrument of Assignment and Assumption relating to the
Austin Operations duly executed by Buyer;
(d) The certificate contemplated by Section 9.1 below, duly
executed by an authorized employee of each of Buyer and Solectron;
(e) The Lease Agreement duly executed by Buyer;
(f) The Master Services Agreement duly executed by Buyer;
(g) The Aversa Operations Framework Agreement duly executed by
Solectron;
(h) The [**********************] Agreement duly executed by
Solectron;
(i) The Malaysia Asset Purchase Agreement duly executed by
Solectron Technology Sdn. Bhd.;
(j) The Malaysia Subcontract Agreement duly executed by
Solectron Technology Sdn. Bhd.;
(k) The Manufacturing Services Framework Agreement duly executed
by Solectron; and
(l) The System License and System Conversion Agreement duly
executed by Buyer.
Section 3.4 SELLER'S DELIVERIES. Subject to fulfillment or waiver of the
conditions set forth in Article 9, at Closing Seller shall deliver to Buyer all
of the following:
* Confidential Treatment Requested
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(a) Certificate of the secretary or an assistant secretary of
Seller, dated March 29, 1996, in form and substance reasonably satisfactory to
Buyer, as to the resolutions of the Board of Directors of Seller authorizing the
execution and performance of this Agreement and the contemplated transactions;
(b) The Instrument of Assignment and Assumption relating to the
Austin Operations duly executed by Seller;
(c) Certificates of title or origin (or like documents) with
respect to any vehicles or other equipment included in the Purchased Assets for
which a certificate of title or origin is required in order to transfer title;
(d) All consents, waivers or approvals required to be obtained
by Seller with respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(e) The certificates contemplated by Section 8.1 below, duly
executed by Marvin S. Self, Senior Vice President, Systems & Software
Businesses, of Seller or such other authorized employee of Seller as agreed to
by Buyer and Solectron.
(f) Such other bills of sale, assignments and other instruments
of transfer or conveyance as Buyer may reasonably request or as may be otherwise
necessary to evidence and effect the sale, assignment, transfer, conveyance and
delivery of the Purchased Assets to Buyer;
(g) The Lease Agreement duly executed by Seller;
(h) The Master Services Agreement duly executed by Seller;
(i) The Aversa Operations Framework Agreement duly executed by
Seller;
(j) The [**********************] Agreement duly executed by
Seller;
(k) The Malaysia Asset Purchase Agreement duly executed by Texas
Instruments Electronic Systems Sdn. Bhd.;
(l) The Manufacturing Services Framework Agreement duly executed
by Seller;
(m) The Malaysia Subcontract Agreement duly executed by Texas
Instruments Electronic Systems Sdn. Bhd.; and
(n) The System License and System Conversion Agreement duly
executed by Seller.
* Confidential Treatment Requested
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, except as set forth in Schedule 4 (the
"Disclosure Letter") (which Disclosure Letter shall specifically reference the
Sections of this Agreement to which the disclosure therein applies and shall be
executed by an authorized manager of Seller), Seller represents and warrants to
Buyer as follows:
Section 4.1 ORGANIZATION OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller is duly qualified to transact business as a foreign
corporation and is in good standing in each of the jurisdictions in which the
ownership or leasing of the Purchased Assets or the conduct of the Operations
requires such qualification. Seller has full power and authority to own or
lease and to operate and use the Purchased Assets and to carry on the Operations
as now conducted.
Section 4.2 AUTHORIZATION. Seller has full power and authority to
execute, deliver and perform this Agreement and all of the Additional Agreements
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the Additional
Agreements by Seller have been duly and validly authorized and approved by all
required corporate proceedings on the part of Seller. This Agreement has been,
and the Additional Agreements, upon execution and delivery, will be duly
authorized, executed and delivered by Seller and is or upon execution and
delivery will be, as the case may be, the legal, valid and binding obligation of
Seller enforceable in accordance with its terms, except (a) as such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights, and
(b) as the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Except as set forth in Section 4.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement or any of the Additional Agreements or
the consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will: (i) violate, conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any Encumbrance upon
any of the Purchased Assets under (1) the Certificate of Incorporation or Bylaws
of Seller, (2) any other note, instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right, restriction or obligation to
which Seller is a party or any of its properties is subject or by which Seller
is bound, (3) any Court Order to which Seller is a party or any of its
properties is subject or by which Seller or any of its properties is bound, or
(4) any Requirements of Laws affecting Seller or its property; or (ii) require
the approval, consent, authorization or act of, or the making by Seller of any
declaration, filing or registration with, any Person.
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Section 4.3 TAXES. To the extent that, in Seller's reasonable
expectation, a failure to do so would adversely affect Buyer or Buyer's use of
the Purchased Assets, Seller has filed all Tax Returns which it is required to
file for any period ending on or prior to the Closing Date and has paid all
Taxes which it is required to pay or which have become payable pursuant to any
assessment. There are (and as of immediately following the Closing there will
be) no Encumbrances on the Purchased Assets relating to or attributable to Taxes
other than Permitted Encumbrances. Seller has no knowledge of any basis for the
assertion of any such claims which, if adversely determined, would result in an
Encumbrance on the Purchased Assets, other than Permitted Encumbrances, or
otherwise adversely affect Buyer or Buyer's use of the Purchased Assets. None
of the Purchased Assets are treated as "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
Section 4.4 CONDITION OF ASSETS. Except as set forth in Section 4.4 of
the Disclosure Letter, the Purchased Assets are in reasonably good condition and
repair (subject to normal wear and tear) and serviceable condition and are
suitable for the uses to which they are being put or would be put in the
ordinary course of business of the Operations consistent with established
industry standards.
Section 4.5 GOVERNMENTAL PERMITS. Seller owns, holds or possesses all
material licenses, franchises, permits, privileges, immunities, approvals and
other authorizations from a Governmental Body which are necessary to entitle it
to own or lease, operate and use the Purchased Assets and to carry on and
conduct the Operations substantially as currently conducted (collectively, the
"Governmental Permits"). Section 4.5 of the Disclosure Letter sets forth a list
and brief description of each Governmental Permit, except for such incidental
licenses, permits and other authorizations which would be readily obtainable by
any qualified applicant without undue burden in the event of any lapse,
termination, cancellation or forfeiture thereof. The Governmental Permits to be
transferred to Buyer in connection with the transactions contemplated hereby (as
indicated in Section 4.5 of the Disclosure Letter), are collectively referred to
herein as the "Transferred Permits." Complete and correct copies of all of the
Transferred Permits have heretofore been delivered or will be delivered prior to
the Closing Date to Buyer by Seller.
Except as set forth in Section 4.5 of the Disclosure Letter (i) Seller has
fulfilled and performed in all material respects its obligations under each of
the Transferred Permits, and to its knowledge, no event has occurred or
condition or state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute a breach or default or violation under any
such Transferred Permit or which permits or, after notice or lapse of time or
both, would permit revocation or termination of any such Transferred Permit, or
which might adversely affect in any material respect the rights of Seller under
any such Transferred Permit; (ii) no notice of cancellation, of default, of
violation or of any material dispute concerning any Transferred Permit, or of
any event, condition or state of facts described in the preceding clause, has
been received by, or is known to, Seller; and (iii) each of the Transferred
Permits is valid, subsisting and in full force and effect and may be assigned
and transferred to Buyer in accordance with this Agreement and will continue in
full force and effect thereafter, in each case without (a) the occurrence of any
breach, default or forfeiture of rights thereunder, or (b) the consent,
approval, or act of, or the making of any filing with, any Governmental Body.
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Section 4.6 TITLE TO TANGIBLE PROPERTY. Seller has good and indefeasible
title to all of the Purchased Assets, free and clear of all Encumbrances, except
for Permitted Encumbrances. Except as disclosed in Section 4.6 of the
Disclosure Letter, and except for those assets which the Buyer will use
subsequent to the Closing Date pursuant to the Master Services Agreement, the
Purchased Assets constitute all of the assets which are reasonably necessary for
the continued conduct of the Operations as now conducted and the Purchased
Assets are all located at the Operations. Upon delivery to Buyer on the Closing
Date of the instruments of transfer contemplated by Section 3.4 above, Seller
will thereby transfer to Buyer good and indefeasible title to the Purchased
Assets, subject to no Encumbrances, except for Permitted Encumbrances.
Section 4.7 INTELLECTUAL PROPERTY.
(a) To the knowledge of Seller, the operation or conduct of the
Operations as they currently are operated or conducted does not infringe or
otherwise violate any Intellectual Property right of any third party.
(b) Except as set forth in Section 4.7 of the Disclosure Letter,
there are no pending actions, and no person has made or threatened to make, a
claim that the operation of the Operations infringes or otherwise violates the
Intellectual Property rights of such person.
Section 4.8 EMPLOYEES.
(a) Each "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA), and each other plan, program or arrangement, whether
written or oral ("benefit arrangement"), providing for compensation or benefits
in connection with the performance of services to Seller and maintained by
Seller with respect to employees of the Austin Operations has been identified in
Schedule 4.8, and copies or descriptions of each such employee benefit plan or
benefit arrangement has been delivered to or made available to Buyer, together
with the most recent determination letter in the case of any pension benefit
plan as defined in Section 3(2) of ERISA. Buyer will not have, as a consequence
of the transactions contemplated hereby, any liability or obligation with
respect to or under any employee benefit plan or with respect to or under any
benefit arrangement maintained by Seller or Seller Group Member with respect to
employees of the Austin Operations or any other employees of Seller or any
Seller Group Member. Seller has complied with the health care continuation
requirements of Section 601 ET SEQ. of ERISA (COBRA) with respect to employees
of the Operations and their spouses, former spouses and dependents.
(b) Each employee benefit plan and benefit arrangement
maintained by Seller with respect to employees of the Austin Operations have
been maintained and administered at all times substantially in compliance with
its terms and all applicable laws, rules and regulations, including but not
limited to ERISA and the Code, applicable to such employee benefit plan or
benefit arrangement.
(c) Schedule 4.8(c) contains: (i) a list of all Regular
Personnel as of January 24, 1996; (ii) the then current base salary rate (as
defined in Section 7.1(a) below) provided by Seller to
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such employees; and (iii) a list of any increase presently scheduled (including
the effective date thereof) in the rate of compensation of any such employees.
(d) Insofar as it pertains to the Austin Operations, the Seller
is not a party to or bound by any union contract and has not experienced any
strike, grievance or any arbitration proceeding, claim of unfair labor practices
filed or, to Seller's actual knowledge, threatened to be filed or any other
material labor difficulty. To the actual knowledge of the Seller, no
organizational effort is being or has been made or threatened by or on behalf of
any labor union with respect to any employees of the Seller.
Section 4.9 CONTRACTS. Set forth on SCHEDULE 4.9 is a list of each supply
and customer contract and each material agreement, arrangement, commitment,
license or other instrument, written or oral, relating to the Operations to
which Seller is a party or by which Seller, the Purchased Assets or the
Operations may be bound or affected. Such agreements, arrangements,
commitments, and other instruments are valid, legal and binding obligations of
the respective parties thereto (assuming that such instruments are binding on
all parties thereto other than the Seller; the Seller has no knowledge to the
contrary); and no defenses, offsets, or counterclaims thereto have been
asserted, or, to Seller's knowledge, may be made by any party thereto. Seller
has not received notice of any default under any of such instruments. To
Seller's knowledge, there are no existing defaults or events or default, real or
claimed, or events which with notice or lapse of time or both would constitute
defaults, the consequences of which, severally or in the aggregate, would have a
material adverse effect on the Operations. Except as indicated in Section 4.9
to the Disclosure Letter, to Seller's knowledge, there exists no actual or
threatened termination, cancellation, or limitation of, or any amendment,
modification, or change to any contract, which would have a material adverse
effect on the Operations.
Seller is neither renegotiating any of the Transferred Agreements nor is it
paying liquidated damages in lieu of performance thereunder. Except as set
forth in Section 4.9 of the Disclosure Letter, any such Transferred Agreements
may be transferred to Buyer pursuant to this Agreement and will continue in full
force and effect thereafter, in each case without breaching the terms thereof or
resulting in the forfeiture or impairment of any rights thereunder and without
the consent, approval or act of, or the making of any filing with, any other
party. Complete and correct copies of each of the written Transferred
Agreements have heretofore been delivered to Buyer by Seller.
Section 4.10 NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
forth in Section 4.10 of the Disclosure Letter, to Seller's knowledge (i) the
Purchased Assets and their uses comply in all material respects with all
applicable Requirements of Laws and Court Orders; (ii) Seller has complied in
all material respects with all Requirements of Laws and Court Orders which are
applicable to the Purchased Assets or the Austin Operations; (iii) there are no
lawsuits, claims, suits, proceedings or investigations pending or threatened
against or affecting Seller in respect of the Purchased Assets or the Austin
Operations, and there are no lawsuits, suits or proceedings pending in which
Seller is the plaintiff or claimant and which relate to the Purchased Assets or
the Austin Operations; and (iv) there is no action, suit or proceeding pending
or threatened which questions the legality of the transactions contemplated by
this Agreement.
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Section 4.11 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.11
of the Disclosure Letter: (i) the operations of the Austin Operations comply in
all material respects with all applicable Environmental Laws; (ii) Seller has,
in respect of the Austin Operations, obtained all environmental, health and
safety Governmental Permits necessary for its operation or required by any
Environmental Laws, and all such Governmental Permits are in good standing and
Seller is in compliance in all material respects with all terms and conditions
of such permits; (iii) to the knowledge of Seller in respect of the Austin
Operations, neither Seller nor any of the present Seller Property or the Austin
Operations, or the past Seller Property or the Austin Operations, is subject to
any pending or ongoing investigation by, notice or order from or agreement with
any Person (including, without limitation, any prior owner or operator of Seller
Property) respecting (a) any Environmental Law, (b) any Remediation Activities
or (c) any claim of Losses and Expenses arising from the Release or threatened
Release of a Hazardous Material; (iv) to the knowledge of Seller, Seller is not,
with respect to the Austin Operations, subject to any pending or existing
judicial or administrative proceeding, Court Order or settlement alleging or
addressing a violation of or liability under any Environmental Law; (v) Seller
has not, with respect to the Austin Operations, filed or does not intend to file
any notice or report under any Environmental Law reporting a violation of any
Environmental Law, which violation has not been fully resolved to the
satisfaction of the applicable governing body or entity; (vi) to the knowledge
of Seller, there is not now, nor has there ever been, on or in any Seller
Property: (a) any underground storage tank or surface impoundment; or (b) any
landfill or waste pile which either is or was used in a frequent manner to
dispose or store any Hazardous Material or contained or contains a substantial
volume of Hazardous Material; or (c) any polychlorinated biphenyls (PCB);
(vii) Seller has not received any notice or claim to the effect that it is or
may be liable to any Person as a result of the Release or threatened Release of
a Hazardous Material into the environment from or on any Seller Property or with
respect to the Austin Operations which has not been withdrawn or settled;
(viii) no Environmental Encumbrance has attached to any Seller Property;
(ix) any asbestos-containing material which is on or part of any Seller Property
(excluding any raw materials used in the manufacture of products or products
themselves) is in good repair according to the current standards and practices
governing such material, and its presence or condition does not violate any
applicable Environmental Law; (x) to the knowledge of Seller, none of the
products Seller manufacturers, distributes or sells in connection with the
Austin Operations, contains asbestos-containing material; (xi) to the knowledge
of Seller other than Hazardous Materials reasonably necessary for the conduct of
the Austin Operations of Seller and other activities of the Seller at its
retained facilities on the Seller's Property which are properly stored in
accordance with applicable Environmental Laws, no Hazardous Material is present
on Seller Property and to the knowledge of the Seller, no reasonable likelihood
exists that any Hazardous Material present on other property will come to be
present on Seller Property; (xii) all Hazardous Materials Activities associated
with the Austin Operations and/or Seller Property have been conducted in
compliance with applicable Environmental Laws except any deviations which have
been corrected; (xiii) no Court Order, action, proceeding, liability or claim
exists or, to the best knowledge of Seller is threatened, against any Disposal
Facility or against Seller, with respect to any transfer, storage or disposal or
release of Hazardous Materials generated by Seller to a Disposal Facility and to
the knowledge of the Seller, there is no valid basis for such claim; (xiv) in
respect of the Austin Operations and/or Seller's Property, Seller is not aware
of any fact or circumstance, which could involve Seller in any environmental
litigation or impose upon Seller any material environmental liability; (xv)
Seller has
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delivered to Buyer or made available for inspections by Buyer and its agents and
employees all records pertaining to Hazardous Materials Activities and all non-
privileged environmental audits and environmental assessments of any Seller
Property conducted at the request of, or otherwise available to, Seller and with
respect to privileged environmental audits and environmental assessments, Seller
has delivered to Buyer complete information, including redacted summaries,
findings and/or conclusions, disclosed by such privileged audits and
assessments; and (xvi) Seller has complied with all environmental disclosure
obligations imposed upon Seller with respect to this transaction by applicable
law.
Section 4.12 FINANCIAL DATA. Seller has provided to Buyer certain
information regarding the historical expenses and revenues of the Operations.
To Seller's knowledge, such historical information does not contain any material
inaccuracies or misstatements. Financial projections, if any, were prepared
based on the judgment of the management of the Operations. Seller makes no
representation or warranty as to the accuracy of any such financial projections.
Section 4.13 STATEMENT OF ASSETS AND LIABILITIES; FINANCIAL
STATEMENTS. The Interim FSAL is true, complete and accurate, has been prepared
in accordance with Seller's accounting policies and practices which are in
compliance with GAAP as consistently applied and fairly presents as of December
31, 1995 the financial condition of the Operations and the Purchased Assets and
Assumed Liabilities.
Section 4.14 NO FINDER. Neither Seller nor any Person acting on its
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement.
Section 4.15 DISCLOSURE. None of the representations or warranties of
Seller contained herein, none of the information contained in the Schedules
hereto or the Disclosure Letter contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in which they
were made, not misleading.
Section 4.16 KNOWLEDGE. As used in this Article 4, the terms "to
Seller's knowledge" and "to the knowledge of the Seller" and phrases of similar
import shall mean the actual knowledge of the persons listed on Schedule 4.16.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, each of Buyer and Solectron, as the case
may be, hereby represents and warrants to Seller and agrees as follows:
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Section 5.1 ORGANIZATION OF BUYER. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to transact business in each of the jurisdictions in
which the ownership or leasing of the Purchased Assets or the conduct of the
Operations pursuant to this Agreement requires such qualification, and has full
corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted pursuant to this Agreement.
Section 5.2 AUTHORITY OF BUYER AND SOLECTRON. Buyer has full power and
authority to execute, deliver and perform all of the Additional Agreements and
to consummate the transactions contemplated thereby, and each of Buyer and
Solectron has full power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of the Additional Agreements by Buyer have
been duly authorized and approved by the board of directors of Buyer, and do not
require any further authorization or consent of Buyer or its stockholders. The
execution, delivery and performance of this Agreement by each of Buyer and
Solectron have been duly authorized and approved by the boards of directors of
Buyer and Solectron, respectively, and do not require any further authorization
or consent of Buyer or Solectron or their respective stockholders. This
Agreement has been duly authorized, executed and delivered by each of Buyer and
Solectron and is the legal, valid and binding agreement of each of Buyer and
Solectron enforceable in accordance with its terms, and each of the Additional
Agreements have been duly authorized by Buyer and upon execution and delivery by
Buyer will be a legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
Neither the execution and delivery of this Agreement or any of the
Additional Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will: (i) violate, conflict with,
result in a breach of the terms, conditions or provisions of, or constitute a
default, an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under (1) the organizational
documents of Buyer, (2) any material note, instrument, agreement, mortgage,
lease, license, franchise, permit or other authorization, right, restriction or
obligation to which Buyer or Solectron is a party or any of its properties is
subject or by which Buyer or Solectron is bound, (3) any Court Order to which
Buyer is a party or by which it is bound or (4) any Requirements of Laws
affecting Buyer; or (ii) require the approval, consent, authorization or act of,
or the making by Buyer or Buyer Group Member of any declaration, filing or
registration with, any Person, including, without limitation, obtaining any
Governmental Permit other than those Governmental Permits listed in Section 4.5
of the Disclosure Letter.
Section 5.3 NO FINDER. Neither Buyer nor any Person acting on its behalf
has paid or become obligated to pay any fee or commission to any broker, finder
or intermediary for or on account of the transactions contemplated by this
Agreement.
Section 5.4 CASH CONSIDERATION. Buyer will, at the Closing, have
available sufficient cash to enable it to perform its obligations under this
Agreement.
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ARTICLE 6
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing.
Section 6.1 INVESTIGATION OF THE OPERATIONS BY BUYER. Prior to the
Closing, upon reasonable advance notice by Buyer to Seller, Seller shall afford
to the officers, employees and authorized representatives of Buyer (including,
without limitation, independent public accountants and attorneys) reasonable
access during normal business hours to the offices, properties, employees and
business and financial records (including computer files, retrieval programs and
similar documentation) of Seller with respect to the Operations and shall
furnish to Buyer or its authorized representatives such additional information
concerning the Purchased Assets and the Operations as shall be reasonably
requested, including all such information as shall be reasonably necessary to
enable Buyer or its representatives to verify the accuracy of the
representations and warranties contained in this Agreement, to verify that the
covenants of Seller contained in this Agreement have been complied with and to
determine whether the conditions set forth in Article 8 have been satisfied.
Such investigation shall be conducted in such a manner as not to interfere
unreasonably with the Operations, and Seller shall have no duty hereunder to
provide access to Seller to any information as to which Seller owes any third
party a duty of confidentiality without such third party's prior written
consent. No investigation made by Buyer or its representatives hereunder shall
affect the representations and warranties of Seller.
Section 6.2 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of
the parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Article 4 or 5 of this Agreement not to
be true and correct in all material respects as of the Closing Date. Each party
shall promptly notify the other of any action, suit or proceeding that shall be
instituted or threatened against such party to restrain, prohibit or otherwise
challenge the legality of any transaction contemplated by this Agreement.
Seller shall promptly notify Buyer of any lawsuit, claim, proceeding or
investigation that is threatened, brought, asserted or commenced against Seller
which would have been listed in Section 4.10 of the Disclosure Letter if such
lawsuit, claim, proceeding or investigation had arisen prior to the date hereof.
Section 6.3 GOVERNMENTAL APPROVALS. During the period prior to the
Closing, Seller and Buyer shall use commercially reasonable efforts, and shall
cooperate with each other, to secure any consents and approvals of any
Governmental Body required to be obtained by them in order to assign or transfer
any Transferred Permits to Buyer to permit the consummation of the transactions
contemplated by this Agreement, or to otherwise satisfy the conditions set forth
in Sections 8.3 and 9.3; PROVIDED that Seller shall not make any agreement or
understanding affecting the Purchased Assets or the Operations as a condition
for obtaining any such consents or approvals except with the prior written
consent of Buyer, which such consent shall not be unreasonably withheld.
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Section 6.4 UPDATE TO DISCLOSURE. Without limiting either party's right
to rely on the representations and warranties as set forth herein, each of Buyer
and Solectron and Seller shall provide the other party with updates to the
disclosures provided or made available to the other party as to material facts
which arise between the date of this Agreement and the Closing Date and which,
if they had occurred and been known prior to the date of this Agreement, would
have been required to have been disclosed in order to make the representations
and warranties contained in Articles 4 and 5 true and correct as of the date of
this Agreement. In addition, (i) Buyer and Solectron shall provide Seller with
updates if, between the date hereof and the Closing Date, there is a change in
the condition (financial or otherwise), business, prospects, employees,
operations, obligations or liabilities of Buyer which, in the aggregate, have or
may be reasonably expected to have a materially adverse effect on the condition
(financial or otherwise), business, prospects or results of operations of Buyer
and its subsidiaries on a consolidated basis and (ii) Seller shall provide Buyer
and Solectron with updates if, between the date hereof and the Closing Date,
there is a change in the Purchased Assets or any change in the condition
(financial or otherwise), business, prospects, employees, operations,
obligations or liabilities of the Operations which, in the aggregate, have or
may be reasonably expected to have a materially adverse effect on the condition
(financial or otherwise), business, prospects or results of operations of the
Operations. The foregoing updates to the Disclosure Letter and the
representations of Buyer and Solectron hereunder shall be deemed to qualify the
representations contained herein for all purposes other than Sections 8.1 and
9.1 hereof.
Section 6.5 OPERATIONS PRIOR TO THE CLOSING.
(a) Except as expressly contemplated by this Agreement, (i) Seller
shall operate and carry on the Operations only in the ordinary course and
substantially as presently operated; (ii) Seller shall keep and maintain the
Purchased Assets in reasonably good operating condition and repair and, except
to the extent specifically agreed to in writing by Buyer, shall use commercially
reasonable efforts to maintain the business organization of the Operations
intact and to preserve the goodwill of the suppliers, contractors, employees,
customers and others having business relations with the Operations, and
(iii) Seller shall not (A) transfer or cause to be transferred from or to Seller
any Regular Personnel without the knowledge of the Buyer, except for voluntary
transfers requested by any Regular Personnel, or (B) otherwise attempt to
persuade any Regular Personnel to terminate his or her relationship with the
Operations.
(b) In furtherance of the foregoing subsection, and without
limitation thereof, except as expressly contemplated by this Agreement or except
with the express written approval of Buyer, Seller shall (i) use the Purchased
Assets in the usual, regular and ordinary course and in substantially the same
manner as heretofore used, (ii) continue to make payments when due and not slow
down those payments as compared to its normal payment procedures and to perform
its obligations under the leases, contracts, commitments and other agreements
included in the Purchased Assets, (iii) maintain insurance against loss or
damage to the Purchased Assets and such other insurance with respect to the
Purchased Assets as has heretofore been maintained, (iv) not sell, dispose of or
encumber or enter into any agreement for the sale, disposition or encumbrance
of, all or any part of the Purchased Assets, except for the sale of Inventory in
the ordinary course of business, (v) with respect to any employee who is or
would thereby become Regular Personnel, not enter into
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any employment contract or, except in the ordinary course of business, increase
any such employee's compensation or benefits, and (vi) not enter into any
contracts or commitments not in the ordinary course of business or involving
receipt or payment of more than $100,000.
Section 6.6 NOTIFICATION BY SELLER OF CERTAIN MATTERS. Subject to the
applicable confidentiality provisions of this Agreement, during the period prior
to the Closing, Seller will as promptly as reasonably possible under the
circumstances advise Buyer in writing of (a) any notice or other communication
from any third Person alleging that the consent of such third Person is or may
be required in connection with the transactions contemplated by this Agreement,
(b) any material change in any representation or warranty contained in Article 4
of this Agreement, and (c) any material default under any Transferred Agreement
or Governmental Permit or event which, with notice or lapse of time or both,
would become such a default on or prior to the Closing Date and of which Seller
has knowledge.
Section 6.7 CONFIDENTIALITY.
(a) Buyer and Solectron agrees that, unless and until each and every
one of the transactions contemplated hereby shall have been consummated, it and
its representatives will hold in strict confidence all information and documents
received from Seller concerning the Purchased Assets and the Operations, and
Buyer and Solectron will not use any such information and documents for any
purpose other than in connection with the transactions contemplated hereby. If
the transactions herein contemplated are not consummated, Buyer and Solectron
will continue to hold such information and documents in strict confidence and,
upon receipt of notice requesting such action, will return to Seller all such
documents then in Buyer's or Solectron's possession without retaining copies
thereof; PROVIDED, HOWEVER, that Buyer's and Solectron's obligations to maintain
such confidentiality shall not apply to any information or documents that are
required by applicable law or the terms of this Agreement to be disclosed, that
are in the public domain at the time furnished, or that become in the public
domain thereafter through any means other than as a result of any act of Buyer
or Solectron, its respective agents, officers, directors, or shareholders which
constitutes a breach of this Agreement.
(b) Seller agrees that, after the Closing, it and its representatives
will hold in strict confidence all information concerning the Purchased Assets
and the Operations and all information provided by Buyer or Solectron to Seller
under the terms of this Agreement and will not use such information except in
furtherance of its continuing business relationships with Buyer and Solectron.
If the transactions herein contemplated are not consummated, Seller will
continue to hold such information in strict confidence; PROVIDED, HOWEVER, that
Seller's obligations hereunder shall not apply to any information or documents
that are required by applicable law or the terms of this Agreement to be
disclosed, that are in the public domain at the time furnished, or that become
in the public domain thereafter through any means other than as a result of any
act of Seller, its agents, officers, directors, or stockholders which
constitutes a breach of this Agreement.
Section 6.8 HSR ACT APPROVALS. Promptly following the execution of this
Agreement, Seller and Buyer shall each file a Premerger Notification and Report
Form and all documentary attachments
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thereto to be filed with the United States Federal Trade Commission (the "FTC")
and the Antitrust Division of the United States Department of Justice (the
"DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act").
Buyer shall pay all filing fees required by the HSR Act in connection with the
transactions contemplated by this Agreement. Seller and Buyer shall file any
additional information requested by the FTC or the DOJ in connection with this
Agreement or the transactions contemplated hereby as soon as practicable after
receipt of any request for such information. Neither Seller nor Buyer shall
unreasonably take or fail to take any action which reasonably could be expected
to have the effect of delaying, impairing or impeding the receipt of approval
under the HSR Act as contemplated by this Section 6.8, provided, however, that
this sentence shall not be construed to require either party to transfer or
assign rights or other assets to a third party.
Section 6.9 PREPARATION OF FINANCIALS. The parties acknowledge that
financial statements have never been prepared and are not currently available
for the Operations. Buyer has advised Seller of the form and content of the
audited and unaudited historical financial statements and other financial data
of the Operations required by Buyer to comply with its filing obligations with
the SEC under the rules and regulations of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including Regulation S-X) in connection with
the consummation of the transactions contemplated hereby (the "Financial
Statements"). Seller shall cause the Financial Statements to be prepared and
delivered to Buyer as soon as practicable with a view to enabling Buyer to
timely file the Financial Statements with the SEC. The Financial Statements
will conform to the requirements of the Exchange Act as set forth in the notice
of Buyer. Seller shall pay all fees and expenses of Ernst & Young, LLP in
connection with the preparation of the Financial Statements.
ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.1 EMPLOYMENT MATTERS.
(a) At or prior to Closing, Buyer will offer employment to all
individuals who are Regular Personnel and Other Personnel (such employment to be
deemed to become effective at 11:59 p.m. Central Standard Time on March 31, 1996
(the "New Employment Start Date") and to be contingent upon the consummation of
the transactions contemplated by this Agreement). Employment will be offered
beginning on the New Employment Start Date at base salary rates equal to at
least the current base salary rates as of February 1, 1996 set forth in
Schedule 4.8(c) hereto. Employees who are on authorized paid or FMLA leave at
the time of the closing will be offered employment upon their return in
accordance with Seller's leave of absence policy. The New Employment Start Date
for such Regular Personnel and Other Personnel shall commence at 11:59 p.m.
Central Standard Time of the day of their return. For all purposes of this
Agreement, the term "base salary rate" shall refer to base salary or wage and
shall not include overtime, bonuses, shift premiums or any other amounts over
and above base salary or base wage.
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(b) Seller shall terminate all Regular Personnel and Other Personnel
as of the Closing Date, such termination to be deemed effective as of 11:59 p.m.
Central Standard Time on March 31, 1996. Seller agrees that all Regular
Personnel and Other Personnel will complete their workdays prior to 11:59 p.m.
Central Standard Time on March 31, 1996. Effective as of 11:59 p.m. Central
Standard Time on March 31, 1996, Buyer will hire, on an "at will" basis and
subject to Buyer's terms, conditions and policies of employment, if any, each of
the Regular Personnel and Other Personnel who are terminated by Seller on the
Closing Date pursuant to the foregoing sentence. Buyer agrees not to
unilaterally reduce the base salary rate of any such employee for a period of
two (2) years from the Closing Date except for performance reasons or
significant changes in job responsibilities in accordance with Buyer's normal
review procedures. Buyer reserves the right to redefine job content or position
description of any employee. Nothing contained in this Section 7.1 is intended
or shall be deemed to (a) require Buyer to employ such persons for any fixed or
predetermined time, or (b) confer upon any employee of Seller, past, present, or
future, any rights of employment of any nature, it being understood and agreed
that the provisions of this Section 7.1 are intended to set forth an agreement
among Buyer and Seller, and are not intended to benefit any persons not party to
this Agreement, including such employees.
(c) From the date hereof to the Closing Date, Seller agrees to use
reasonable efforts to assist Buyer in identifying, recruiting and hiring Regular
Personnel and Other Personnel to establish operations substantially comparable
to the Austin Operations as of the Closing Date; provided, however, that Seller
shall have no obligation to interview personnel on Buyer's behalf.
(d) Buyer shall pay to New Regular Personnel who remain continuously
employed by Buyer for a twelve (12) month period beginning on the New Employment
Start Date a retention bonus in an amount equal to one month of such New Regular
Personnel's annualized earnings based upon his or her base salary rate as of
February 1, 1996 as shown on Schedule 4.8(c) hereto. Seller shall reimburse
Buyer for the cost of such retention bonuses, which shall be paid within
three(3) business days following any such payments, or as soon as practicable
thereafter. Buyer shall also pay to New Regular Personnel who remain
continuously employed by Buyer on the first and second anniversary of this
Agreement and who as of Closing (1) had completed fifteen (15) full years of
service with Seller and (2) had not attained age fifty (50), service awards in
an amount equal to one-half of one percent (0.5%) of such New Regular
Personnel's annualized earnings based upon his or her base salary rate as of
February 1, 1996 as shown on Schedule 4.8(c) hereto multiplied by the number of
full years of service completed by such New Regular Personnel. Seller shall
reimburse Buyer the amount of the service awards within three (3) business days
following payments.
(e) Buyer will provide to all Regular Personnel and Other Personnel
who accept Buyer's offer of employment extended pursuant to Section 7.1(a)
above, employee benefits equivalent to such benefits provided generally to all
employees of Buyer. Such employees shall not receive credit for employment
service with Seller through the New Employment Start Date for purposes of
determining eligibility for participation and determining such employee's
interests under any employee benefit plans of Buyer. Medical coverage insurance
provided by Buyer for such employees and their covered dependents will not
include exclusions for pre-existing conditions, nor will insurance physicals be
required. Buyer reserves the right, in its sole discretion, to change elements
of the
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employment benefits provided its employees, including any New Regular Personnel
hired pursuant to this Section 7.1.
(f) (1) New Regular Personnel shall be employed subject to Buyer's
customary employment, compensation and benefit policies, including, but not
limited to, bonus policies, overtime, shift premium, paid time off, other
similar policies, and, except as provided in (2) below, vacation pay policies.
(2) New Regular Personnel shall accrue vacation pay under
Buyer's vacation pay policy, except, in addition to vacation accrued in
accordance with Buyer's policy, New Regular Personnel who, under Seller's
vacation policy in effect prior to January 1, 1996 would have accrued three (3)
weeks vacation per year with Seller (at the time of the Closing), shall have one
(1) weeks vacation credited to their vacation account on the New Employment
Start Date, and one (1) weeks additional vacation credited to their vacation
account at the one (1) year anniversary of their New Employment Start Date,
provided that such employee has been continuously employed by Buyer during that
period. New Regular Personnel who, under Seller's vacation policy in effect
prior to January 1, 1996 would have accrued four (4) weeks vacation per year
with Seller (at the time of the Closing), shall have two (2) weeks additional
vacation pay credited to their vacation date at the time of their New Employment
Start Date, and on the one (1) year anniversary thereof, provided they are
continuously employed by Buyer during that period. Thereafter, all New Regular
Personnel will be credited vacation pay solely in accordance with Buyer's
vacation pay policy.
(3) Seller shall be responsible after the Closing for the COBRA
continuation coverage of all dependents and former spouses of Regular Personnel
and Other Personnel who elect or become entitled (because of the occurrence of a
qualified event) to elect such coverage prior to the Closing. Seller shall
offer medical and dental continuation coverage under its health benefit plan
("Seller's Health Plan") to all New Regular Personnel and their dependents
pursuant to the provisions of COBRA.
During the period that COBRA continuation coverage is in
effect, Buyer shall collect and transmit to Seller's Health Plan at least
monthly, the applicable COBRA premium for each Qualified Beneficiary.
(4) Seller shall amend the TI Employees Pension Plan so as to
provide that effective upon their employment with Buyer, New Regular Personnel
shall continue to accrue credited service for vesting (as such term is defined
in the TI Employees Pension Plan) until the first to occur of the termination of
their employment with Buyer, the day the employee first satisfies the
requirements for Early Retirement, or the fifth anniversary of their becoming
New Regular Personnel. Seller shall further amend the TI Employees Pension Plan
effective prior to Closing, to credit employees of the Operations who have
attained age fifty (50) and who have at least fifteen (15) full years of
service, but who have not met the service requirement for an early retirement
benefit under the TI Employees Pension Plan with the number of years and days of
credited service for benefit accrual (not to exceed five (5) years of such
service) that would have been accrued under the plan if
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the employee were continuously employed from the date that the employee first
met the requirements for early retirement under the plan.
(5) Seller shall amend the TI Universal Profit Sharing Plan (the
"TI Plan") so as to cause all New Regular Personnel to be one hundred percent
(100%) vested as to their account balances under such TI Plan as of the New
Employment Start Date. Seller shall allow all New Regular Personnel under the
TI Plan to elect to transfer their account as provided in Code Section 411(d)-4.
Solectron shall amend its 401(k) Plan (the "Solectron Plan") to permit the
Solectron Plan (i) to accept transfers (including transfers of loans) of the New
Regular Personnel TI Plan Accounts, and (ii) to "grandfather" any such loans
transferred from the TI plans. Seller and Buyer agree to work together as to
the details of the foregoing transfers with a view toward (i) maximizing the
flexibility offered New Regular Personnel as to disposition of their TI Plan
accounts, (ii) avoiding the necessity for accelerated loan repayments, (iii)
issues involving Seller's stock, and (iv) avoiding unnecessary administrative
burdens for Seller.
(g) Buyer shall prepare and furnish to Regular Personnel and Other
Personnel who accept Buyer's offer of employment extended pursuant to Section
7.1(a) above, Form W-2 which shall reflect all wages and compensation paid to
such employees for that portion of the calendar year in which the Closing occurs
during which such employees were employed by Seller. Seller shall furnish to
Buyer the Forms W-4 and W-5 of each Regular Personnel and Other Personnel who
accept Buyer's offer of employment extended pursuant to Section 7.1(a) above.
Buyer shall send to the appropriate Social Security Administration office a duly
completed Form W-3 and accompanying copies of the duly completed Form W-2. It
is the intent of the parties hereunder that the obligation of Buyer and Seller
under this Section 7.1 shall be carried out in accordance with Section 5 of the
Internal Revenue Service's Revenue Procedure 84-77. To the extent possible, all
previously authorized payroll deductions of Regular Personnel shall continue
following the Closing.
(h) Seller agrees to hold harmless and indemnify Buyer from and
against any severance pay, Worker Adjustment and Retraining Notification Act
("WARN") liability or damages, discrimination or other employee related claims
or damages arising or resulting from Seller's actions prior to, on or after the
Closing Date. Solectron and Buyer agree to hold harmless and indemnify Seller
from and against any severance pay, WARN Act liability or damages,
discrimination, labor law or other employee related claims or damages arising or
resulting from Solectron's or Buyer's actions prior to, on or after the Closing
Date with respect to New Regular Personnel; provided, however, that neither
Solectron nor Buyer shall have any liability for severance pay or other benefits
payable under Seller's employee benefit plans or benefit arrangements solely as
a result of the transactions contemplated by this Agreement, including, but not
limited to, the termination by Seller of Seller's Regular Personnel and Other
Personnel pursuant to Section 7.1(b) above.
(i) Notwithstanding anything to the contrary herein, New Regular
Personnel who, on the Closing Date, are employed in the U.S. pursuant to a work
or training visa shall become New Regular Employees of the Buyer at such times,
and under such terms and conditions as Seller and Buyer shall agree.
Prospective new employees of the Austin Operations to whom Seller has made
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offers prior to the Closing, shall become New Regular Employees of the Buyer
only if Seller and Buyer so agree.
(j) Upon each offer of employment Buyer shall request from New
Regular Personnel and provide to Seller a signed release and consent to the
transfer by Seller to Buyer of the personnel records of such employee maintained
by Seller. All Personnel records of each employee who signs such release and
consent shall be transferred by Seller to Buyer as soon as practicable after
such release and consent is provided to Seller. With respect to New Regular
Personnel who do not sign such release and consent, only the name, Seller
employee number, social security number, W-4 income tax withholding form
information, current job assignment, current rate of wages or salary, and the
amount of service completed with Seller and its subsidiaries shall be
transferred. In the event any applicable laws or regulations prohibit or
restrict the transfer of personnel information pursuant to this paragraph (j),
the obligations of Seller shall be to transfer only such information as shall be
permitted by such laws or regulations. Buyer shall make all such records
available to Seller in the future upon request so long as Buyer retains such
records under its normal policies.
(k) Seller has undertaken reasonable efforts under its established
procedures to complete and retain legally prescribed I-9 employment forms on all
employees hired by Seller since the effective date of the requirements to
complete such forms. Seller will transfer all such forms to Buyer together with
the personnel records transferred pursuant to paragraph (j).
(l) Other provisions with regard to personnel of the Malaysia
Operations will be set forth in the Malaysia Asset Purchase Agreement.
(m) Since January 29, 1996, Buyer has, with Sellers's approval,
offered employment to individuals who are currently employed by Seller at the
site of the Austin Operations (the "Other Personnel") and who are not listed on
Schedule 4.8(c). Schedule 7.1(m) contains (i) a list of all Other Personnel as
of March 28, 1996; (ii) the then current base salary rate (as defined in Section
7.1(a) above) provided by Seller to such employees.
Section 7.2 TAXES.
(a) Subject to Section 2.3 hereof and notwithstanding anything to the
contrary in Article 10 below, Seller shall be responsible for and pay all Taxes
of Seller, its affiliates, the Operations or the Purchased Assets arising at any
time with respect to periods ending on or prior to the Closing Date, including
the portion of real, personal or other property taxes attributable to such
periods.
(b) To the extent relevant to the Purchased Assets and the
Operations, Seller shall (i) provide Buyer with such assistance as may
reasonably be required in connection with the preparation of any Tax Return and
the conduct of any audit or other examination by any taxing authority or in
connection with judicial or administrative proceedings relating to any liability
for Taxes and (ii) retain and provide Buyer with all records or other
information that may be relevant to the preparation of any Tax Returns, or the
conduct of any audit or examination, or other tax proceeding.
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Seller shall retain all relevant documents, including prior year's Tax Returns,
supporting work schedules and other records or information that may be relevant
to such returns and shall not destroy or otherwise dispose of any such records
without the prior written consent of Buyer.
Section 7.3 CONFIDENTIAL TREATMENT. Solectron agrees to seek confidential
treatment under Rule 24b-2 promulgated under the Exchange Act for this Agreement
and any Additional Agreement Solectron proposes to file with the SEC. Prior to
the proposed filing of any such agreements, Solectron shall (i) give Seller
reasonable prior written notice of such proposed filing, (ii) seek confidential
treatment for those portions of such agreements reasonably requested by Seller,
(ii) use reasonable efforts to secure such confidential treatment, and (iv) to
the extent and for such period as confidential treatment is secured, hold all
such information in strict confidence.
Section 7.4 COVENANT NOT TO COMPETE.
(a) For a period of eight (8) years from and after the Closing Date
no Seller Group Member shall engage anywhere in the world in the primary
business currently engaged in by the Operations which consists of assembly of
electronic boards and subsystems for third parties; provided, however, that
nothing herein shall preclude Seller or any Seller Group Member from
(i) manufacturing boards, subsystems or products designed wholly or partly by or
for Seller or any Seller Group Member for internal use or sale to third parties
or the manufacture or assembly of boards and subsystems for inclusion in such
products, (ii) design of ASIC products for customers or providing design
services for customers that involve products marketed or sold to third parties,
or (iii) engaging in activities by Seller's businesses that are ancillary to
marketing Seller's components, subsystems or products, (iv) continuing to engage
in the custom manufacturing services business currently engaged in at its
current site in Aversa, Italy subsequent to the Closing, (v) manufacturing and
selling boards, subsystems or products for U.S. or foreign government end use
and military specification items, or engaging in activities that are ancillary
to marketing such items, (vi) continuing to engage in the business currently
engaged in by the Circuit Card Assembly operation in Lewisville, Texas, and
(vii) except as provided in Section 7.4(b) below.
(b) For a period of two (2) years from and after the Closing Date, no
Seller Group Member will acquire (by asset purchase, stock purchase, merger,
consolidation or otherwise) a Person which is primarily engaged in substantially
the same business as is currently engaged in by the Operations.
(c) For a period of twenty-five (25) months following the Closing
Date, Seller, Solectron and Buyer shall not solicit for employment or hire,
employ or otherwise retain (whether as an employee, officer, agent, consultant,
advisor or in any capacity whatsoever) any employee of either of the other
parties, or any employee in the Operations of Seller as of the Closing Date,
including Regular Personnel who refuse an offer of employment by Buyer, without
the prior written consent of such other party except as agreed to by Buyer and
Seller in connection with the Malaysia Operations pursuant to the terms of the
Malaysia Asset Purchase Agreement; provided that Buyer shall have the right to
employ as a New Regular Employee any employee of the Austin Operations whose
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employment with Seller was terminated on the New Employment Start Date pursuant
to Section 7.1(b) above.
(d) If any of paragraphs (a), (b) or (c) of this Section 7.4 is
materially breached by any Seller Group Member, then the time period set forth
in the Section so breached shall be extended by an additional period of time
equal to the duration of such breach.
(e) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 7.4 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability will have the power to reduce the scope, duration
or area of the term or provision, to delete specific words or phrases or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision with a term or provision and
this Agreement will be enforceable as so modified.
Section 7.5 MALAYSIA OPERATIONS. Solectron and Seller agree that it is
their intention that Solectron Technology Sdn. Bhd. purchase from Texas
Instruments Electronic Systems Sdn. Bhd., and Texas Instruments Electronic
Systems Sdn. Bhd. sell to Solectron Technology Sdn. Bhd., certain assets of the
Malaysia Operations. Promptly following the execution of this Agreement,
Solectron and Seller agree to negotiate in good faith to complete mutually
acceptable agreements relating to the purchase certain assets of the Malaysia
Operations, which agreements shall (i) include a purchase price equal to the net
book value of the Malaysia Operations as of the Closing; (ii) provide for the
consignment of Purchased Assets of the Malaysia Operations back to Texas
Instruments Electronic Systems Sdn. Bhd.; and (iii) provide for a subcontract
arrangement for Texas Instruments Electronic Systems Sdn. Bhd. to perform the
Transferred Agreements on behalf of Solectron Technology Sdn. Bhd.
Section 7.6 TRANSITION SUPPORT PAYMENTS. Seller agrees to provide to
Buyer $3,000,000 in services or in the form of a credit against payments due by
Buyer for transition support expenses incurred following the execution of this
Agreement. Transition support expenses shall include, but not be limited to,
costs and expenses incurred by Buyer under the Lease Agreement and the Master
Services Agreement.
Section 7.7 INTELLECTUAL PROPERTY MATTERS.
[***************]
* Confidential Treatment Requested
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[***************]
Section 7.8
[***************]
* Confidential Treatment Requested
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[***************]
Section 7.9 MANUFACTURING SERVICES.
Promptly following the date hereof, Seller and Solectron agree to work in
good faith to establish by the Closing Date a Manufacturing Services Framework
Agreement to provide for a framework whereby Seller and Solectron shall identify
new business opportunities for Solectron to provide manufacturing services to
Seller and Seller Group Members.
Section 7.10 PRODUCT WARRANTY. Buyer shall be responsible for repair or
replacement of all products sold by the Operations prior to the Closing Date in
accordance with the product warranty terms of the Operations. To the extent
such product warranty obligations constitute Retained Liabilities, Seller shall
reimburse Buyer for the costs incurred by Buyer in connection therewith.
Section 7.11 INTELLECTUAL PROPERTY LICENSE. With respect to the following
enumerated categories of Retained Intellectual Property, Seller hereby grants to
each Buyer Group Member an irrevocable, perpetual, sublicenseable, fully-paid
royalty free, worldwide right and license to use, practice and otherwise
exploit: Copyrights, Trade Secrets, and non-patented technology and
manufacturing processes (exclusive of Seller's patents and patented
manufacturing processes) and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data and
copyrightable works which comprise Retained Intellectual Property in
substantially the same manner that such Retained Intellectual Property is
currently being used, practice or exploited by the Operations or is reasonably
anticipated to be used, practiced or otherwise exploited by the Operations.
Buyer agrees to protect any such Trade Secrets against unauthorized disclosure
or misuse with the same degree of care that it uses with respect to its own
Trade Secrets of like importance.
Section 7.12 TECHNOLOGY SHARING. Promptly following the Closing, Buyer,
Seller and Solectron agree to work in good faith to identify areas in which
sharing of certain technology and know-how would be beneficial to both Parties.
The Parties agree that such cooperation may include, among others (a) annual
meetings between Buyer, Seller and Solectron to share technology "road maps" in
areas such as (i) interconnect technology and semiconductor packaging, (ii) ASIC
design and (iii) ASIC design tools; and (b) concerted efforts to identify
potential collaborative opportunities
* Confidential Treatment Requested
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or joint projects of mutual interest such as (i) bare die placement capability,
(ii) bare die test capability and (iii) multi-chip module products and processes
The Parties also agree to execute an appropriate non-disclosure agreement
relating to the foregoing promptly following the Closing.
Section 7.13 MATERIAL ADVERSE CHANGE. In the event of a material adverse
change in the Purchased Assets or the Operations (including, but not limited to,
any material adverse change resulting from fire, flood, casualty, act of God or
the public enemy or other cause, regardless of insurance coverage for such
damage) subsequent to the date of this Agreement and prior to the Closing Date,
the Parties agree to negotiate in good faith an adjustment to the Purchase Price
to reflect such change. In the event the Parties are unable to agree on an
adjustment to the Purchase Price, the Parties shall submit such matter to
binding arbitration in accordance with AAA procedures for arbitration in force
as of the date of such arbitration proceedings. Notwithstanding the foregoing,
the Parties agree that a material adverse change shall not include any change in
general business environment or any change in the Purchased Assets or Operations
resulting primarily from the actions of Solectron or any of its representatives.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall be subject, at the
option of Buyer, to the satisfaction, on or prior to the Closing Date, of the
following conditions.
Section 8.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES.
Each of the representations and warranties of Seller contained or referred to
herein and in the Additional Agreements shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date, except
for changes therein specifically permitted by this Agreement or resulting from
any transaction expressly consented to in writing by Buyer; and there shall have
been delivered to Buyer a certificate or certificates to such effect, dated the
Closing Date, signed on behalf of Seller by Marvin S. Self, Senior Vice
President, Systems & Software Businesses, of Seller or such other authorized
employee of Seller as agreed to by Buyer and Solectron.
Section 8.2 NO RESTRAINT OR LITIGATION. No action, suit, investigation or
proceeding shall have been instituted or overtly threatened to restrain or
prohibit or otherwise challenge the legality or validity of the transactions
contemplated hereby.
Section 8.3 NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all approvals and actions of or by all Governmental Bodies which are
necessary to consummate the transactions contemplated hereby, which are either
specified in Section 4.2 of the Disclosure Letter or otherwise required to be
obtained prior to the Closing by applicable Requirements of Law.
Section 8.4 NECESSARY CONSENTS. Seller shall have received the consents
specified on Schedule 8.4 hereto, in form and substance reasonably satisfactory
to Buyer, to the transactions contemplated hereby from the other parties to such
Transferred Agreements.
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Section 8.5 EMPLOYEES. The key employees of the Austin Operations
identified on Schedule 8.5 shall have accepted (which acceptances shall not have
been withdrawn) offers of employment by Buyer extended as contemplated by
Section 7.1 above.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall be subject, at the
option of Seller, to the satisfaction, on or prior to the Closing, of the
following conditions:
Section 9.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES.
Each of the representations and warranties of Buyer and Solectron contained or
referred to in this Agreement and the Additional Agreements shall be true and
correct in all material respects on the Closing Date as though made on the
Closing Date, except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing by
Seller or any transaction contemplated by this Agreement; and there shall have
been delivered to Seller a certificate or certificates to such effect, dated the
Closing Date and signed on behalf of Buyer and Solectron by an authorized
employee of each of Buyer and Solectron.
Section 9.2 NO RESTRAINT OR LITIGATION. No action, suit or proceeding by
any Governmental Body shall have been instituted or overtly threatened to
restrain, prohibit or otherwise challenge the legality or validity of the
transactions contemplated hereby.
Section 9.3 NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all approvals and actions of or by all Governmental Bodies necessary to
consummate the transactions contemplated hereby, which are required to be
obtained prior to the Closing Date by applicable Requirements of Laws.
ARTICLE 10
INDEMNIFICATION
Section 10.1 INDEMNIFICATION BY SELLER. With the exception of the Seller
Environmental Liabilities described in Section 10.6, Seller agrees to indemnify
and hold harmless each Buyer Group Member from and against any and all Losses
and Expense incurred by such Buyer Group Member in connection with or arising
from:
(a) any breach by Seller of any of its covenants in this Agreement;
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(b) any breach of any warranty or the inaccuracy of any
representation of Seller contained or referred to in this Agreement or any
certificate delivered by or on behalf of Seller pursuant hereto; and
(c) the Retained Liabilities.
The indemnification provided for in Section 10.1(b) shall terminate one
(1) year after the Closing Date and no claims shall be made by any Buyer Group
Member under Section 10.1(b) thereafter, except that the indemnification by
Seller shall continue as to any Loss or Expense of which any Buyer Group Member
has notified Seller in accordance with the requirements of Section 10.3 on or
prior to the date such indemnification would otherwise terminate in accordance
with this Section 10.1, as to which the obligation of Seller shall continue
until the liability of Seller shall have been determined pursuant to this
Article 10, and Seller shall have reimbursed all Buyer Group Members for the
full amount of such Loss and Expense in accordance with this Article 10.
Section 10.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
harmless each Seller Group Member from and against any and all Loss and Expense
incurred by such Seller Group Member in connection with or arising from:
(a) any breach by Buyer or Solectron of any of its covenants in this
Agreement;
(b) any breach of any warranty or the inaccuracy of any
representation of Buyer or Solectron contained or referred to in this Agreement
or any certificate delivered by or on behalf of Buyer or Solectron pursuant
hereto; and
(c) the Assumed Liabilities.
The indemnification provided for in Section 10.2(b) shall terminate
one (1) year after the Closing Date, and no claims shall be made by any Seller
Group Member under Section 10.2(b) thereafter, except that the indemnification
by Buyer shall continue as to any Loss or Expense of which Seller has notified
Buyer in accordance with the requirements of Section 10.3 on or prior to the
date such indemnification would otherwise terminate in accordance with this
Section 10.2, as to which the obligation of Buyer shall continue until the
liability of Buyer shall have been determined pursuant to this Article 10, and
Buyer shall have reimbursed all Seller Group Members for the full amount of such
Loss and Expense in accordance with this Article 10.
Section 10.3 NOTICE OF CLAIMS.
(a) Any Buyer Group Member or Seller Group Member (the "Indemnified
Party") seeking indemnification hereunder shall give to the party obligated to
provide indemnification to such Indemnified Party (the "Indemnitor") a notice (a
"Claim Notice") describing in reasonable detail the facts giving rise to any
claim for indemnification hereunder and shall include in such Claim Notice
amount of such claim, and a reference to the provision of this Agreement or any
other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is
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based; PROVIDED, however, that a Claim Notice in respect of any action at law or
suit in equity by or against a third Person as to which indemnification will be
sought shall be given promptly after the action or suit is commenced; and
PROVIDED FURTHER, that failure to give such notice shall not relieve the
Indemnitor of its obligations hereunder except to the extent it shall have been
prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article 10 shall be determined in accordance with the dispute resolution
mechanism set forth in Section 12.15 hereto. The Indemnified Party shall have
the burden of proof in establishing the amount of Loss and Expense suffered by
it.
Section 10.4 EXCLUSIVITY OF REMEDY. Except as otherwise specifically set
forth herein or in any Additional Agreement, the indemnification provisions
contained in this Article 10 shall be deemed to be, to the extent permitted by
law, the exclusive remedy or exclusive means to obtain relief, as the case may
be, of any party hereto in the event of any breach of any representation,
warranty, covenant or agreement contained herein (or in any certificates or
other documents delivered pursuant hereto) by any other party hereto or with
respect to any claim of any third party arising out of or in connection with
this Agreement or the transactions contemplated hereby, and the provisions of
this Article 10 shall be in lieu of, any other rights or remedies that may be
available to any party at law, in equity or otherwise.
Section 10.5 THIRD PERSON CLAIMS.
The Indemnitor shall have the right to conduct and control, through
counsel of its choosing, the defense, compromise or settlement of any third
person claim, action or suit against any Indemnified Party as to which
indemnification will be sought by such Indemnified Party from any Indemnitor
hereunder, and in any such case the Indemnified Party shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnitor in connection therewith;
PROVIDED, that the Indemnified Party may participate, through counsel chosen by
it and at its own expense, in the defense of any such claim, action or suit as
to which the Indemnitor has so elected to conduct and control the defense
thereof. So long as the Indemnitor is defending in good faith any third party
claim as to which indemnification has been sought hereunder, the Indemnified
Party shall not settle or compromise such third party claim.
Section 10.6 ENVIRONMENTAL INDEMNIFICATION BY SELLER.
(a) INDEMNIFICATION. Seller agrees to indemnify and hold harmless
each Buyer Group Member from and against any and all Losses and Expenses
incurred by any of them, to the extent caused by or arising out of any of the
following "Seller Environmental Liabilities":
(i) Except to the extent discharged, disposed of or
released by any Buyer Group Member or any of such Buyer Group Member's agents,
employees and contractors, any
37
<PAGE>
Hazardous Material present in the soil, groundwater, underground storage tanks
or indoor air or outdoor air in amounts harmful to health or the environment on
or about the Seller Property, or past Seller Property, or any property in the
vicinity of the Seller Property to the extent, with respect to such property,
that the presence of Hazardous Materials is caused by or in any way related to
Seller's Operations, prior to or after the Closing Date;
(ii) Any Hazardous Material Activity conducted in the
course of the Operations on or before the Closing Date or by Seller, any Seller
Group Member or any of such Member's agents, employees or contractors on or
about the Seller Property at any time;
(iii) The exposure of any employee of the Seller or any
other person to any Hazardous Material in the course of, or as a consequence of,
any Hazardous Material Activity conducted in the course of the Operations of
Seller on or before the Closing Date or by Seller or any Seller Group Member or
any of such Member's agents, employees or contractors on or about the Seller
Property at any time; or
(iv) The presence at any Disposal Facility of any
Hazardous Material generated in the course of the Operations of Seller and
transferred from the Seller Property prior to the Closing Date, or in connection
with a Hazardous Material Activity conducted on or about the Seller Property by
Seller or any Seller Group Member or any of such Member's agents, employees and
contractors at any time.
(v) The cleanup and/or remediation of (a) any state or
federal Superfund site(s) or (b) any Hazardous Material, waste disposal and/or
recycle facilities in which Seller or any Seller Group Member may be or have
been designated as a "Potentially Responsible Party," or may be or are in any
way and to any extent responsible for, at any time prior to or after the Closing
Date.
(b) ADEQUATE PROTECTION FROM LOSS. Seller acknowledges that its
obligations under the foregoing Section 10.6(a) shall arise upon the threat or
institution of any Losses or Expenses for which Seller is liable under this
Indemnity, and not merely upon the realization by an Indemnified Party of an
actual loss; and, therefore, Seller agrees, within fifteen (15) days following a
written demand, to indemnify, hold harmless and take such other reasonable
actions as the Indemnified Party may reasonably request to protect the
Indemnified Party from such Losses and Expenses, provided the Indemnified Party
provides Seller with notice, and cooperation as may be reasonably requested by
Seller, provided further, however, that such cooperation does not result in any
cost to the Indemnified Party.
(c) WAIVER BY SELLER. To the extent permitted by applicable Law,
Seller, on behalf of itself and its Successors (other than Buyer and the Buyer
Group Members), after consultation with counsel, hereby waives (i) any and all
rights to join Buyer, the Buyer Group Members and their Successors in any
litigation or proceeding to the extent arising out of or in connection with any
of Seller's Environmental Liabilities; and (ii) any and all Losses and Expenses
which any of them may have with respect to any Seller Environmental Liabilities.
38
<PAGE>
(d) SURVIVAL. It is expressly acknowledged by Seller that the acts,
omissions, breach of any covenant in this Agreement or in any Additional
Agreement, or violation of Environmental Laws by Buyer Group Members and/or
their respective Successors (whether active, passive, negligent, wrongful or in
violation of any agreement) shall not impair the right of any of such Persons
(including the Person acting or omitting to act) to enforce the Seller's
indemnities and releases pursuant to this Section 10.6, it being understood and
agreed that, subject only to the limitations set forth in this Section 10.6, the
purpose of this Section 10.6 is to allocate risk of loss as between the Buyer
Group Members and their Successors on the one hand and Seller on the other hand
with respect to the matters covered by Seller's Environmental Liabilities solely
to Seller in all events, without regard to the conduct of any person or any
other fact or circumstance. The obligations and rights of the parties under
this Section 10.6 are in addition to, independent from, and severable from the
rights and obligations of the parties under this Agreement or any other
agreement between them and shall survive, notwithstanding the termination,
expiration or breach of such agreements or any other agreement between any of
the parties hereto and notwithstanding any other act or omission of the parties,
whether or not such acts are in violation of the express provisions of this
Agreement, any other agreement or applicable law. This Agreement shall survive
the sale, transfer, assignment or hypothecation of any Buyer Group Member or any
of their properties, or any interest therein, to any Person.
Section 10.7 ENVIRONMENTAL INDEMNIFICATION BY BUYER.
(a) INDEMNIFICATION. Buyer agrees to indemnify and hold harmless
each Seller Group Member from and against any and all Losses and Expenses
incurred by any of them, to the extent caused by or arising out of any of the
following "Buyer Environmental Liabilities":
(i) Any Hazardous Material discharged, disposed of or
released into the soil, groundwater, indoor air or outdoor air in amounts
harmful to health or the environment on or about the Seller Property or any
property in the vicinity of the Seller Property by any Buyer Group Member or any
of such Member's agents, employees or contractors after the Closing Date;
(ii) Any Hazardous Material Activity conducted in the
course of the Operations after the Closing Date or by any Buyer Group Member or
any of such Member's agents, employees or contractors on or about the Seller
Property after the Closing Date;
(iii) The exposure of any employee of the Buyer or any
other person to any Hazardous Material in the course of, or as a consequence of,
any Hazardous Material Activity conducted in the course of the Operations after
the Closing Date or by any Buyer Group Member or any of such Member's agents,
employees or contractors on or about the Seller Property after the Closing Date;
(iv) The presence at any Disposal Facility of any
Hazardous Material generated by Buyer after the Closing Date in the course of
the Operations and transferred from the Seller Property after the Closing Date
or in connection with a Hazardous Material Activity
39
<PAGE>
conducted on or about the Seller Property by any Buyer Group Member or any of
such Member's agents, employees and contractors after the Closing Date; and
(v) Any use by any Buyer Group Member of any
Environmental Permit issued and maintained after the Closing Date in the name of
Seller and held and/or used exclusively by any Buyer Group Member.
(b) ADEQUATE PROTECTION FROM LOSS. Buyer acknowledges that its
obligations under the foregoing Section 10.7(a) shall arise upon the threat or
institution of any Losses or Expenses for which Buyer is liable under this
Indemnity, and not merely upon the realization by the Indemnified Party of an
actual loss; and, therefore, Buyer agrees, within fifteen (15) days following a
written demand, to indemnify, hold harmless and take such other reasonable
actions as the Indemnified Party may reasonably request to protect the
Indemnified Party from such Losses and Expenses; provided the Indemnified Party
provides Buyer with notice and cooperation as Buyer may reasonably request;
provided, further, however that such cooperation does not result in any cost to
the Indemnified Party.
(c) WAIVER BY BUYER. To the extent permitted by applicable Law,
Buyer, on behalf of itself and its Successors, after consultation with counsel,
hereby waives (i) any and all rights to join Seller, the Seller Group Members
and their Successors in any litigation or proceeding to the extent arising out
of or in connection with any of Buyer's Environmental Liabilities; and (ii) any
and all Losses and Expenses which any of them may have with respect to any Buyer
Environmental Liabilities.
(d) SURVIVAL. It is expressly acknowledged by Buyer that the acts,
omissions, breach of any covenant in this Agreement or in any Additional
Agreement, or violation of Environmental Laws by Seller, the Seller Group
Members and/or their respective Successors (whether active, passive, negligent,
wrongful or in violation of any agreement) shall not impair the right of any of
such Persons (including the Person acting or omitting to act) to enforce the
Buyer's indemnities and releases pursuant to this Section 10.7, it being
understood and agreed that, subject only to the limitations set forth in this
Section 10.7, the purpose of this Section 10.7 is to allocate risk of loss as
between Seller Group Members and their Successors on the one hand and Buyer on
the other hand with respect to the matters covered by Buyer's Environmental
Liabilities solely to Buyer in all events, without regard to the conduct of any
person or any other fact or circumstance. The obligations and rights of the
parties under this Section 10.7 are in addition to, independent from, and
severable from the rights and obligations of the parties under this Agreement or
any other agreement between them and shall survive, notwithstanding the
termination, expiration or breach of such agreements or any other agreement
between any of the parties hereto and notwithstanding any other act or omission
of the parties, whether or not such acts are in violation of the express
provisions of this Agreement, any other agreement or applicable law. This
Agreement shall survive the sale, transfer, assignment or hypothecation of any
Seller Group Member or any of their properties, or any interest therein, to any
Person.
40
<PAGE>
Section 10.8 LIMITATION OF INDEMNIFICATION. Except with respect to
Sections 10.6 and 10.7 hereof, as to which no monetary limitations shall apply,
neither party to this Agreement shall be entitled to indemnification pursuant to
Section 10.1 or 10.2 hereof for any Losses and Expenses incurred unless the
aggregate amount for which indemnification is first sought is in excess of
$100,000 whether represented by one or more claims, in which case the Indemnitor
shall be liable only for the amount in excess of $100,000. No Buyer Group
Member or Seller Group Member shall be required to make, or cause to be made,
any payments pursuant to Sections 10.1 or 10.2 hereof to the extent the
aggregate payments such Buyer Group Member or Seller Group Member, as the case
may be, has made pursuant to Sections 10.1 or 10.2 hereof in respect of any such
Losses and Expenses would exceed the Purchase Price. In addition, in case any
event shall occur which would otherwise entitle any party to assert a claim for
indemnification hereunder, no loss, damage or expense shall be deemed to have
been sustained by such party to the extent of (i) any tax savings realized by
such party with respect thereto or (ii) any proceeds received by such party from
any insurance arrangement.
ARTICLE 11
TERMINATION
Section 11.1 TERMINATION. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual consent of Buyer and Seller;
(b) by Buyer or Seller if the Closing Date shall not have occurred on
or before June 30, 1996 (or such later date as may be mutually agreed to by
Buyer and Seller);
(c) by Buyer in the event of any material breach by Seller of any of
the representations, warranties, covenants or agreements of Seller contained
herein and the failure of Seller to cure such breach within fourteen (14) days
after receipt of notice from Buyer requesting such breach to be cured; or
(d) by Seller in the event of any material breach by Buyer of any of
Buyer's representations, warranties, covenants or agreements contained herein
and the failure of Buyer to cure such breach within fourteen (14) days after
receipt of notice from Seller requesting such breach to be cured.
Section 11.2 NOTICE OF TERMINATION. Any party desiring to terminate this
Agreement pursuant to Section 11.1 above shall give notice of such termination
to the other parties to this Agreement.
41
<PAGE>
Section 11.3 EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to this Article 11, all further obligations of the
parties under this Agreement (other than Sections 6.7, 12.3 and 12.10) shall be
terminated, provided that nothing herein shall relieve any party from liability
for its breach of this Agreement.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants and obligations contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement. The respective
representations and warranties of each party hereto contained herein shall not
be deemed waived or otherwise affected by any investigation made by the other
party hereto and shall survive the Closing Date.
Section 12.2 NAMES, TRADEMARKS, ETC. Buyer and its affiliates will revise
trademarks and product literature, change signage and stationery and otherwise
discontinue use of the names "TEXAS INSTRUMENTS INCORPORATED," "TI" and
variations thereof (collectively, the "TI Trade names") as promptly as
practicable after the Closing; provided, however, that Buyer may consume the
Inventory, stationery and similar supplies on hand as of the Closing which
contain TI Trade names thereon; provided that to the extent practicable, such
items are overstamped or otherwise appropriately indicate that the Operations
are then being conducted by Buyer.
Section 12.3 NO PUBLIC ANNOUNCEMENTS. Except as heretofore made, neither
Buyer, Solectron nor Seller shall, without the approval of the others, make any
press release or other public announcement concerning this Agreement, the
Additional Agreements or their existence or the transactions contemplated by
this Agreement, except as and to the extent that any such party shall be so
obligated by law, in which case the other parties shall be advised and the
parties shall use their reasonable efforts to cause a mutually agreeable release
or announcement to be issued.
Section 12.4 NOTICES. All notices, requests, instructions or other
communications or other documents required or permitted hereunder shall be in
writing and shall be deemed given or delivered when delivered personally via
telecopier or five (5) days after being sent, when sent by registered or
certified mail, or one (1) day after being sent, when sent by overnight private
courier, addressed as follows:
42
<PAGE>
If to Buyer or Solectron, to:
Solectron Texas, L.P.
12501 Research Road
Austin, Texas 78759
Attention: Susan Wang
Telecopier: (408) 956-6059
with copies to:
Solectron Corporation
847 Gibraltar Drive
Milpitas, California 95035
Attention: Susan Wang
Telecopier: (408) 956-6059
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven Bochner
Telecopier: (415) 493-6811
If to Seller, to:
Texas Instruments Incorporated
7839 Churchill Way, P.O. Box 650311, M/S 3995
Dallas, Texas 75251
Attention: Charles D. Tobin
Telecopier: (214) 917-3804
with a copy to:
Texas Instruments Incorporated
P.O. Box 655474, M/S 241
Dallas, Texas 75265
Attention: Richard J. Agnich, Esq., and
Richard T. Thurston, Esq.
Telecopier: (214) 995-3511
or to such other address as such party may indicate by a notice delivered to the
other parties hereto.
43
<PAGE>
Section 12.5 SUCCESSORS AND ASSIGNS.
(a) The rights of any party under this Agreement shall not be
assignable by such party hereto prior to the Closing Date without the written
consent of the other, except that the rights of Buyer hereunder may be assigned
prior to the Closing Date, without the consent of Seller, to any corporation all
of the outstanding capital stock of which is owned or controlled by Buyer.
Following the Closing Date, either party may assign any of its rights hereunder,
but no such assignment shall relieve it of its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. The successors
and permitted assigns hereunder shall include without limitation, in the case of
Buyer, any permitted assignee as well as the successors in interest to such
permitted assignee (whether by merger, liquidation (including successive mergers
or liquidations) or otherwise). Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person other than
the parties and successors and assigns permitted by this Section 12.5 any right,
remedy or claim under or by reason of this Agreement.
Section 12.6 ACCESS TO RECORDS AFTER CLOSING DATE. For a period of five
(5) years after the Closing Date, Buyer and its representatives shall have
reasonable access to all of the information, books and records of the Operations
which Seller or any of its Affiliates may retain after the Closing Date in each
case subject to the Confidentiality Agreement or similar nondisclosure agreement
if the Confidentiality Agreement shall have terminated or expired. Such access
shall be afforded by Seller and its Affiliates upon receipt of reasonable
advance notice and during normal business hours. Buyer shall be solely
responsible for any costs and expenses incurred by it pursuant to this Section
12.6. If Seller or any of its Affiliates shall desire to dispose of any of such
books and records prior to the expiration of such five (5) year period, Seller,
prior to such disposition, shall give Buyer a reasonable opportunity, at Buyer's
expense, to segregate and remove such books and records as Buyer may select.
Section 12.7 ENTIRE AGREEMENTS, AMENDMENTS. This Agreement and the
Exhibits and Schedules referred to herein and the documents delivered pursuant
hereto contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements
or understanding between or among any of the parties hereto. This Agreement
shall not be amended, modified or supplemented except by a written instrument
signed by an authorized representative of each of the parties hereto.
Section 12.8 INTERPRETATION. Article titles and headings to sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement. The
Schedules (but not the Exhibits) referred to herein shall be construed with and
as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein.
44
<PAGE>
Section 12.9 WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 12.10 EXPENSES. Except as otherwise expressly agreed to in
writing by the Parties, each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
Section 12.11 PARTIAL INVALIDITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
Section 12.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of Seller, Buyer and Solectron.
Section 12.13 FURTHER ASSURANCES. On the Closing Date Seller shall
(i) deliver to Buyer such other bills of sale, deeds, endorsements, assignments
and other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Buyer and its counsel, as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in Buyer all the
right, title and interest of Seller in, to or under any or all of the Purchased
Assets, and (ii) take all steps as may be reasonably necessary to put Buyer in
actual possession and control of all the Purchased Assets; PROVIDED, HOWEVER,
that Seller shall not be responsible for any costs involved in the transition of
the Malaysia Operations and the relocation of the Purchased Assets or the
operations relating to the Malaysia Operations by Buyer or Solectron. From time
to time following the Closing Date, Seller shall execute and deliver, or cause
to be executed and delivered, to Buyer such other instruments of conveyance and
transfer as Buyer may reasonably request or as otherwise may be reasonably
necessary to more effectively convey and transfer to, and vest in, Buyer and put
Buyer in possession of, any part of the Purchased Assets, and, in the case of
licenses, certificates, approvals, authorizations, agreements, contracts,
leases, easements and other commitments included in the Purchased Assets
(a) which cannot be transferred or assigned effectively without the consent of
third parties which consent has not been obtained prior to the Closing Date, to
cooperate with Buyer at its
45
<PAGE>
request in endeavoring to obtain such consent promptly, and if any such consent
is unobtainable, to use its reasonable efforts to secure to Buyer the benefits
thereof in some other manner, or (b) reasonable efforts jointly with Buyer to
secure to Buyer the benefits thereof in some other manner (including the
exercise of the rights of Seller thereunder). Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any license, certificate, approval, authorization, agreement, contract,
lease, easement or other commitment included in the Purchased Assets if an
attempted assignment thereof without the consent of a third party thereto would
constitute a breach thereof.
Section 12.14 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of California. The Additional Agreements shall be
governed by such laws as set forth therein.
Section 12.15 DISPUTE RESOLUTION. For any dispute or claim arising out of
or relating to this Agreement, or breach hereof, or any dispute with respect to
the infringement by one party of a patent or patents of the other party, the
parties, prior to filing any claims in a court of law or to binding arbitration,
shall in good faith first negotiate a written resolution of such dispute or
claim for a period not to exceed thirty (30) days from the date of receipt of a
party's request for such negotiation. Such negotiations shall be conducted by
managers of each party who have authorization to resolve any such dispute or
claim. In the event the parties cannot negotiate a written resolution to such
dispute or claim during this thirty (30) day negotiation period, and prior to
filing any claims in a court of law the parties shall then submit such dispute
or claim to nonbinding mediation with Judicial Arbitration & Mediation Services
("JAMS"). The mediation may be initiated by the written request of either party
to the other party, shall commence within thirty (30) days of receipt of such
notice and shall be conducted in accordance with the standard mediation
procedures established by JAMS, unless otherwise agreed by the parties. The
mediation shall not exceed a period of thirty (30) days. In the event the
parties do not resolve such dispute or claim as a result of such mediation or in
the event such dispute or claim is not resolved within three (3) months, either
party may seek to resolve the dispute or claim in a court of competent
jurisdiction or seek other legal or equitable resolution, and the parties agree
that any information provided for use in, or disclosure made in the course of,
any negotiation or mediation shall not be deemed an admission by any party in
any binding arbitration or court of law. The judgment or decree of a court
shall be deemed final when the time for appeal, if any, shall have expired and
no appeal shall have been taken or when all appeals taken shall have been
finally determined. Notwithstanding the foregoing, either party may at any time
apply to any court of competent jurisdiction for injunctive relief in the event
of an alleged breach of the Confidentiality Agreement.
Section 12.16 SOLECTRON GUARANTY. Solectron hereby guarantees to Seller
the payment and performance by Buyer or any assignee of the Buyer of its
obligations under this Agreement. This Guaranty shall be irrevocable and
Solectron's obligations under this Guaranty shall continue in full force and
effect until the obligations under this Agreement are fully paid, performed and
discharged.
46
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller and Solectron have caused this Agreement
to be executed on the date first above written.
"BUYER"
SOLECTRON TEXAS, L.P.
By: Solectron Texas, Inc.
General Partner
By:
----------------------------------------
Susan S. Wang
Executive Vice President
"SELLER"
TEXAS INSTRUMENTS INCORPORATED
By:
----------------------------------------
Marvin S. Self
Senior Vice President
Systems and Software Businesses
"SOLECTRON"
SOLECTRON CORPORATION
By:
----------------------------------------
Susan S. Wang
Executive Vice President,
Chief Financial Officer and Secretary
47
<PAGE>
SOLECTRON CORPORATION AND SUBSIDIARIES Exhibit 11.1
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 29, February 28, February 29, February 28,
------------ ------------ ------------ ------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average number of shares of common
stock and common stock equivalents:
Primary:
Common stock 49,989 41,460 49,856 41,418
Common stock equivalents - stock options 1,541 758 1,424 819
------------ ------------ ------------ ------------
51,530 42,218 51,280 42,237
Fully diluted:
Common shares issuable upon assumed
conversion of convertible
subordinated notes 1,974 9,549 1,967 9,549
Incremental increase in common stock
equivalents using end of period
market price 344 - 483 -
------------ ------------ ------------ ------------
53,848 51,767 53,730 51,786
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income - primary $27,650 $18,034 $54,997 $36,228
Interest accretion on convertible
subordinated notes, net of taxes 241 1,600 591 3,147
------------ ------------ ------------ ------------
Net income - fully diluted $27,891 $19,634 $55,588 $39,375
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share - primary $0.54 $0.43 $1.07 $0.86
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share - fully diluted $0.52 $0.38 $1.03 $0.76
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000835541
<NAME> SOLECTRON CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-30-1996
<PERIOD-START> NOV-25-1995
<PERIOD-END> FEB-23-1996
<CASH> 309,170
<SECURITIES> 0
<RECEIVABLES> 288,417
<ALLOWANCES> 0
<INVENTORY> 349,572
<CURRENT-ASSETS> 976,123
<PP&E> 236,957
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,228,555
<CURRENT-LIABILITIES> 357,894
<BONDS> 0
0
0
<COMMON> 341,010
<OTHER-SE> 261,318
<TOTAL-LIABILITY-AND-EQUITY> 1,228,555
<SALES> 657,176
<TOTAL-REVENUES> 657,176
<CGS> 591,815
<TOTAL-COSTS> 591,815
<OTHER-EXPENSES> 23,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,176
<INCOME-PRETAX> 41,893
<INCOME-TAX> 14,243
<INCOME-CONTINUING> 27,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,650
<EPS-PRIMARY> .54
<EPS-DILUTED> .52
</TABLE>
